Nokia Disaster Told One Picture at a Time: Today Picture 7: When is a Platform "Burning": The Test Of CEO Sanity (alternately titled:) Is Elop Really This Delusional?

So we continue the Nokia management disaster, studied through a single issue, and single picture per blog. Today we examine management judgement by CEO Stephen Elop. So before I continue, this is a series of blog articles to study the Nokia mess.

So far we've done: the Nokia smartphone unit sales collapse due to the Elop Effect, the competitive picture of Nokia vs Apple and Samsung, Nokia market failure in context of other historical handset industry collapses, the failure of the promised migration from Symbian to Windows Phone, the disasterous Lumia sales pattern using the Windows Phone system and the Revenue Collapse in Nokia's handset business. For those who may wonder am I nit-picking some extreme data points on a personal vendetta or agenda, this is Nokia's official filing to the USA SEC and NY Stock Exchange of the full set of risks to the new strategy as announced by Elop in February 2011. I have not invented these problems, they were clearly stated by Nokia two YEARS ago as so dangerous, they may jeopardize Nokia's profitable handset business. Please read the official Nokia corporation filing to the US Securities and Exchange Commission in their long and explicit risk assessment in their Form 20-F two years ago.

Now lets examine whats going on inside the head of the CEO who wants to be called 'The General' and who pretends to be a strategic thinker. Elop's name will always be tied to the most damaging management memo of all time, the so-called 'Burning Platforms' memo. A memo which cost Nokia 13 Billion dollars of revenues wiped out, and 4 Billion dollars of profits destroyed. A memo that Elop himself has since admitted, caused damage to Nokia smartphone sales. The costliest memo of all time. How can a CEO be allowed to destroy 13 Billion dollars of revenues - and wipe out 4 Billion dollars of profits - and allowed to remain in charge? Why is Elop still running Nokia. I have started an 'Elop Firing Watch' via Twitter, where my followers picked dates of when they think Elop will be fired.

WHEN IS A PLATFORM ON FIRE

So we come to today's picture. This is a picture about the mental ability of CEO Stephen 'Call Me The General' Elop. Is he really a sharp, strategic thinker. Or is he a delusional psychopath. Lets remember, delusion is a severe insanity of the kind, where a madman looks at facts, refuses to accept them, and substitues his/her own alternate imagined fantasy instead of reality.

This is Nokia's situation as of February 2011 and as of February 2012. So the data is according to the just-ended fiscal years (2010 and 2011), after Nokia has just reported its final annual results at the end of January. This is what Nokia looked like, and what Elop, the Chief Executive Officer said about his company and its smartphone business at the time:




This picture may be freely shared

On February 9, 2011, looking at the just-ended, just-reported Nokia fiscal year 2010, Nokia's new CEO sees Nokia is more than twice as big as its nearest rivals including Apple's iPhone - and Nokia grew more in 2010 than Apple so the gap between Nokia's smartphone and Apple was increasing - Apple was not catching up, Nokia was pulling away from Apple. Nokia set a world record in growth in smartphones in 2010. Nokia did this profitably - how profitably? Nokia set a Nokia-record in growth in revenues and a Nokia record in profits in its smarpthone unit - and the Nokia profitability in the smartphone unit grew towards the end of the year, setting also a Nokia quarterly growth record. Nokia's smartphone revenues were second largest in the industry behind only Apple's, and Nokia's profits were also second largest in the industry, behind only Apple's.

You are the biggest, you grow the fastest, you set a world record in growth. You do this with increasing revenues and increasing profits, both of those company-wide records. This, is what the CEO calls a strategy that is failing, and failing so badly, Nokia apparently needs desperately a new strategy, and Nokia is on a 'burning platform'. Delusion is the type insanity where you are able to look at facts, refuse to accept them, and to substitute an imagined fantasy insteady of the reality.

Then lets fast-forward 12 months. Nokia has announced the new strategy by Elop. The Nokia record-setting growth in smarpthone unit sales, turns into a world-record collapse in smartphone unit sales. Nokia proceeds to set a world record fall in smartphone revenues in that year. And Nokia produces its first-ever loss in the smartphone unit - thus a Nokia record failure in the unit that is supposed to deliver the future to Nokia.

You set an industry record crash in unit sales, an industry record collapse of revenues, and the unit that invented the smartphone and the only legacy handset maker to do profits with smartphone sales in every single quarter of smartphone existence, suddenly produces a loss. This, the CEO now says that Nokia is "no longer on a burning platform", and that "Nokia's future is secure", and Nokia is in "an era of growth". Delusion is the type insanity where you are able to look at facts, refuse to accept them, and tosubstitute an imagined fantasy insteady of the reality.

I am not making this up. Elop looked at Nokia's record-setting industry-crushing dominating year 2010 in smartphone growth, highly profitably, and sees 'distress' and 'disater' and 'failure' and panics, and abandons Nokia's winning ways, and issues his Burning Platforms memo (totally full of delusional lies by the way). Elop says that Nokia has "fallen behind" the competition and if continues on the same path (that had just grown faster than the competition) Nokia would "get further and further behind, while our competitors advance". That was February 9, 2011, two years ago.

Then yes, Nokia went to set a world record failure in handsets, Nokia fell in the next year, 2011, worse than Motorola or Palm or Siemens or RIM. Nokia literally set a world record collapse in handsets. The unit sales set a record in collapse, Nokia smartphone revenue fall is a world record, and the perennially secure profit-machine was turned upside-down to produce its first-ever loss. This, the CEO says on February 13, 2013 in an interview to Business Day that "Nokia is no longer on the edge of a burning platform" and "Nokia's future is secure" and Nokia is "facing a new era of growth."

Delusion is the type insanity where you are able to look at facts, refuse to accept them, and to substitute an imagined fantasy insteady of the reality.

ELOP WAS THE ARSONIST

The Nokia smartphone platform was not on fire in 2010. Nokia was more than twice as big as its nearest rivals - this is such enormous dominance of an industry, that Toyota has never enjoyed such a massive overpowering lead in cars. Neither has GM or Renault or Volkswagen or Fiat - ever. That dominance is so huge, Hewlett-Packard has never had the pleasure of being twice as big as its nearest PC maker rival. Nor has Dell, nor has Lenovo or IBM or Apple or Compaq or Toshiba or Acer or Asus or Fujitsu etc. But not just was Nokia twice as big as its nearest rivals - Apple's iPhone and RIM's Blackberry in smartphones, Nokia was growing more in 2010 than its nearest rivals - the gap was increasing. Nokia did this with highly profitable business, with increasing revenues and increasing profits. Towards the end of the year, when Elop took over, Nokia's smarpthone unit average sales prices jumped up at a Nokia-record, the revenues for the first time grew bigger than the traditional 'featurephones' ie 'dumbphone' unit - and the jump in Nokia's profitability set a Nokia-record. Nokia's loyalty was so strong, in an independent UK survey by Right Mobile Phone Nokia's customer base had the highest retention rate of any handset brand.

Nokia's Symbian was the bestselling smartphone OS, and it was the biggest OS by installed base, and it was the bestselling smartphone OS in China, the world's largest individual country market for smartphones, and Symbian was the bestselling smarpthone OS on the continent that sold most smartphnoes, Europe. Symbian was the bestselling smartphone in the country with the biggest growth of mobile in 2010, India, as well as the bestselling smartphone in the continent with the biggest growth of mobile, Africa. Nokia's Ovi was the second bestselling app store behind only Apple's iPhone App Store, except that Ovi was available with over 100 carriers supporting it, with apps in over 60 languages, growing far faster than Apple's iPhone App Store. Nokia's Qt was being introduced as the app developer tool to provide apps across multiple smartphone platforms including Symbian, Maemo, MeeGo Moblin, initially, and soon also Blackberry, Android as well as the featurephones running Nokia S40. Qt would shortly reach twice as many devices as the installed base of Windows on PCs, tablets, and smartphones.

This is what the CEO calls a 'burning platform' and forces Nokia to quit the winning - not winning, utterly DOMINATING strategy, and instead to select the weakest, tiniest, unproven, unloved platform by the company known for plunging its 'partners' to loss-making and bankruptcy, Microsoft. When you take a winning strategy and turn it into world-record collapse - you have set your platform on fire. You, CEO Stephen 'Call Me The General' Elop are an arsonist. There was no fire on Nokia's platform, Stephen 'Call Me the General' Elop. No. There was no fire. The platform was not burning. You set it on fire, Mr Pretend-Patton. You, and only you. Nokia's smartphone platform was the strongest in the industry in 2010, by far the most overpowering, winning, dominating strategy. 77% market share in the world's biggest smarpthone market, China! The strongest loyalty in the UK. The second-biggest app store in the world, closing in on number 1, Apple. Nokia record profits, Nokia record revenues and the world's biggest smartphone unit sale growth. There was no fire on that platform at Nokia. You took it, and set it on fire. You are a menace. You are a psycopath!

NOW WHAT OF YEAR 2012

Lets fast-forward to today. Now we have seen a second year in the Elop new strategy era. This is what the picture looks like now. Nokia has broken its own record in failure, yes, setting a new world record collapse in smarpthone unit sales, to catastrophic levels in 2012, and also set a new world record in smartphone revenue crash, and now Nokia also sets a world record loss in smartphone sales. What does the CEO think of this performance?




This picture may be freely shared

Now just over a week ago, Elop told us that he is "very encouraged" that Nokia's "execution against our business strategy" has "started to translate into financial results". Financial 'results' yes, if by results you mean not just Nokia-record losses, but handset industry record level losses. That is a 'financial result' yes, but not one that any CEO would be 'very encouraged' by, unless it is your intention to destroy Nokia?

Delusion is the type insanity where you are able to look at facts, refuse to accept them, and to substitute an imagined fantasy insteady of the reality.

In 2012, Nokia took its own world record collapse in smartphone unit failure, and managed to do even worse, setting a new world record in failure. Nokia took its record-setting revenue collapse in smartphone sales, while the global smartphone industry exploded growing over 40% in units and over 30% in revenues, and Elop managed to wipe out 55% of Nokia smartphone unit sales and 50% of Nokia smartphone revenues - from year 2011 that was already a world record setting failure year for Nokia and Elop's new strategy. The defintion of insanity is to do the same thing and to expect a different result. In 2012, Nokia took its company-record loss in the smartphone unit, and made it far worse, producing a world record loss by any smarpthone maker, in 2012.

Nokia's new Lumia smartphones running the Windows Phone by Microsoft, are the worst smartphones Nokia has ever launched. With the last edition of Symbian, a new launch of a new version of Symbian did 5 million units in one quarter in Q4 of 2010. Now with these new Lumia smarpthones, after 5 quarters, Nokia has yet to even match that in any quarter, the very best that Lumia has managed is a paltry 4.4 million units - five quarters after launch - while the smartphone market has more than doubled in size in the mean time. The Lumia series is plagued with failures and problems and bugs. The Lumia buyers hate the devices so much, in an independent survey of Lumia buyers by Yankee Group in 2012, four out of ten Lumia buyers rated it the worst phone they had ever seen. The loyalty of the Windows Phone series is so bad, the Bernstein survey of smartphone brand loyalty found that two out of three who were hoodwinked into buying a Lumia, hate it so much, they will definitely never buy another Windows Phone smarpthone again! 

The Lumia series has the hightest return rates of any phone made by Nokia ever (customer returning phones after purchase). The Lumia series has the lowest resale value of any Nokia phone ever released, in many markets the resale value is already zero. It may amuse American readers but yes, in Africa, India, Indonesia, Brazil, China, much of the rest of the world, handsets are sold second-hand, like cars. Your resale value is a significant factor in how much you are willing to pay for your new phone, especially as most people live in countries where phones are not subsidised by the carriers and sold on 2 year contracts. Consumers pay full retail prices for their handsets, ie the real price of an iPhone is 640 dollars, not the 179 dollars that AT&T advertises on a 2 year contract. Back to Lumia, the European carriers for example said, that the Lumia series is not suitable for European consumers, and the carriers have effectively boycotted Lumia sales from the start. The very latest survey by the Telegraph in the UK this past week found that in-store sales staff won't offer Lumias to customers asking for smartphones, they offer Samsung Galaxies instead.

The Windows ecosystem is dead, it is the sixth of six, literally the smallest in existence. It has not been growing, it has been shrinking. The Windows ecosystem has a modest catalog of apps primarily because Nokia was paying app developers to build Windows versions of their apps (and so did Microsoft too, offer payments when developers simply refused to bother to develop apps to the tiny ecosystem). The traffic generated by Windows Phone apps is so miniscule it doesn't register on most measurements, while ironically, Symbian still runs biggest or second biggest app environment on the three most populous of the six inhabited continents.

Elop looks at record failing Nokia smartphone unit sales, record collapsing Nokia smartphone revenues, and hideously huge losses - for the full year the Nokia smarpthone unit generated a 2 Billion dollar loss, at one point in Q3 when pushing the Lumia series very hard, Nokia was making a 49% loss per smartphone sold! This compares to a 2 Billion dollar profit Nokia made just before this mad Microsoftian misadventure that Elop calls a new strategy. Elop sees collapsing sales, record-setting revenue crash and massively growing 2 billion dollar loss - and he says he is "very encouraged" that his strategy is now succeeding? That his strategy has "started to translate into financial results" Delusion is the type insanity where you are able to look at facts, refuse to accept them, and to substitute an imagined fantasy insteady of the reality.

WHAT DOES DELUSIONAL CEO DO?

Can a CEO be this mad? How can Nokia's Board accept the management of a madman? Why is Nokia led by the leadership of a lunatic? This is what happens if a delusional psycopath is in charge:

Nokia invented the smartphone and the first Nokia smartphone had a full QWERTY keyboard. Nokia's business-oriented E-Series on Symbian was renown for its wide range of QWERTY keyboards and the heavily texting-addicted youth were often selecting Nokia QWERTY based smartphones. About one in three Nokia smartphones sold globally have had QWERTY keyboards historically. Elop admits to having had 'internal debates' about QWERTY. The Lumia series has introduced 9 devices so far, not one of them has a physical QWERTY keyboard in any form factor. Elop has voluntarily abandoned one third of Nokia's loyal custoemr base with this one moronic move. Only a delusional psycopath looks at facts, is able to actively ignore the truth, and subtitute his own hallucination in the place of reality.

Nokia announces the new superphone the N9 with MeeGo. The press love the phone. After Nokia's share price has been in free-fall for five months, suddenly on the N9 news, Nokia's share price jumps 5%. Any sane CEO would celebrate and be seen everywhere with the new superphone. Elop announces to Finnish newspaper Helsingin Sanomat, that no matter how well the N9 will sell, Nokia will not release more phones to run on MeeGo. WTF ? Can you see Steve Jobs ever saying something that moronic? Can you see Steve Ballmer - hardly a rocket scientist among CEOs, himself listed as one of the worst CEOs in the world - but would Ballmer say, that if the next Xbox is a success, he won't do more of them? What CEO takes a highly praised product, and kills its future? Only a delusional CEO can do that.

Nokia's traditional stregth is the camera. Nokia's own internal surveys reveal, year after year, that the camera is the number 1 reason what Nokia smartphone buyers want when buying a Nokia branded smartphone. Nokia has had a 12 megapixel flagship smarpthone since 2010 and on Symbian, introduces the industry-shattering 808 Pureview with its 41 megapixel monster-sensor in 2012. And once again, Nokia itself says in 2012, that yes, Nokia customers number 1 request is the camera. Nokia wins best cameraphone year after year after year in survey after survey, from the N93 to the N95 to the N9 to the 808 Pureview. Yet the delusional CEO looks at the facts, and decides he has a better imaginary reality inside his head, and he regresses, releasing puny 8 megapixel cameras on THREE SUCCESSIVE flagships on the Lumia series. So bad, that even in 2012, the old 2010 Symbian based flagship N8 wins in side-by-side camera tests (and the N8 still registers in December 2012, among the top 5 bestselling Nokia smartphones sold in China for example when the phone is literally more than 2 years old and 9 newer Lumia phones have been released)

Nokia's biggest rival is Samsung. Samsung competes against top end smartphones, in mid-priced featurephones and in low-cost dumbphones. Samsung is the only rival to match up to Nokia in every country and in most markets Samsung and Nokia were numbers 1 and 2 back in 2010. When Elop wrote his Burning Platforms memo, Nokia was 50% bigger than Samsung in dumbphones and 4x bigger in smartphones. Elop in his memo lists many competitors - including Google who is perhaps Microsoft's rival, but as Google didn't make handsets, smartphones nor networking equipment, Google was not in any way Nokia's significant rival in 2010. But Elop ignored Samsung? Then in February 2011, when Elop was asked about Samsung, he said, he does not lose any sleep over Samsung !!! At that very moment, Samsung passed Nokia as the world's biggest handset maker. It had already passed Nokia as the world's biggest smartphone maker. Today Samsung is 6 times bigger than Nokia in smartphones and produces the second largest profits in handsets, behind only Apple. Elop said he didn't lose any sleep over Samsung. Delusion is the type insanity where you are able to look at facts, refuse to accept them, and to substitute an imagined fantasy insteady of the reality.

Nokia's MeeGo based 'Searay' handset is selected by Verizon as their Nokia return handset. Verizon love MeeGo and the Searay. Nokia has for years hoped to return to the US market. Any sane CEO would tell Verizon, you will get it. But Elop? He refuses to let Verizon get the Searay, and rather bastadizes the Searay, forces it to use Windows Phone - and when Verizon see the Lumia 800, they say no way. Nokia lose a year of Verizon sales. Only a delusional CEO can behave like this.

Nokia's N9 is released in September 2011 and immediately achieves in side-by-side tests, the astonishing rating by practically all tech tests, that it is better than the iPhone !!! There has never been a Nokia smarpthone that regularly beats the iPhone (the E90 Communicator was the last Nokia smartphone to manage it but only occasionally, not consistently). This is not just the only Nokia smartphone consistently ranked better than the iPhone, it is the ONLY smartphone by ANY BRAND to do that consistently. Also the MeeGo OS is rated superior to the iPhone iOS - something Windows, Blackberry, Android, Symbian etc have never achieved. So any reasonable CEO of course would rush to launch the N9 to every strong iPhone market like the USA, France, UK, etc. What does Elop do? He forbids the release of the N9 to any strong iPhone markets? Remember, this is at the time when Nokia is setting global records for smarpthone sales collapse and producing massive losses, with its factories idling. The N9 is a highly profitable smarpthone commanding premium prices. What idiot CEO refuses to let the N9 be sold? Only a delusional psycopath can look at the facts - that the new Nokia N9 is better than the iPhone - and then explicitly forbid its sale in any market where the iPhone is strong. What is wrong with Elop? 

THe 808 Pureview is released in February 2012 and its demand highly exceeds Nokia production. The 808 Pureview instantly is heralded as the best cameraphone of all time. The 808 Pureview runs on Symbian using traditional Nokia strengths, and has lots of abilities and features that Windows Phone cannot support. The smart CEO would take the high popularity and visibility of the 808 Pureview, and rush to release a series of Pureview smarpthones, the 818 Pureview with QWERTY slider. the 707 Pureview with a slightly smaller sensor like 22 megapixels, but stll far bigger than any current rivals. And for Christmas 2012, produce the uberphone, the 909 Pureview with a 50 megapixel sensor, and optical zoom. Right? Nokia itself admits, the demand for the Pureview was far higher than Nokia anticipated. This is a hit phone! It won all awards in 2012 for best cameraphone. And most Nokia customers came in asking for a good camera. Any smart CEO would have produced a family of Pureview with Symbian, especially as Nokia factories are idling and Elop himself promised 150 million more Symbian while he has only delivered 74 million so far. And with no royalties paid to anyone, Nokia can do Symbian far cheaper than for example Lumia where Nokia has to pay a royalty to Microsoft. If the 808 Pureview was a failure, it makes sense to end it. If the Pureview is in such high demand Nokia can't keep up, any sane CEO would rush a series of sister products. But not Elop. Nokia now announced there will be no more Symbian based smarpthones, even as Windows Phone cannot support nearly all the features that make the 808 Pureview the best cameraphone on the planet.

Delusion is the type insanity where you are able to look at facts, refuse to accept them, and to substitute an imagined fantasy insteady of the reality.

I could go on and on and on and on. Nokia's CEO is delusional. He looks at Nokia performance and cannot relate to it. He does not see success as success, he seems to want to destroy any success he finds. Elop is to success what water is to fire. Elop found the strongest smartphone global juggernaut, and set it on fire like an arsonist. He then looks at the disasterous failure and calls it a success. Elop is dangerous as a CEO, not dangerous to his rivals, dangerous to his own employees, to his own Board, to his own shareholders and investors. Why is a delusional psycopath allowed to remain in control of Nokia?

For those who didn't like my little clown-faces, I have created a cleaner version of the picture. If you want to write about this story and use my pictures, you may prefer this one, haha. Feel free.




This picture may be freely shared

This was part 7 in the Nokia disaster. Elop has presided over the world-record collapse of a dominating juggernaut. Elop is literally the worst CEO of all time. Unfortunately this series is nowhere nearly done, I will return with more articles in the series, always one picture and one angle to the mess that did not exist before Elop, but what was caused by Elop.

(I need to point out, Nokia was in trouble before Elop, yes, Nokia corporation, not Nokia smarpthones. Nokia had trouble with 'execution' not its smartphones strategy. Nokia needed help in execution, delivering new phones on time and without bugs. Elop did not address those - his new Lumia phones have been plagued with more errors and bugs than any Nokia phones ever before, including the notorious N97. What Elop did, was to see that there was a problem, ignored it, and created a new problem. Its like a doctor, who arrives at an accident scene, sees that a patient has lost a leg and the leg needs to be cleaned and properly amputated. Then the doctor rather than attending the leg, decides to cut off an arm from the patient.. Elop has found problems at Nokia, ignored those, but created new problems of his own - wait, this is EXACTLY like Elop, the Delusional Psycopath)

Stay tuned, more troubles coming from the Nokia saga told one picture at a time. And for those who missed it, we have an 'Elop Firing Watch' on the blog, a contest to guess what date is Elop fired from Nokia. (that date cannot come too soon, and will probably be named a national holiday in Finland, haha) The contest has over 100 entries..

Comments

[Tomasz R.]

It looks like Nokia is getting some help from EU in the form of R&D grants for graphene research. "EU money could be a life saver"

http://www.fudzilla.com/home/item/30336-nokia-gets-$135-billion-to-develop-graphene

[foo]

@Tomasz R: "It looks like Nokia is getting some help from EU in the form of R&D grants for graphene research."

That's great news!

The only problem is that Nokia had a negative net income of $4.2 billion in 2012.

If they keep burning cash at the same rate, the injection of $1.35 billion will be lost in less than 6 months.

There is a small hope, though: Nokia made $585 million profit in Q4/2012.

The bad news is that Q4 is the best quarter of the year... so Nokia could keep loosing money (albeit in a small rate) in Q1/2013.

[foo]

Windows Phone 8 hasn't slowed Microsoft's mobile freefall

New data shows Redmond's smartphone share is smaller than ever

Four months after its formal launch, not only has Windows Phone 8 failed to win Microsoft a bigger piece of the mobile pie, but Redmond's share of US smartphone subscribers is actually still shrinking, according to the latest figures from analytics firm comScore.

http://www.theregister.co.uk/2013/02/07/winphone8_share_still_shrinking/

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