I have been chronicling Nokia's disaster since Stephen Elop announced his mad new strategy (his first 5 months in charge were a brief period of strong, healthy, profitable growth for Nokia, if you remember). As the Elop Era at Nokia has been a series of mistakes and errors, I have run a series of blogs, each focusing on one strategic blunder, and used only one picture per blog to illustrate that error. So far we've had 9 blogs in this series: the Nokia smartphone sales collapse due to Elop Effect, the competitive picture of Nokia vs Apple and Samsung, Nokia market failure in context of other handset collapses, the failure of the migration from Symbian to Windows Phone, the disasterous Lumia sales pattern with Windows Phone, the Revenue Collapse in Nokia's handset business, the CEO delusions: When was Nokia truly burning, and when was it safe from any platform fire? the Extent of the Failure in Elop Strategy Promise vs Delivery and finally the Ultimate Proof of Failing the Future: Elop reversed Nokia's world-leading migration from dumbphones to smartphones.
I have several times in the series mentioned, that the
damage done by Elop over the past two years has been worse than the biggest
management failures of history. We did the mobile handset industry, where this
Elop-orchestrated catastrophy has been obviously the worst fall in handset
history. Worse than Motorola, Palm, Siemens, Blackberry, etc. And I've
mentioned other famous management disasters like the launch of New Coke by Coca
Cola in 1985, or the Exxon Valdez oil spill or the problems Toyota had with a
global recall of millions of cars with brakes problems. Today we will put Nokia
and the Elop Effect into the context of the world's worst management mistakes
of the modern management era.
RECENT CASES OF WORST MANAGEMENT BY GLOBAL GIANTS
Note, first, that I am not going to include clear crimes ie
fraud. So I am not going to include clear management crimes, like those that
destroyed Enron, Worldcom and Lehman Brothers. I mean mismanagement, where yes,
management may have been negligent in their duties or made catastrophically bad
management decisions, but the problem is not one of frauding the public and
claiming profitable business where none existed.
In this series, the problem is one of incompetence, of truly
horrid management 'skill'. So for example, for the world's luxury car market
leader, Mercedes-Benz, to release a new car model that was so unstable, if you
drove it into a curve, it tipped over - the A-Series (launched in 1990 and soon
recalled and redesigned). Or the world's biggest soft drinks maker, Coca Cola,
launching New Coke in 1985, but simultaneously removing the existing soft drink
from the market - facing a huge consumer backlash, that soon saw Coca Cola
re-introducing the old flavor as 'Coca Cola Classic' - which today still exists
simply as Coke, while New Coke was quietly renamed as Coke II and then finally
discontinued in 2002. These are cases of clear management failures, mistakes,
errors that cost their parents dearly. They are studied at MBA classes the
world over as how not to run a business.
I also include management failures of 'process' where they
perhaps allowed mistakes to enter into the production process, while the big
disaster could be called an 'accident'. Toyota's brakes problem in 2009 is one
of these, as is BP's Deepwater Horizon oil spill in the Gulf of Mexico in 2010.
In these cases there were a series of management problems that helped create
the conditions that resulted in the problems. I also include the Exxon Valdez
oil tanker accident in Alaska in 1989, even though one could argue, that was
due solely to the incompetence of the Captain of the oil tanker that ran
aground. Even so, Exxon had decided to operate those single-hull cheaper oil
tankers - a double-hull tanker - the type was already available at the time -
would not have resulted in that kind of damage to Alaska, so Exxon management
did create conditions that enabled that accident to happen.
There are other major collapses of major companies. Pan Am
was one of the big international airlines, that went bankrupt rather fast. But
its troubles started from a terrorist incident (a Pan Am operated Boeing 747
Jumbo Jet was bombed and fell from the sky over Lockerby in Scotland in 1988
killing everyone onboard. The Khaddafi government of Libya claimed
responsibility for the bombing). The resulting travel problems were further
damaged by a global economic downturn at the time plus some suddenly collapsed
merger talks, leaving Pan Am exceptionally exposed, and the airline died a
quick death. But no level of preparation by an airline at the time could have
prevented government-sponsored terrorism in this, pre 9/11 era of air travel.
Pan Am was a particular case of being totally in the wrong place at the wrong
time, but even so, while it was an American 'flag carrier' airline and well
known around the world, at the time by 1988, Pan Am was not anywhere near the
world's largest airline and wasn't even a Fortune 500 sized company.
I am also going to exclude failed mergers and acquisitions, that often lead to big losses in the first year or years of attempting the merger, some succeed, others fail spectacularly in costly manner, like AOL-Time Warner. This is not an analysis of the mergers and acquisitions industry. This is an analysis of management incompetence WITHIN their own business, using their own resources. So yes, I will limit this discussion to companies that were (among)
the largest of their industry - or a given lucrative industry sector. And I
limit the analysis to truly major global industry giants, ie companies big
enough to make it into the Fortune Global 500 - companies on that list should have
totally professional management and know what they are doing. There have been
even more spectacular cases of corporate destruction by management, we on this
blog have examined the Osborne Effect and the Ratner Effect as they relate to
Nokia's Elop and what I call the Elop Effect. But neither Osborne Computer company nor Ratners jewelry company
were anywhere near Global Fortune 500 sized companies, so we ignore those.
I could also go back in time, such as Ford and its launch of the Edsel in
1958 is a famous example of the giant car-maker producing a total disaster of a
new car launch. But that goes so far in history, to a different era. I will
limit this blog to those incidents most of my readers were alive to remember.
Please recognize, I am NOT an expert on car manufacturing, or the oil
production industry, or the food and beverage market. I am doing my best here,
aided by online sources and Wikipedia, but honestly, am not the expert. I have
tried to do an honest job of chronicling briefly the extent of the problem, in
particular with the famous incident or crisis, and how it impacted that
corporation's global revenues, and profits, and if the CEO was fired. But
remember, I am not an expert on those industries, if I got some part a bit
wrong, please allow me that and tell me where I erred, I will correct any
mistakes of course. I can only claim to know the mobile industry where I have
written the most books of this industry and have been thought of as one of its
thought-leaders for more than a decade... With that, I do want to set Nokia's
collapse into a context of global management disasters. I'll do this in
chronological order. So we start from 1985 and a brand new drink called New
Coke.
COCA COLA COMPANY - NEW COKE LAUNCH 1985
Coca Cola was the world's largest soft drinks manufacturer
in 1984. It was highly profitable and saw growing sales. But Coke saw its
market share in slight but steady annual erosion to rival Pepsi Cola, who
offered a more sweet cola drink. So suddenly in 1985, without warning, Coca
Cola introduced its New Coke flavored cola drink, which was sweeter than that
of Pepsi. Bizarrely, what Coca Cola company did, was to pull its old standard
Coca Cola product from the market at this launch - not to introduce the new
flavor alongside old Coke but to replace the old flavor. We all know what
happened - a big consumer backlash demanded old Coke to be returned to the
market, which Coke did, by calling it Coca Cola Classic. For many years both
products were sold side-by-side in North America, but the popularity of the new
flavor diminished and the New Coke product was ended in 2002.
What happened to Coca Cola company in 1985? How did this
launch disaster impact the Coca Cola company? Coke's sales fell by 3% in the
year that followed and Coke lost its market lead to Pepsi. But Coke was never
unprofitable in this episode, and after a year, would recover both its market
lead and a position of increased sales above what it had in 1985. Yes, New Coke
launch was a mistake but one, from which Coca Cola management quickly and
smartly recovered (some even suggest a cunning management conspiracy here, that
Coke knew its customers would demand old Coke back, and this was all
pre-planned, expressly to withdraw the old flavor immediately.. Coke management
has responded to that rumor saying they wish they had been that clever). The
company contined to make profits through this episode and the CEO didn't lose
his job.
EXXON - EXXON VALDEZ OIL TANKER GROUNDING IN ALASKA 1989
So next up, from 1989 we get the famous oil spill in Alaska.
Exxon's giant oil tanker, Exxon Valdez ran aground and spilled massive amounts
of oil into a pristine and vulnerable Alaska environment. Exxon was the world's
largest oil company at the time who had seen strong growth in revenues the year
before, and made massive profits. Yes, the oil spill was a PR nightmare, and
yes, there were clean-up costs, but Exxon revenues did not stop growing into
the two years that followed. And Exxon continued to make huge profits. Yes, we
can count that Exxon's profits dipped in the year following the accident, but
were still massive. When the damages are added to the somewhat diminished
profits, Exxon's total profits following the oil spill were down by about a
third for no more than two years, and after that recovered fully. While the
Captain of the ship Joseph Hazelwood was fined and lost his job working for
Exxon, he didn't lose his Master's License (which means, he was still licensed
to pilot giant ships). However, with his reputation ruined, he never captained
another major ship again.
DAIMLER-BENZ - MERCEDES BENZ A-CLASS UNSAFE TO DRIVE INTO
CORNERS 1997
Next up we get to 1997 and the Mercedes A-Class. This was
Daimler-Benz company's first attempt at a minivan type of vehicle, a hybrid
type of vehicle body, between a standard station-wagon/estate vehicle and a
proper full-size van. The A-Series design had a flaw, that its center of
gravity was too high for the width and length of the wheelbase. If driven into
a corner at normal street-legal speeds, the A-Series would tip over. This was
first reported by a Swedish car-testing magazine and soon replicated the world
over. The car and company faced a lot backlash and damage to the reputation.
The A-Series was soon recalled and totally redesigned to avoid the tipping
problem. Now, Daimler-Benz was nowhere near the biggest car maker, so its
inclusion to this list is tenuous, but Mercedes Benz was the market leader (at
least in value of cars sold if not in volume of cars sold) in the luxury car
segment. Overall, Mercedes was only the 10th biggest car maker at the time. But
yes, as the biggest luxury car maker, I will include it to this listing of the
biggest management blunders, as this is also a popular MBA case study in
management failure.
What happened to Daimler-Benz due to the A-Series fiasco?
Sales revenues ended up down one percent for one year before recovering and
returning to growth. Daimler-Benz did not produce losses during this recovery
operation and relaunch of the A-Series. The company generated healthy profits
all through the launch disaster. While a bad publicity episode for the
Mercedes-Benz brand, the company was healthy through this rough patch and the
CEO kept his job.
TOYOTA - BRAKES PROBLEM GLOBAL RECALL 2009
Toyota was the world's largest car maker, growing strongly
and generating healthy profits in 2008. In fact, the car company had never
produced a loss in any quarter of its existence. Toyota's cars were very highly
rated for build quality and safety at the time. Then came the brakes catastrophy
of 2009, which resulted eventually in 14 million Toyota cars being recalled.
How did it impact Toyota? Sales fell very badly, falling 8%
in the next year, and recovered only partly in the second year after the
problem. It took Toyota three years to return to the sales levels it had seen
before the problem. Toyota's profits turned into losses, and the company posted
its first-ever annual loss for that year, resulting in the CEO resigning in
2010. Toyota lost its market leadership position falling to number 2. But
within the next year, Toyota returned to profits and today Toyota has also
recovered its number 1 global car-maker status. Looking at damage to profits, the
level of the losses generated were of the magnitude of 7% of total revenues,
for one year. I should mention, Toyota's shares fell 15% in value to its worst
moments about a year after the incident before recovering.
BP - DEEPWATER HORIZON OIL SPILL IN GULF OF MEXICO 2010
BP was the world's third-largest oil company at the time,
with strong growth in sales and huge profits. An underwater oil drilling
platform had a rupture very deep in waters at depths where spill damage
capability was not proven. The company took months to stop the spill and seal
the well.
How did this impact BP? BP had previously seen strong growth
in sales revenues, those slowed to flat sales and BP had only 1% more revenues
in the year after the spill. The company went from generating profits to making
a loss for one year, but then returned again to making profits in the second
year. The CEO was fired. When the damages are added to the losses, the total
cost to BP were of the level of about 6% of total revenues if allocated over
one year, or about 3% per year for two years, if spread over two years.
NOKIA - ELOP EFFECT DESTROYING A MARKET-DOMINATING POSITION
IN HANDSETS 2011
Nokia was the world's largest handset maker by a wide margin
in 2010, and was growing sales in both units and revenues; and was vastly profitable.
Nokia's new CEO, Stephen Elop took over in September 2010 and for the last
quarter of the year, Nokia produced record profits of its long history. The
stock market seemed to like the new CEO, Nokia's share prices were up by 11% by
late January 2011 and the ratings agencies all rated Nokia a near-perfectly run
company, with all three ratings agencies grading Elop's first five months so
good, Nokia's credit ratings were one notch below perfect.
The future of mobile phones is what are called 'smartphones'. While some
revisionists want to claim that Nokia had been in trouble before Elop changed
Nokia's strategy with smartphones, and the popular myth claims that Nokia was
'losing' to the iPhone and Samsung, Blackberry etc. That is simply not true. Nokia
had invented the smartphone and dominated the global smartphone market, not
just selling more than twice as many smartphones as its nearest rivals - a
powerful position never enjoyed by Coca Cola, Toyota, Exxon, BP or Daimler-Benz
in their industries - but growing more in 2010 than its nearest rivals, so the
gap from Nokia to its chasers, like Apple, Samsung and RIM/Blackberry was in
fact increasing during 2010, not diminishing. Please bear this in mind - even
as various history revisionists want to perpetuate the myth, in reality in
2010, Nokia grew more than Apple, more than Samsung, more than Blackberry -
Nokia was so dominant in smartphones that Toyota, Exxon, Coca Cola had never
had that size of a lead - and Nokia's massive lead was increasing in 2010, not
diminishing. This was a 'winning hand' if the future of handsets was indeed, as
we know it is, smartphones.
In February 2011, Nokia's new CEO Stephen Elop repeated two infamous
and massive communication errors, each individually so damaging, that they had already
previously been turned into case studies of supreme management mistakes,
studied at MBA schools. First, Elop issued a memo highly critical of Nokia's
products calling them so bad as to liken Nokia's position to that of being on a
burning oil rig. The 'Burning Platforms' memo was widely reported in the press,
and resulted in a 'Ratner Effect' whereby if the CEO of a company bad-mouths
his own products, he will be believed and sales will collapse, specifically,
sales support of the sales channel will disappear. As it did. Nokia's handset
sales fell at a mobile industry-record speed from this moronic statement. What
makes it worse - is that the Burning Platforms memo was not even accurate, Elop
himself has since issued nearly a dozen statements walking back or fully
reversing positions he took in that costly memo. So where Ratner accurately
called his jewelry crap, Elop actually made the unforgivable error - he called
Nokia products worse than they actually were, only expediting the speed of the
collapse.
I said two communication problems. Elop added to the 'Ratner Effect' problem
with the announcement of the switch of his smartphone platforms to one new one.
Nokia was going to switch from Nokia's own, self-developed platform trio of the
old but still serviceable Symbian, Nokia's own-developed Linux-based Maemo used
in limited production, and Nokia's newest, also Linux-based highly praised and
beloved MeeGo (developed with Intel). These were abandoned in favor of a future
platform by Microsoft, as an evolution of the then-current version of Windows
Phone which Nokia at the announcement was not even going to deploy.
Because of this ridiculously premature announcement, Nokia
could not show any phones and not even commit to any dates of when the first
phones of the new platform would be available. (Nokia's first Windows based
smartphones would not be sold until 9 months later in small quantities and 12
months for global distribution in volume. This is an eternity in a handset
business where product cycles are measured in months and handset replacement
cycles for smartphones in most advanced markets were under 12 months.)
This announcement of promising a new - and incompatible -
platform for Nokia's premium products, while not offering anything to sell or
even show, is called the 'Osborne Effect' named after the computer manufacturer
who committed this error before. As with Osborne, Nokia smartphone demand instantly
collapsed, as any buyer recognizes the current product line is instantly
obsolete. Sales volumes, revenues and profits at Nokia fell due to these two
effects, to an unprecedented degree, that I have christened the 'Elop Effect'
ie the costliest management communication of all time.
But Nokia is more than smartphones. The Elop Effect also
hurt Nokia's other handset business, its 'dumbphones' or 'featurephones'
business. Yet Nokia also sells other products and services such as its
networking infrastructure products and various mapping services etc. How big is
Nokia's Elop Effect damage? Did Nokia's overall sales suffer?
Did it ever? Nokia had seen solid growth in its revenues
from 2009 to 2010, now its sales collapsed. In the first year after the Elop
Effect, Nokia sales tumbled 9%. In the second year, Nokia sales fell another
24%. Total fall over two years since the Elop Effect is 29% of revenues. This
is BY FAR the biggest damage done by management to any Fortune 500 sized
company in such a short period of time. When Toyota saw only half as bad a
decline in sales revenues (and BP only less than one quarter as bad), their
CEOs departed.
What of profits? Nokia had strongly profitable handset
business (its only loss-making quarter since it became the world's largest
handset maker was one quarter in 2010 where the loss was driven by the
networking unit; the Nokia handset unit had never reported a loss). And the Nokia
profits were growing towards the end of the year 2010, when in Q4 the
smartphone unit established a Nokia record for profits and profitability. Now
what happened after the Elop Effect? The smartphone unit was immediately
unprofitable, and has not recovered to profits since the Elop Effect. The
dumbphone unit was also plunged into loss-making, and its 'return to profits'
finally in Q4 of 2012, was accomplished by accounting gimmicks, most of all by
Elop selling the Nokia HQ building - and allocating all that revenue a profit
to the handset unit, not spread across all Nokia units. By selling handsets,
Nokia's handset unit is still unprofitable now. I am deeply suspicious of
Elop's recent corporate sales activities (the Oulu Finland Nokia campus was
sold recently as was a series of patents) - if these are again used to bolster
supposed 'handset business' profitability to create the illusion of the handset
unit being supposedly 'profitable' once again.
Back to the Elop Effect. How big was the damage? When the
abandoned profits and resulting losses are added, and taken as a percentage of
sales, the loss to profits was 8% in 2011 and 10% in 2012. Note, not of the
smartphone unit, or even the handset unit, this is of all Nokia Corporation
revenue as of the level prior to this self-induced catastrophy of the Elop
Effect, so for the full year 2010. The damage to Nokia profits (as a
percentage) is twice the damage level caused at Toyota over two years, and
three times the damage done at BP, over two years. Whereas Toyota's share price
damage was the worst in this group, down 15% one year into the crisis, Nokia's
share prices collapsed, down 55% in the first five months after the Elop Effect
and still today, more than two years since the damage was caused and were down
as far as 80% at the worst levels before rumors emerged that Nokia might be
sold. Those rumors have helped Nokia share prices recover somewhat but the
Nokia's share price is still 65% below where it was before the Elop Effect at
the start of February 2011. All three ratings agencies now rate Nokia as junk.
Elop's predecessor, Kallasvuo saw Nokia share price
fall by about 50% over three years and was fired (and during his tenure Nokia
still produced profitable annual business every year). Elop has not produced
one profitable year and has seen share prices fall more in shorter time than
under Kallasvuo. Why is Elop allowed to run this company (to the ground).
THE PICTURE OF THE SIX BIGGEST MANAGEMENT FAILURES
Here is the picture today. This is on one graph, the six most infamous
management 'events' that could be called a crisis or in some cases management
failure or in some cases accidents that the management had to deal with. New
Coke, Mercedes Benz A-Series and the Elop Effect were the only ones completely
controlled by the management, done by management plan and schedule. Of these
six, the first-year damage to the corporation is biggest - at Nokia. Of these
six infamous management disaster situations, only Nokia is the one that could
not fix the problem in two years, and Nokia is the only one where the problem
got worse in the second year. And of these six management challenges, only
Nokia resulted in corporate losses for two years running.
This picture may be freely shared
WORST CEO OF ANY FORTUNE 500 SIZED COMPANY - EVER
Elop has caused by far the biggest damage to any Fortune 500
sized global company, that was a market leader in its industry, in the modern
era of management. Elop is incompetent, and because he did not move rapidly to
fix the damage he caused - he has admitted his memo caused damage to Nokia
handset sales for example, and he has admitted his Windows Phone based
smartphones are not appealing to the market due to hatered of partner
Microsoft's position in the world.
Any other CEO of any other handset maker, would never have killed the existing
platforms when introducing a new platform. That is not mere speculation by Mr
Ahonen. That is historically accurate. It is the 'textbook' way to do it. It is
literally how every other smartphone manufacturer has ever introduced a new
platform. That is how Samsung introduced Windows alongside Symbian. That is how
HTC introduced Android alongside Windows. That is how SonyEricsson introduced Android
alongside Symbian. That is how Palm introduced Windows alongside its own Palm
OS. That is how LG introduced Android alongside Windows. That is how Samsung
introduced bada alongside Android and Windows. No handset maker has ever done
anything as stupid as Elop. Nobody ever has! Ever! If the Nokia management felt
that its current platforms were not up to the competition, the correct way -
looking after Nokia's interest - would have been to introduce the Windows
platform alongside the existing Symbian, Maemo and MeeGo platforms, not
immediately ending the existing ones.
THE RIGHT WAY AND THE WRONG WAY
And obviously Windows should not have been rushed to be pushed to all global
markets. That made no sense whatsoever. Windows did not support most languages,
did not have carrier support and didn't have any apps to sell in most markets
where Nokia dominated with Symbian. If Windows was not popular in China (the
world's largest handset market where Nokia's Symbian held over 60% market share
in 2010) but obviously Nokia's Symbian based smartphones were not only the
bestselling brand, but the brand with high loyalty too - then the sane move
would be to continue developing new desirable smartphones aimed at the Chinese
market, where Symbian had the carrier relations, the vast library of apps, the language support etc and
not replace that with Windows that was non-existent in that market at the time!
If Nokia were to suddenly introduce a Windows based
smarpthone series, then the logical place to do that is the one market where
Nokia was not a leader, but the market where Microsoft was strongest. That is
obviously the USA - and only launch Windows based Nokia smartphones to that market, as a test. If Nokia had been just sensible about Windows, it would
brought Windows alongside Symbian and MeeGo, but at least initially only
offered Windows Lumia series to the US market. Then see if it got success
there, if popular, then perhaps introduce it to Europe next.
And we have the evidence. Today, even in Microsoft's best
market, the USA, after a year of massive promotion of Nokia Lumia with the
world's largest handset launch budget by Nokia, added by the biggest handset
launch ever by AT&T, and added by even more billions from Microsoft,
Nokia's Lumia is well known as a Windows Phone smartphone in the USA, but the
latest MKM survey found that only 0.7% of US mobile phone users were willing to
buy a Nokia Lumia running Windows Phone. This is in line with the previous
Bernstein consumer survey and the Yankee Group survey that both found that
Windows Phone and/or Lumia are rated worst phones with shear hatered, most
owners of one want to get rid of the phones and platform and buy any other
smartphone instead. This is how well Nokia and Microsoft are received in
Microsoft's best market. How do you think it fares in markets that the Lumia
series is not designed for, and not supported as strongly? Where its price
points are far above the market price levels?
But yes, lets examine the evidence for the US market. Before this partnership
was announced, Nokia's Symbian had 1.6% of the US market and Windows had 4.0%,
so the partners 'separately' had 5.6% of the US market in December 2010
(according to new sales market share stats by Kantar for Dec 2010). Now its more
than a year since Lumia launched in the US market. With massive AT&T and
Microsoft marketing support and Nokia's world-record launch budget, how is this
partnership doing two years after the partnership was formed, in Microsoft's
best market? Kantar reports that in February 2013, Windows had 4.1% of the US
smarpthone market and Symbian had 0.1%. The partnership apart was able to
command 5.6% of the US market, but when two turkeys merge, they do not form an
eagle. When these two were forced together, today their combined market share
is 4.2%. The partnership has lost one quarter of the customers it used to own
in Microsoft's best market !!! By very clear evidence, this partnership was
poisonous to Nokia, even in the one country where Windows had some meaningful
market position before the partnership started! Nokia sacrificed 1.5% of
Symbian sales to generate 0.1% gain to Windows. American customers loyal to
Nokia smartphones are rejecting the Nokia Lumia Microsoft Windows Phone
proposition at a rate of 15 to 1.
And what was the result? Go to Europe. Just before the Elop
Effect, Nokia had 33.4% market share for smartphones in Europe, according to
Kantar market share numbers for December 2010. Microsoft's two Windows based
smartphone platforms, Windows Mobile and Windows Phone, had a combined European
market share of 3.9%. Now after Elop sacrificed the Symbian share, the latest
Kantar numbers (for 3 of the big 5 European countries, unfortunately Kantar
didn't release stats for all 5 big European countries) have Symbian share for
Nokia now down to 2% and Windows is up to 8.5%. Note. Windows had almost 4%
before Nokia was sacrificed. They managed to just over double their market
share in Europe, at the cost of Symbian devastated from 33% to 2%. The
trade-off was devastating. One in three European smartphone owners were happily
loyal Nokia Symbian smartphone owners in 2010 still said they were happy and
intended to continue to buy Nokia smartphones in the future. These were then
forced to abandon the Nokia they knew and take the highly flawed Windows
platform (with 101 faults that Nokia owners would hate, now ugraded to 121
faults..). So in the attempt to shift loyal Nokia customers from Symbian to
Windows in Europe, out of every 7 attempted, 6 refused the Lumia and went to buy a
Samsung Galaxy or iPhone or some other vendor smartphone (on another platform).
This is total catastrophic failure by the CEO and a self-destructive 'strategy'
where migration utterly fails.
If we go to markets where Microsoft and Windows smartphones
were traditionally weak or non-existent, like China, Africa, India etc - and
Nokia was the powerhouse in each of those markets commanding far more than half
of the total smartphone market - the damage is far more severe in this
transition. Nokia's Lumia smartphones on Windows not only have their 101 faults
(now with improved Lumia, get them while they're hot, 121 faults to annoy loyal
Nokia customers!) but in these markets there are usually no handset subsidies,
so the pricing of the Windows smarpthones are far higher than low-end Symbian
smartphones used to be, so the pain is particularly hard felt in Emerging World
markets - where all the big growth in the industry is right now, and the part
where Nokia had the strongest presense, strongest brand and strongest loyalty.
Apple's iPhone is nowhere in Africa or India if you go today to those markets.
WHEN EVERYONE ELSE SEES THE TRUTH BUT YOUR CEO
Furthermore, every other handset maker who provides Windows
based smartphones has said in public that there is no carrier/retail/customer
demand for the smartphones. Hence every single one of the other smartphone
manufacturers has shifted production away from Windows - Sony and Motorola
totally to Android; HTC more to Android; Samsung to Android and its own bada,
and now launching also Tizen as yet another platform 'that isn't Windows';
Huawei to Android, Tizen and Firefox yet another new platform 'that isn't
Windows'; LG to Android and purchasing Palm WebOS as a new parallel platform yet
one more 'that isn't Windows'. ZTE is going to Android and Firefox. Palm abandoned its Windows project to build its new own OS, called WebOS (Palm was later sold to HP, and then what remains onto LG)
Look at that list. They are all past or still-current Windows 'partners' in
smartphones. Every one has admitted Windows Phone is not competitive today, and
every one of them has taken an active - and expensive - step to shift to at
least one other platform - two of Nokia's rivals have gone the extra step of
launching (or buying) a new OS that is not Windows - Samsung (twice! bada and
Tizen) and LG with Palm WebOS. There is nothing wrong with the CEO
expressing confidence in a platform, but if the market is so clear - and brutal
- in rejecting that one, only a moron CEO would not react to it, and only an
insane CEO would refuse to sell highly praised and desirable products on
another platfrom of its own! - if Nokia itself owns that rival platform and its
products are so good, they win industry awards ahead of Apple's iPhone and that
get recommendations from the press saying 'its so good, fly to another country
to buy one' and where used product retail values are 4 times bigger than what
you can sell the current Windows products for. Yes. That is the honest truth
about the N9 and N950, Nokia's first two MeeGo based superphones, that should
be sold in every market now, if the market says that they dont' like the
Windows offering.
If Elop was thinking of Nokia's best interest, he would
focus on selling Nokia products, designed by Nokia engineers, that have Nokia
DNA, that are beloved by Nokia customers, that have no royalty payments due to
outsiders, that Nokia can control. Like the N9 and N950, on MeeGo, yes an
operating system that on side-by-side comparisons was rated regularly BETTER
than the iPhone !!! Who is ever rated better than Apple? No Windows product in
history, haha.. But Nokia's MeeGo and N9 were, regularly so. If your sales are
collapsing at a world-record rate, and your smartphone unit generates a 22%
loss for every phone you actually manage to sell, on that undesirable Windows
platform - only a delusional madman would insist, he rather sells the
undesirable Windows products at a loss - for which he has to pay royalties to
Microsoft, and which have Nokia-record return rates, and world-record level
customer dissatisfction - than selling the most beloved Nokia products ever
made, the N9 and N950 (and their unreleased newer siblings) on MeeGo.
SOME CONTEXT
Do we want context? BP's Deepwater Horizon oil spill was at
least partly an accident, and even today, the three major companies involved
with that oil rig are accusing each other of whose fault the problem was. With
the Elop Effect, there was no 'accident' - the Elop Effect was 100% caused by
Stephen Elop, voluntarily and deliberately causing damage to Nokia's products,
sales and reputation. The Exxon Valdez oil tanker was yes, driven onto rocks in
Alaska, but the guy in charge of causing that damage - the Captain, was at
least sacked by Exxon and no longer allowed to drive big oil tankers. Elop
crashed SS Nokia and is still allowed to remain at the helm. Toyota's brakes
were a process problem that surfaced suddenly, after the faulty brakes had been
installed into millions of cars. Elop's problem did not build over time like a
hidden bomb- Nokia's R&D capability is still second to none in mobile, look
at the awards Nokia won for example with the 808 Pureview last year, the best
cameraphone of all time, superior to professional DSLR cameras even under some
circumstances. Or the D&AD award - considered the 'Oscars' of industrial design - that Nokia's MeeGo based N9 won over not just Nokia's Lumia devices but over Apple. Nokia has not lost it in
the design and capability of its phones. This damage was not a creeping
systematic rot from the inside, like the myth suggests, that the iPhone had somehow killed Nokia. No, this was a new wound, opened by the new CEO, out in
the open for all to see.
Mercedes A-Series was badly designed and were withdrawn until fixes were made
and a new series was launched. While Mercedes fixed its new A-Series, it of
course did not stop selling its other profitable cars - just like Nokia should
not have stopped selling its successful smartphones on other platforms
especially on its MeeGo system. And New Coke is perhaps the nearest to this
example - but there Coca Cola was smart enough to notice, that when customers
ask for something they have made in the past, they should give it to them,
especially if the new item is not a global hit success.
Elop did not have to announce his new Windows platform in
February, when the first phones wouldn't be sold until November. That was a
management mistake. (The February 2011 announcement of Windows did not serve
Nokia's best interests, but clearly were welcomed by Microsoft, and to the
degree Elop as Nokia's new CEO acted in Microsoft's best interest against
Nokia's interest, he not only broke his fiduciary duty, he is guilty and must
be fired and sued for all compensation paid to him, any of his signed contracts
with Microsoft such as the Windows contract are null and void, and Elop must be
investigated by the various stock markets and forbidden from ever taking
corporate officer positions in companies that operate on a stock market).
Elop did not have to say bad things about his own company
products. No CEO needs to do that, but even worse, his statements were mostly
false, several that Elop himself has reversed since. Elop has admitted the
Burning Platforms memo damaged Nokia (to the tune of Billions of Euros I should
add, it is the costliest management memo of all time). That he issued such a
damaging memo alone stands as proof his judgement is not suited to run a major
Fortune 500 sized company.
That Elop launched his Windows products instantly replacing
his highly successful smartphones on Nokia-owned platforms - that yes, actually
grew more sales in 2010 than any major rival like Apple, Samsung and Blackberry
- that Elop would terminate such successful sales and replace it with unproven
Windows that only sold in miniscule numbers - Nokia smartphones on its own
Symbian and Maemo platforms held 34% market share in 2010, but global Windows
smartphone market share across all Windows partners was 2% in 2012 !!! Yes,
that includes all Nokia Lumia sales. Windows total market share globally last
year was a puny 2%. And Elop abandoned his 34% Nokia-controlled market share
for a slice of that 2%. Is he perhaps mathematically challenged, Stephen Elop?
Did he fail his mathematics courses at McMaster University in Canada?
But this clearly shows that Elop does not act in Nokia's
best interest. This decision to sacrifice massive dominant Nokia market
position to bolster Microsoft's collapsing world position (it held 12% market
share as recently as five years ago) serves Microsoft interests only. No other
handset manufacturer has ever made this moronic move, of ending existing
successful sales platforms before a new platform has proven itself by
generating bigger sales. Elop may be suitable to be a Vice President of
Destroying Partners over at Microsoft, but this decision means he is not knowledgable
enough to run any phone manufacturer company of any size.
That Elop would continue to push Windows, when all evidence
- including every single one of Windows manufacturers - has shifted production
partly or completely away from Windows to alternate platforms - this
unwillingness to face facts, tells us Elop is living in some CEO delusional
world, where he rules an imaginary world, not unline Kim Jong Un, who imagines
his puny military could defeat the combined forces of the USA, South Korea and Japan
haha... The delusions of Elop have cost Nokia billions. Any other CEO of any
other company would have - and indeed have - altered their product mix away
from the undesirable Windows to more desirable platforms.
That Elop refuses to offer MeeGo based smartphones to Nokia
customers - even where Nokia competitors, like worlds' largest smartphone maker
Samsung and number 3, Huawei, plus others like Panasonic and NEC, are launching
smartphones on the evolution of MeeGo (called Tizen) instead of Windows - tells
us everything we need to know about which platform has potential and which doesn't. It is expensive to launch on new platforms. Only a total fool would be the owner of such a highly popular and capable platform as MeeGo, and instead of allowing sales on it, forbids sales in all major Nokia markets, and pushes the undesirable and unprofitable Lumia series instead. Elop would rather hide a huge success for Nokia, and rather take tiny sales
of Windows instead. Again, this is criminal disregard of Elop's fiduciary duty
to Nokia owners (shareholders). He has put another company's interests
(Microsoft) ahead of the company he was hired to run (Nokia). He has to be
fired instantly for such breach of duty.
I could go on. I end here. I have shown that in the context
of the most notorious management failures and crisis faced by management in our
lifetimes, from New Coke to Toyota brakes, from Exxon Valdez to Deepwater
Horizon, those management catastrophies pale in contrast to what Elop has
achieved at Nokia. Nokia's collapse in the past 2 years is the biggest fall of
any Global Fortune 500 sized company ever. That it was caused by the CEO's own
actions, and his subsequent actions did not rapidly fix the problem, but made
them worse, is proof that Elop is indeed not just the worst CEO in telecoms, or
the worst CEO of the year, he is the worst CEO of all time. He has to be fired
for this.
Nokia Board. Its your move. Get rid of him before the Annual
shareholder's meeting. Or you will face investigations for collusion and even
criminal negligence for letting this man destroy the company while you do
nothing.
Nokia shareholders, if the Board doesn't fire Elop for this gross
mismanagement, then the Board is in collusion with Elop and the Board must be
fired too. Get ready for the Annual shareholders' meeting. Don't let this
clown, the Microsoft Muppet, the Pretend-Patton, Stephen 'Call me the General'
Elop, destroy your company.
If you are a journalist or blogger, reading this story - please PLEASE study this issue and report on it. We are witnessing the biggest management fiasco of all time, this will be a must-read case study of management stupidity and incompetence, and Elop's name will be synonymous with wanton destruction of a global market leader. Please write and report on this story - this is the biggest story in management and business of the year, if not the decade. Please do study it - a good place to start are those 9 links on the top of this article, each with just one picture showing the different dimensions of this calamity.
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