How To Surrender War of Ecosystems - Nokia's Elop Sets Ever More Platforms on Fire: Nokia Money killed today

I am stunned by news from Nokia today. We hear that Nokia is terminating Nokia Money, the Nokia mobile payments solution it has launched in several countries in Asia including India the second largest mobile phone market on the planet behind only China, and other big Asian countries like Pakistan.

THE FUTURE OF MONEY

 

This is mind-boggling to me. Nokia saw the birth of mobile money, when the world's first mobile payment solution went commercial, in Finland. It was Coca Cola which deployed the world's first two SMS text messaging payment based vending machines in the Helsinki region in 1999. One was at the Helsinki airport. The other? In the technology city part of Espoo, Otaniemi - yes exactly the same township where Nokia Headquarters are based.

 

The world's first major international consumer survey of mobile commerce was .. by Nokia in May of 2001, covering over 11,100 people in seven major countries across four continents. (I happen to know, as it was my department at the time that conducted that survey and I was often quoted about its findings in 2001). By the time I presented a keynote to the world's first conference on mobile commerce in London in June of 2001, there were dozens of commercially launched early mobile payments solutions from lotteries to train tickets.

 

Since then we've seen ever more clever mobile payments and solutions. Smart Money out of the Philippines won industry awards for the first complete mobile payments solution (built around SMS). Soon its cross-town rival Globe launched G-Cash in the Philippines. More advanced solutions arrived in the form of NFC based payments solutions in Japan and South Korea, onto the SIM card based centralized mobile solution first executed in South Korea.

The world's first full 'mobile wallet' solution was launched by NTT DoCoMo as Osaifu Keitai in Japan in 2006. NTT of Japan is the company that launched the whole mobile industry years before the famous Motorola phone was sold in the USA. NTT DoCoMo is the most inventive and innovative company in mobile, they launched the world's first mobile internet service, first 3G service etc. And again, Nokia would know of this mobile payments development quite intimately, as NTT DoCoMo was a strategic partner with Nokia on the Symbian platform - those Osaifu Keitai mobile wallet phones were using Symbian as their operating system. NTT DoCoMo reports that Osaifu Keitai is the most loved service by its customers in the illustrious history of the company and is exceptionally 'sticky' in building loyalty.

In 2008 Safaricom of Kenya launched M-Pesa the internationally most famous mobile payments solution. Its creators including my friend Susie Lonie won the Economist Innovation award for 2010. Today more than 30% of the total Kenyan economy transits a mobile phone. Vodafone, the world's largest mobile operator group by revenues has been expanding the M-Pesa solution from South Africa to parts of Asia.

China Mobile the world's largest mobile operator group by subscribers believes strongly in mobile payments and has an initiative to develop it together with Vodafone and Softbank of Japan. Again Nokia would know this intimately as China Mobile was a strategic partner in the MeeGo operating system environment, and MeeGo was designed from the start to include NFC support (something that Microsoft Windows Phone for example cannot do today).

Nokia got involved in mobile money directly in 2009, with the launch of Nokia Money in India in 2009. Nokia has since been saying that the mobile money side of Nokia is one of the main keys to securing market success for the 'next billion' internet users that Nokia wants to serve.

Nokia said in 2010 that from 2011 all Nokia smartphones would support NFC, both using Symbian and using the upcoming MeeGo OS. Then Nokia's CEO Olli-Pekka Kallasvuo was fired, and Nokia hired ex-Microsoft man Stephen Elop to run Nokia. In February 2011 Elop released his infamous Burning Platforms memo (the costliest management memo of all time and half of the Elop Effect, the most damaging management communication by any Fortune 500 sized company in the economic history of humankind).

POURING MORE GASOLINE ON BURNING PLATFORM?

I am not going to re-litigate the Burning Platforms memo here again. I am only going to quote Nokia's CEO Stephen Elop about the very survival of Nokia. Elop wrote in his memo:

 

"Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem."

Stephen Elop also provides his definition of what is an ecosystem and what are its components, when he wrote in that memo:

 

"The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things."

Note that Elop says after developers and applications, the third item he lists is ecommerce (mobile payments) ahead of advertising, search,. social apps, location-based services etc.

Elop has been critical of Nokia management of the past, and stated that Nokia had missed major trends and was falling behind, as he wrote:

 

"What happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind."

And Elop blamed past management and promised he would correct these errors when he wrote in his notorious memo:

"I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally. Nokia, our platform is burning. We are working on a path forward — a path to rebuild our market leadership."

Nokia has seen the birth of mobile money, in its own 'backyard'. Nokia has seen some of its closest strategic partners invest heavily and reap great rewards out of mobile money. Nokia has moved into this space early and strongly. Mobile payments are one of the MOST CRITICAL ELEMENTS of any ecosystem in mobile. 

Elop accuses Nokia of missing the big ecosystem view to winning in the mobile handset wars, and that Nokia has "missed big trends" and fallen behind by years. But in the case of Mobile Money, Nokia has literally been ahead of the curve, and literally years ahead of any other handset manufacturer, and often partnered with the major players of the industry.

BIGGEST MOBILE TREND THIS DECADE

In 2009 Estonia became the first country to eliminate the use of cash in a traditionally coins-operated industry - parking meters. Today you cannot pay for parking by coins in Estonia, but you can of course pay by mobile (Nokia knew this, Finland's first mobile parking solution was launched in 2000). In 2010 Sweden joined that idea by prohibiting coin use in bus fares, you can of course pay by mobile (Nokia knew this too, as the world's first public transport payment by mobile was launched in Finland in 2001 by Helsinki Public Transport). By the summer of 2010, Sweden became the first country on the planet to start Parliamentary deliberations of when to end the manufacturing of cash altogether - replaced by mobile phone payments. Today that race has been joined in countries from Kenya and Somaliland to Philippines and South Korea and Japan. In 2011 Turkey became the first nation to issue a target date for the end of cash: 2025.

In 2011 Visa became the first major financial industry giant to state that the future of payments is mobile. Yes. Visa. Visa says cash will disappear to be replaced by mobile money. The thinking is that radical, Visa only said that last year. If there ever was a major digital disruption opportunity in the world, here is one moment, in early 2012, that we can safely say, the biggest change to humankind this decade, is the shift from coins and cash, to mobile payments. A truly massive global trend. And Nokia had an enormous head-start in it. Here, more than anything else, Nokia was truly ahead of its rivals. Where Elop said Nokia had "missed big trends" and did not capitalize on the leadership, here was a case of true Nokia leadership which had been executed better than any other handset makers. Apple is not even out with its iWallet concept and Google's mobile payments are at their infancy.

In the memo Elop mentions Google or Android five separate times as a major threat to Nokia's future and a strong player in the battle of ecosystems, suggesting Google is a rival that Nokia should learn from. Google's Chairman Eric Schmidt wrote in the Harvard Business Review last year, that mobile money is the number 2 priority for Google's strategy. Not Google's 'mobile' strategy or its 'smartphone' strategy. Number 2 priority for all of Google!

Elop promised his staff that Elop will change Nokia leadership. To return 'accountability' and to 'align' Nokia to the new disruptive trends and to 'deliver innovation fast enough' on a 'path forward' to 'rebuild market leadership' - obviously suggesting Elop will be using the ecosystem thinking.

Now we hear that Nokia Money will be terminated. After Nokia had recruited 1.2 million paying consumers to its Nokia Money service (which is not free - it has a registration fee), now Nokia gives 3 months for those customers to deplete their Nokia Money accounts and then the mobile payment service will be discontinued. Nokia will also return its mobile banking license to the Reserve Bank of India etc. Note, as the India banking regulator tells that there are currently about 10 million mobile banking users in India, Nokia had achieved a 12% market share in the early going of a market that will soon pass 100 million users - most people in India do not have regular banking accounts and don't use such 'common' payment methods to many of my readers here, as credit cards etc.

I am flabbergastered. I have been critical of Elop's management but at least I believed Elop did understand that the future of smartphones was dependent on ecosystems - he did write that in his memo. But Elop is now actively dismantling and destroying something that he said was a major key to winning in ecosystems? Where Nokia had indeed built a huge lead over Google and Apple, Elop now destroys that leadership position. This is the same lunacy we saw a month ago when Nokia sold its advertising unit! What happened inside his brain? This man is a menace. He is single-handedly destroying all assets that Nokia had built. Specifically, Elop is destroying all the parts of the leadership in the ecosystems battle, from screwing the developers by killing the QT based migration path from Symbian to MeeGo, to now, yes, unbelievably, terminating the Nokia Money service! Why? So that Nokia could become a slave to Microsoft? Elop has to be fired NOW !

(PS anyone who wants to understand the mobile money opportunity, my 12th book was the world's first book on mobile money. If you want to see more, see Tomi Ahonen Pearls Vol 3: Mobile Money) 

Comments

[Bart]

This truly makes me wonder how decisions are being made inside Nokia atm. The problem with the company doesn't seem to be a lack of vision or direction (however, one might disagree severely with it), but more the way Nokia is seemingly is being handed over to the whims of one CEO. What about the checks and balances? As history has tought us: the only thing necessary for the triumph of evil is for good men to do nothing. So, where are the good men within Nokia and why aren't we hearing from them?

[zlutor]

Unbeliveable...

As said in a Hungarian joke: 'it must be serious because it would be too harsh to be a joke...' :-(

[incognito]

It's an act of shear lunacy, nothing more to add. As I've commented on your previous post, by the rate Elop is dismantling Nokia, I really wouldn't be surprised to hear that they'll shutting down their feature-phone development. What baffles me is - how come nobody, not even the Finnish government which lost a great deal of tax money last year, is not at least raising an eyebrow with news such as this.

I never sided with the conspiracy theorists, but more and more that becomes the only reasonable explanation of what Elop is doing with Nokia. Or as great Sir Arthur Conan Doyle through the mouth of Sherlock Holmes would say - ...when you have eliminated the impossible, whatever remains, however improbable, must be the truth.

[elm70]

I'm shocked.

Nokia Money was an example of Nokia being exceptional in the emerging market.
Now there will be 1.2 millions of people that will hate Nokia in India.

What companies needs are army of funboys ... and Nokia is creating an army of hate boys.

Indians have been already punished by Elop memo, in which it stated that Symbian is junk.
Indians have been resilience on buying Nokia, and appreciate the brand, but with additional 1.2 millions of Nokia hater it will be a further downhill for Nokia

Tomi, you state it again, on more time ... Elop need to be fired ... but this is not going to happen.
In May 2012 3 new board member will be appointed in Nokia, this means excluding few exceptions all Nokia board member have been hired from May 2011, together with Elop ... now, for me it is 100% clear, Nokia is controlled by few strong share holder that love Elop and love his work that give and will give terrific benefit to Microsoft and other American company

Tchuss

e_lm_70

[Tomi T Ahonen]

Hi Bart

I agree. I am devastated by this news now but it has been a pattern by Elop ever since February 2011. I have not seen one action by Elop since then, that has not been inherently damaging to Nokia's leadership position, excepting for those cases where he had a 'corrective' action after the initial damage (like reversing the idiotic naming decision or the crazy product design decisions like abandoning forward-facing cameras or microSD support etc).

I have tried to do my part on this blog to at least draw attention to the mistakes as they were made. I am stunned by how silent the Finnish media has been about the obviously blatantly damaging decisions made by Elop. If this was a CEO of a US corporation, the Wall Street journalists would have yelled bloody murder at these mad decisions. But even with all that, where Nokia truly had a genuine competitive advantage against all other handset makers, and already a stong foothold in India's early mobile money market - which is scheduled to have 100 million users in three years - that Elop now kills it, right after they are on their feet. This simply makes no sense at all.

Thank you for writing. I am trying to recover my balance for today, haha..

Tomi Ahonen :-)

[ste]

After 13 years in mobile money (according) to your history) just 1.2 million customers and a coverage described by you as "it has launched in several countries in Asia including India [...], and other big Asian countries like Pakistan."

Sorry but I don't see that in your description: "But in the case of Mobile Money, Nokia has literally been ahead of the curve, and literally years ahead of any other handset manufacturer"

Why does it not have 1.2 million customers just in Finland? M-Pesa has 14 million customers in Kenya alone. Amazon and Apple severeal hundred million.

[JD!]

And this all happened when Indian Govt allowed 100% Foreign Direct Investment for Nokia Money like ventures! They are now being considered seperate than banks i.e. now Nokia doesnt need any help from banks which they had tied up and can have full control of transactions. Even a seperate category is getting created for Mobile money just like Banks! And Damn it is getting killed :(

Mobile money is something which all companies are targetting and Nokia had already a base of 1.2 million... Now getting screwed.

[Kirill Zelenski]

just one word - Great job, Elop! ((

[don_afrim@twitter]

Tomi, you're forgetting that Nokia at this point in time is incapable of doing anything just like Microsoft. They can't even make a decent phone just like Microsoft can't design a decent OS. They copy all the bad things from the iphone (non removable battery, micro sim, etc) and forget to include all their great inventions like xenon flash, fm transmitter, dual screen, etc... they are stupid!!!

It will run out of business any minute now just like Microsoft.

Whoever in Finland decided to partner with Microsoft wanted to destroy Nokia.

[Peter]

Very interesting! Please elaborate, because if Nokia wants to focus on the core, would that not be handset making? I can not find using the mobile as a wallet on your top ten list on what we do on our phones in the Tomi Ahonen almanac 2012. Will even the best wallet service be enough to sell a telephone in the years to come?

[anamika]

I am not sure how Nokia Money works but Airtel india's biggest mobile provider launched its money service recently http://airtelmoney.in/wps/wcm/connect/airtelmoney/airtelmoney/home

[Tomi T Ahonen]

Hi zlutor, incognito, elm70

Thanks all, I am devastated by this, really, I am very depressed. This is 100% wrong decision by Nokia in every possible way, whether the 'real' needs of Nokia customers or the trend of the industry or the emphasis of BRIC countries or Nokia's stated goal to serve the 'next billion' or Elop's strategic mission and his description of ecosystems etc. And it was a true leadership position, all abandoned.

zlutor - haha, thanks. I hear you :-)

incognito - thanks and me too. I thought there has to be some sanity to Elop's actions, some tiny sliver of sense. And when you read the Burning Platforms memo, and all the statements since Elop has said about need of winning in ecosystems and focusing on Nokia's strong market positions in the Emerging World etc. And then this..

elm70 - haha, sadly, yes, Communities Dominate Nokia too. You are so correct, those 1.2 million loyal Nokia users will now become Nokia-haters. What Nokia really does not need in India is to have an army of fanatics who feel betrayed.

Also good point about the evolution of the Nokia Board.

Thank you all. Please keep the comments coming

Tomi Ahonen :-)

[vladkr]

Nokia loyal customers/fanatics don't feel betrayed in India only. It seems that E. Murtazin's prediction of Nokia's death by the end of 2012 - beginning of 2013 is more and more realistic unfortunately.

I still don't see the point of all that. Even if the goal is to make Nokia less valuable and easier to acquire by Microsoft, what would MS do of a dead cow ?

There is no engineering, almost no production, no programming anymore.

Nokia will organise its "Nokia World" venue in Helsinki this year; isn't it a bit risky, regarding that Elop achieved to ruin a company and a whole (Salo) region ? Is it just provocation ?

[chip_mk]

It seems Elop’s mission is to lobotomize Nokia and turn it into dumb OEM, apparently with wider consent of relevant factors for some undisclosed reason. My condolence to all Nokians who‘ve invested so much effort in putting Nokia to the leading position in so many areas (being in similar position, I know how much hurts).

[KPOM]

Is it possible they concluded that 1.2 million customers after 13 years wasn't enough of a head start? What are Microsoft's plans regarding mobile money? Obviously we know Google's, and it's presumed that Apple will be out with something (if the next iPhone has NFC, that would be a strong indicator). Maybe something is happening behind the scenes between Visa, MasterCard, and the major manufacturers. Apple tends not to roll something out until it is ready to offer a full product, so that may be another year or so, and it could be a deal with one of the credit card processors (look how Apple has successfully strung deals with the record labels and Hollywood studios). Maybe Microsoft is planning something similar, or plans to join an alliance.

[Tomi T Ahonen]

Brief comment to all

I notice some have read somehow that the 1.2 Million Nokia Money users were achieved in 13 years. No. Mobile Money was invented in 1999 (by Coca Cola) and has hundreds of millions of users worldwide. Nokia Money was launched 2 years ago and just in India has already over 1.2 M users a very strong start and a head-start ahead of the other rivals in the India market.

Tomi Ahonen :-)

[n900lover]

KPOM:

In other words nokia is now ms ward, waiting for redmond to move first and then meekly follow, if they are allowed to do so.

Btw I'm curious what synergies this brings to the supposed meltemi linux os for featurephones. Will be even the nokia's own meltemi permanently tied to microsoft and it's various solutions, or is it that Elop just doesn't plan to have money on featurephones at all?

[Oliver]

There is an infamous picture of Elop, probably during a joint event with Microsoft, with his finger pointing down. I have never been comfortable with the CEO of a company vivdly expressing such an image. But that was over a year ago, now we see what message he was conveying back then.
The sad thing is that he is being paid so much to vandalize the company. Nokia could have got some idle youths to do it for free.

One manner of spell are the shareholders under. Are they blind to the destruction taking place?
Can't they hear the collective cries and anguish of thier customers and well wishers, with every unimaginable decsions and turns they take?
Or have they all signed a suicide pact like those dooms day cults?
Is there something much more sinister involved?
Are we dealing with a very powerful entity that sees NOKIA as an obstacle to its ambitions and are using a few shareholders to actualize their objectives?

It seems there is no fight left in the once mighty NOKIA!!!. We are now left with a corporate mouse.

Corporate cowards.

[Oliver]

@Don Afrim

Nokia is very well capable of making a decent phone, matter of fact they'd be spoiled for choice what level of features they should adorn the phone with.

As Tomi has said over and over, it is not a lack of capability that has been Nokia's problem. Go back a few years to the early Nokia Communicator series, these were phones that were way ahead of their time. Yes they were not touch screen phones. But a touch screen is only a glorifies mouse or directional key.

All Nokia needed to do in response to Android and that other fruit device, was to take a deep breath and then take steps purposefully.

Elop was just the very wrong kind of leader for this organization. He can't even inspire a dog to bark.

[vladkr]

@Oliver :
As a small shareholder of Nokia, I just don't know what to do.

Nokia never contacts shareholders for any decision, no offer to vote is made... to Nokia we just don't exist.

So what can we do? Sell all the shares and let the company sink peacefully?