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The CEO Insane - How To Rescue Nokia (story updated)

I know I know, nobody is going to listen to me anyway. But Nokia's Shareholder Meeting is coming up, and some have been asking me how would I fix Nokia today. I wrote a long detailed blog last year telling what was broken and how to fix Nokia overall, not just the smartphones part. Its sad to see it took Elop a year to get around to trying some of the ideas that I insisted Nokia needed to do back then (he is now, for example the 808 PureView is exactly what I suggested). So I will try to keep this short and to the point and focus only now on the catastrophic situation with Nokia's smartphones unit and the Lumia line. And am trying to inject some humor into this rant. Lets see how the sane CEO would behave when faced with, lets say, a hypothetical situation...

( UPDATES TO THIS STORY on 28 March, 11 April & 12 April, see end of story )

LUMIA LAUNCH FAILURE

 

Your company launches a new platform called Windows Phone, on a new brand of smartphones called Lumia. This is sold in parallel with two other smartphone OS platforms you also support currently, Symbian and MeeGo. The new Lumia phones are introduced in a dozen leading countries in Europe and Asia. Now five months later, you discover that the first Lumia phones are not competitive in the market on their specifications and designs. They receive mediocre support in the press. They receive alarmingly often published opinions suggesting customers are better off buying smartphones by rival manufacturers or ones using your other platforms. Smartphones have traditionally been a key to the profits of the company but currently your smartphone unit is generating a loss.

The sane CEO moves strongly to embrace the hot smartphones on the two other platforms, in particular the highly rated N9 using MeeGo and 808 PureView using Symbian and takes every opportunity to be seen with these desirable phones, and to try to convince all in the media that if you don't like the first Lumia, don't worry, take these alternatives from Nokia instead. The sane CEO would fight Android and the iPhone (and Blackberry) with MeeGo and Symbian, if Lumia is not working (now). Smartphones on the two platforms would be broadly promoted in all major markets including launching the N9 to all Lumia launch countries and the 808 PureView especially in the USA. This could be done while working to improve the next Lumia smartphones to remove the obstacles to their market success.

The insane CEO refuses to be seen anywhere near an N9 or 808 PureView and only insists on talking about the undesirable Lumia. The insane CEO would refuse to even sell the N9 in the European and Asian Lumia markets and refuse to sell the 808 PureView in the USA.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

N9 KILLER SUPERPHONE ON MEEGO

 

Your N9 running MeeGo has received glowing reviews in all markets where it has been released. It alone outsold both Lumia smartphones by a ratio of 3 to 1 in Q4, the first quarter when both were sold, even as Lumia smartphones were cheaper; the N9 was sold in less affluent countries, and the Lumia were sold in Nokia's best markets. The comparison reviews consistently rate the N9 a far better smartphone. It is rated consistently a better value even while being more expensive than the Lumia, in consumer reviews from Australia to South Africa to your company's native Finland. Whereas Lumia phones are manufactured at Compal factories in Taiwan, your own Nokia factories are idling and the N9 could be manufactured at far lower costs in your own factories - the most efficient handset factories on the planet. Whereas the Lumia phones use components not usually used by Nokia, the N9 uses standard Nokia components so the manufacturing of the N9 gain from bulk discounts in its components. Whereas the Microsoft Windows Phone OS causes a royalty payment per handset that Nokia has to pay to Microsoft, the MeeGo OS on the N9 is (co-)owned by Nokia and no royalty payment is needed. The profitability of selling the N9 is far higher than the Lumia, even before marketing expenses are considered. Meanwhile because the N9 is a true flagship phone and significantly more expensive, it would not even threaten to cannibalize Lumia customers. But because of the outwardly similar appearance, the N9 could actually help sell the Lumia. The current attraction of the N9 is so intense, the biggest European handset market, Germany, had the extraordinary review by Germany's biggest newsweekly magazine, Der Stern, suggesting to its readers, they should drive to another country - like Switzerland or Austria - to purchase an N9 because it is truly that good, but inexplicably, the N9 is currently not sold in Germany (rather than to buy an Nokia Lumia which is sold in Germany).

The sane CEO immediately orders mass production of the N9 and releases it to every country and makes massive promotions in Germany, personally appearing in Der Stern inteviews holding the N9. Judging by the Q4 numbers of the few relatively poor and often small countries where the N9 was sold, if it was offered globally, Nokia would sell at least 4 or 5 million N9 units per quarter. This single action alone would return Nokia's loss-making smartphone unit to profitability.

 

The insane CEO steadfastly refuses to sell the N9 in most of Nokia's best markets, and puts his own ego ahead of the profitability of Nokia.

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

RETAIL CHANNEL REFUSES TO SELL LUMIA

 

You have already admitted in public that many retailers in many countries do not support the Lumia fully. You have mentioned the retailers in the UK as particularly problematic. Now comes news from Nokia's home market where Nokia traditionally had over 80% market share - even higher in smartphones - that the Finnish handset retailers are refusing to sell Lumia. This is the nail in the coffin, really. When your own dogs bite. When sales people in Finland refuse to show Lumia phones when asked for by name! Even as Nokia has massive marketing support and huge in-store displays. Similarly a separate survey by Talouselama of European handset retail stats, says Lumia sales are collapsing.

The sane CEO takes the two other platforms, Symbian and MeeGo, and rapidly pushes several highly regarded phones on those platforms, in particular the N9, the 808 Pureview and the N950 - and rushes those handsets to the retail channel. The sane CEO warmly embraces the Symbian and MeeGo based smartphones and issues a public statement about Nokia's acknowledgement that Lumia needs more work, to restore the retail channel's trust in Nokia. If he feels so inclined, the sane CEO may end the Lumia series or consider relaunching it with new handsets next year. In any case the sane CEO points out the strong synergy Nokia's Symbian has with MeeGo and Nokia's featurephones running S40, to Nokia's developer community, through Nokia's Qt developer tools and Nokia's Ovi store.

 

The insane CEO refuses to sell the hot new phones on the MeeGo and Symbian platforms, and keeps pushing more and more undesired Lumia handsets to the market. 

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

N950 KILLER SUPERPHONE ALSO ON MEEGO

 

Your company designed and started production of a second MeeGo based super-smartphone, the N950, as the sister phone for the highly loved N9, last year. This is the QWERTY-slider version, well suited for high text messaging users, Twitter and Facebook users, email and business users, similarly to how Blackberry, Nokia E-Series and Communicator smartphones are used. The N950 uses the highly praised MeeGo OS and is built in Nokia factories, running on Nokia components and could be priced above that of the N9 to be very profitable for Nokia. As none of the four first Lumia smartphone have a QWERTY keyboard, nor does the N9, nor does the 808 PureView, the N950 is the topmost and only modern QWERTY flagship smartphone for Nokia, since the E7 from more than a year ago - a smartphone that in many markets is still the bestselling Nokia smartphone today. The N950 would be in rare status, where for example Apple still refuses to sell a QWERTY version, so only the N950 would be isolated from iPhone rivalry for the approximately 30% of consumers who prefer QWERTY keyboards on their smartphones. The N950 is comprehensively loved by all who have used the device as an exceptionally solid premium smartphone from Nokia. And as there is no comparable QWERTY device on Lumia series, the sale of the N950 now would in no way 'hurt' Lumia sales. There is no downside to launching the N950 everywhere, only a huge, profitable upside.

 

The sane CEO rushes to launch the N950 to every market now, to capitalize on the good will of the N9 and MeeGo. The launch of the N950 to Nokia's major markets alone would be enough to turn Nokia's loss-making smartphone unit into profit-making.

 

The insane CEO takes the N950 that its factories already manufacture in trickle levels, and refuses to sell the N950 in any country, only handing out a few of the N950 smartphones to some developers.

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

CONSUMERS REJECT LUMIA

 

Your Windows Phone vision as communicated a year ago was to replace Nokia's Symbian based smartphones on a 1 to 1 basis, with Windows Phone. This assumed Microsoft could deliver a competitive and desirable OS out of Windows Phone version 7.5 and that Nokia's first Lumia smartphones would be well received. Now evidence comes from the early markets that even when supported by the biggest marketing campaign ever seen in mobile history, by the largest handset maker in the world; and then further augmented by a massive support campaign by Microsoft - including giving free Xbox 360 videogaming consoles to customers who buy Lumia 800 smartphones - the customer are not willing to take Lumia smarthpones. The crushing statistics from Britain report that Nokia is now losing a third of its last, most loyal, remaining customers, when pushing the transition from Symbian to Lumia. And British press, such as the Guardian, actually recommend consumers to return their Lumia smartphones. The second hand market and auction sites like Ebay are overflowing with Lumias being discarded.

The sane CEO acknowledges the first attempt at Lumia has failed in the best Nokia markets and reacts rapidly to offer strong substitutes to those markets - in particular the Nokia N9 which has consistently in all side-by-side reviews outperformed the best Lumia 800, and also rush other top Nokia smartphones such as the 808 PureView and N950. The sane CEO would be seen broadly embracing these smartphones and issuing clear statements that Nokia is not abandoning the Symbian and MeeGo platforms - while showcasing how advanced these platforms are.

 

The insane CEO refuses to sell Nokia's best phones but pushes ever worse and ever less desirable, and ever cheaper Lumia clones to these markets where the first Lumias have already failed.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

TABLET FOLLY

 

Apple is making a ton of profits out of the iPad. The tech press love stories of tablets. The reality is, that if you are a PC maker like Apple, Samsung or Lenovo, a tablet can be a great strategic move. There is a lot of synergy between the PC/laptop business and tablet business, from shared components to the same distribution channel to synergies in marketing, pricing, and branding. If you are a handset maker like Motorola or RIM, to try to compete in the tablet space is lunacy. There are few shared compoents, the distribution channel is totally different, the marketing is different, the pricing is totally different and so is the branding. Apple and Samsung have been very profitable doing tablets. RIM and Motorola found massive losses out of their forays into tablets.

 

The sane CEO would never contemplate any tablet project as long as Nokia corporation was producing massive losses. The sane CEO would concentrate on Nokia's core business in handsets, and put the biggest effort in restoring the profitability of the smartphone unit. With smartphones even against Apple, Nokia would have many natural strengths from its long history in mobile phones, such as the fantastic camera on the 808 PureView or the swipe touch technology on the N9, to the QWERTY on the N950 etc, to a home-field advantage of still today the biggest installed base of both smartphones globally, and dumbphones who will soon migrate to smartphones.

 

The insane CEO would squander scarce resources on a futile tablet project, resources desperately needed to fix the leaking ship of the smartphones unit. With tablets against Apple, Nokia would bring no assets and no competitive advantages while facing Apple at its home turf and massive market share domination in both tablets themselves, and compared to Nokia, Apple's considerable installed base of Macintos PCs and laptops.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation. But Microsoft would ever so dearly love to see someone make tablets for Windows, and Microsoft couldn't care less if that manufacturer made any profit out of it, nor indeed whether it lived or died. Microsoft just wants a tablet to face off against Apple. But I'm not saying Elop is in Microsoft's pocket)

CHINA

 

The world's largest mobile telecoms market is China. The world's largest mobile phone handset market is China. The world's largest smartphone market is China. The world's largest carrier/operator is China Mobile, alone bigger than all US carriers combined - and twice that number still. Yes, take all US carriers, AT&T, Verizon, Sprint etc, add them together, and then double that number, and its still not as big as China Mobile the carrier is alone. Your Nokia brand is China's biggest handset brand and most desirable handset brand. Your Nokia smartphones have been the bestselling smartphones of China and the Nokia Ovi store is China's biggest app store and the Symbian OS has by a huge margin China's biggest smartphone installed base. Nokia had achieved the exceptional partnership arrangement with China Mobile, that they were a co-developer of the MeeGo OS. Windows Phone has not yet even been introduced a single smartphone model in China by any handset brand, not even HTC or Samsung, while the Nokia N9 has been selling there since Q4 of last year.

 

The sane CEO issues public reassurances to China Mobile that Nokia will remain with MeeGo and use it as one of Nokia's platforms and to support China Mobile, and to help China Mobile's initiative and software partners to expand the Chinese-language services even beyond MeeGo to other Qt compatible platforms including Nokia's Symbian, S40 and Maemo, and also Android and Blackberry. The sane CEO will immediately commit to producing TD-SCDMA 3G versions of all MeeGo capable handsets today - the N9, the N950 and the older N900. TD-SCDMA is a China-specific 3G standard that for example Apple does not support with the iPhone. Nokia has traditionally provided Symbian based smartphones on TD-SCDMA. Before those Chinese variants are finalized, the sane CEO would rush the N950 to the Chinese market now to capitalize on China Mobile's interests in MeeGo.

I am sorry, I really have to stop here for a moment. Do you realize what this means? Nokia had in its pocket, the monopolistic exclusive rights to 12% of the planet's mobile phone total market! All it needed, was for Elop to go, hat in hand, to China Mobile and promise there will be glorious MeeGo and Symbian smartphones, running Ovi in Chinese, on that TD-SCDMA 3G standard which Nokia already supports fully, and China Mobile would forever block the iPhone and Blackberry and Android and Samsung and HTC and all others from its networks. This is as near to a monopoly as you can hope for. This was the greatest coup in mobile. This was a license to print money. Canalys reported that Nokia's smartphone market share was 77% in China in 2010 - and it was even higher on China Mobile's network obviously. This was Nokia's cherry on the top, just before Stephen Elop's suicidal Elop Effect. And with Nokia's massive factories in China, they could churn out those millions of smartphones at great profit. Any sane CEO sees, this is the most imporant customer relationship that has ever existed in the mobile industry, and you do not screw with it. The sane CEO will turn heaven and earth, to get China Mobile smiling and happy back, to a MeeGo and Symbian based partnership with Nokia. Ok, lets return to my rant...

The insane CEO spits in the eye of China Mobile's commitment to MeeGo, and forces China Mobile to contemplate Windows Phone based, clearly undesirable and globally market-failing Lumia smartphones instead, especially where MeeGo is fully compatible with the Nokia Ovi store and the Qt developer tools, while Windows Phone is not. Where the Ovi store has tons of Chinese apps and Windows Phone obviously has nothing to offer. And the Chinese market has very little utility and compatibility with Microsoft platforms where PC penetration is low, Zune is not popular and Xbox 360 is actually legally forbidden in the market.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

 

SUPERPHONES

 

Nokia's global brand, price premium and overall appeal has been driven over the years by genuine iconic superphones from the 9000 Communicator to the N93 to the E90 Communicator to the N95 to the N900 to the N8 to the E7 to the 808 PureView. Nokia's flagship phones are expected to showcase technology nobody else has, much like the automotive world looks at the Mercedes S-Class for the ultimate cutting edge tech that will come to normal cars only years later.

The Symbian OS is fully capable of delivering superphones (as is MeeGo for the most part) but Windows Phone is not. Windows Phone is severely crippled when contemplating superphones. Nokia has just admitted, that for example just the camera technology of the 808 PureView, which yes, runs Symbian happily today, won't be able to be put onto Windows Phone based Lumia phones until in 2013 at the earliest. Standard Nokia superphone features like NFC and multiple displays and TV out and HDDI output and enhanced Dolby sound and Augmented Reality etc are simply not supported on Windows Phone. There is no ability to use the Lumia as a WiFi hotspot. Some of the first Lumias have even more problems like not offering forward facing cameras so you can't do videocalls. Not to mention more mundane features we expect like folders and the ability to edit a text message and to display the clock in idle mode and genuine multitasking etc.

A sane CEO will observe from what Microsoft has now delivered on its promised Windows Phone to Nokia's Lumia, and conclude, Windows Phone is not ready for prime time, and certainly not suited for top end premium phones, superphones that can compete head on with the iPhone 4S and Samsung Galaxy Beam etc. The sane CEO will start to issue clear statements that of course Nokia will continue with MeeGo into the future as its OS for the top line superphones - because MeeGo was designed from the ground to be an OS for superphones - and that also Symbian will live on, as it is actually quite well suited as well for many top phone uses from cameraphones to business-oriented QWERTY phones.

 

The insane CEO abandons the top of the market that Nokia used to rule, to the iPhone and Samsung Galaxy, and only competes in the middle of the smartphone market where every rival is competing and prices are squeezed and profit margins are thin. The insane CEO would continue to suggest that there is no future for Symbian nor for MeeGo.

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

 

ECOSYSTEMS

Yes, the consensus is - and has been for quite a while - that the big race in smartphones is for the ecosystem. The key to the ecosystem is whose OS has the biggest installed base, not the number of apps on an app store for example or some billion-level download number. Your memo told the world what are the main elements of a mobile phone ecosystem as you wrote that after counting the hardware and software, an ecosystem will also include: "developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things."

Nokia has recruited the world's largest army of developers to its ecosystem (over 400,000 copies of Nokia's developer kits have been issued, this totally dwarfs all other smartphone developer communities). By the app store, Nokia's Ovi was ranked second best by number of downloads when you took over and is still third best, far ahead of for example Windows Phone. In ecommerce Nokia not only had the world's most widely used mobile content store in Ovi - the bestselling content store in every language except English, Japanese and Korean - ie covering 93% of the planet's population. And Nokia had a huge lead in its mobile money solution, Nokia Money, ahead of rivals like Google. Nokia's in-house mobile advertising agency was one of the first, and one of the world's biggest. And so forth and so forth.

The sane CEO believes what he wrote, that the future is won on the ecosystems and he would safeguard Nokia's ecosystem lead and build upon it. Like how mobile money is a key to customer loyalty and Nokia handset branding in Emerging World countries.

The insane CEO would spit on Nokia developers by announcing that the promised migration path from Symbian via Qt to MeeGo is ended. The insane CEO would sell Nokia's advertising unit and simply discontinue Nokia's mobile money project when it had already won 12% of the mobile money market share in India, the world's second largest mobile telecoms market. The insane CEO would open the door for a rival company's ads to be shown on Nokia screens without Nokia control to potentially threaten Nokia's brand loyalty.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation. I cannot but be bewildered, what in the world could possess Mr Ecosystem Elop to actually destroy Nokia ecosystem components? I mean, about the only conceivable reason would be if Elop somehow wanted to help Microsoft's ecosystem defeat Nokia's ecosystem? No, that cannot be, Elop is a Nokia CEO)

 

AFRICA

 

The largest part of your current customer base and new phone sales are in the 'Emerging World' markets, in particular Africa, India, the Middle East, Indonesia, Brazil, Russia, etc. You talk of the 'next billion' users there. Windows Phone is utterly unsuited for this market. Microsoft itself says Windows Phone OS is not currently suited for low-cost smartphones. Nokia itself said last year that Windows Phone was not suited for the Emerging World markets. Windows Phone is the most closed and restricted environment which in Emerging World markets is far more damaging, where due to problems with cellular coverage, electrical supply, poverty, illiteracy etc - the need to be able to transfer files via Bluetooth, and with microSD cards and using interactive USSD etc is vital. PC penetration is minimal, Microsoft's PC Windows markets share even among PC owners is low and most of Microsoft's platforms are not used such as Zune and Xbox. The ability to use cloud-based file sharing and storage is both prohibitively expensive and incredibly unreliable in these markets.

Nokia's Symbian is perfectly suited for this market, as Symbian is fully functional with modest specification handsets and is fully open in various connectivity from Bluetooth to NFC to microSD to TV-out to HDMI etc. Nokia's Ovi Store is the run-away dominant market leader in this market. Symbian today can power smartphones that cost less than 100 dollars (unsubsidised price). Windows Phone lowest price Lumia costs 250 dollars (unsubsidised price). In the Emerging World markets this price differential is decisive. Morgan Stanley Deloitte told us that 300 million smartphones at a price of under 100 dollars (unsubsidised) will be sold this year. Nokia cannot compete there with Lumia, only with Symbian.

 

The sane CEO continues to expand Symbian to lower cost smartphones in rough parallel as Samsung and Android, and uses Nokia's scale as a competitive advantage to capture the Emerging World markets to Nokia's Symbian based ecosystem, including Ovi Store and Qt.

 

The insane CEO tries to push 'lower cost' Lumia handsets like the Lumia 610 - which still costs 250 US dollars (unsubsidised price) and issues statements that Nokia is accelerating the end of Symbian while Lumia is not ready to take over this low end and Nokia has no alternative.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

CLOUD COMPUTING

 

The emerging view is that the future of the whole internet, telecoms and computing industry is headed to the clouds. Nokia believed in cloud computing and mentioned Elop's background in Microsoft's Cloud Computing project as a desirable skill when Elop was hired. One would think he would understand and value the leadership position that Nokia had gained in Cloud based solutions.

 

The sane CEO would fully support and expand and capitalize on Nokia's leadership in cloud based solutions.

The insane CEO shuts down Nokia's Ovi Share and Ovi Contacts and forces Nokia users to migrate to cloud-based solutions run by rivals.. like Microsoft's Skyshare, Windows Live and Outlook. 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation. The conspiracy theorist might suggest that Mr Cloud Computing would deliberately sabotage Nokia's cloud solutions just so Microsoft would have less competition. You might think that; I could not possibly suggest such a thing.)

808 PUREVIEW

 

Your stunning 808 PureView cameraphone with gobsmackingly awesome camera technology won the phone of the show award at the world's biggest mobile telecoms trade show in Barcelona last month, ahead of stiff competition such as Samsung's Galaxy Beam with its tantalizing built-in pico projector. The 808 PureView runs on Symbian, an OS you have previously suggested was obsolete and equivalent to a burning platform. Yet on this magnificent superphone, Symbian does tricks Windows Phone cannot even hope to do this year, from normal Symbian abilities such as true multitasking to abilities more relevant to the camera excellence such as HDMI output. The 808 PureView is receiving the best early reviews of any Symbian based phone ever, even in usually hostile US tech press. The 808 PureView starts shipping in weeks, for example to the UK market.

 

The sane CEO celebrates the excellence of the PureView, rides the hot press, is seen everywhere with that phone, and uses it to celebrate the competitive advantages of Symbian, its open system, its Qt developer tools, Nokia's Ovi store etc and of course, the sane CEO launches the 808 PureView to the US market immediately.

 

The insane CEO refuses to be seen near the 808 PureView and even facing strong US media love of the astonishing cameraphone, refuses to launch it in the USA

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation. This could not have possibly anything to do with the embarrassing fact, that even after Elop's Burning Platforms memo, the 'failing' Symbian continued to outsell Microsoft's Windows Phone - in Microsoft's home market of the USA last spring. No, there can't be any such grudge between Redmond and Espoo, could there? And besides, the CEO of Nokia would look after Nokia's best interest, right, not Microsofts in any case)

 

LOYAL CUSTOMERS

 

The Lumia smartphones are now obviously a dud. They were not designed by Nokia's A-Team out of Finland, in fact the Lumia designers come from California, from what at best could be called the junior squad, the farm team, the total novices. And now we have seen the evidence is overwhelming. They messed it up rather comprehensively for Nokia's new line of smartphones. The Lumia is just barely suitable to make a good impression in the store, but by the time you bring it home, it will disappoint you day in and day out. Not unlike the complaints about Detroit cars of the past, made to look good in the showroom but a disaster to live with over time (I trust this has long since been fixed with the new Detroit). But its a common accusation of US designs, focusing on the shallow first impression rather than the durable value.

So lets look at Nokia's loyal user base. They have used Nokia branded phones for years, many for over a decade. They have always expected certain levels of utility and convenience and logic and rational behavior on their Nokia phones, whether smartphones or featurephones. How is Lumia today? The user may be impressed in the store. But takes the Lumia home, and tries to move old pictures from the old phone to this new phone or vice versa. There is Bluetooth yes on the Lumia but it won't do file transfer. What of the microSD slot? There isn't one. Shot some video in the camera? Try sending it via MMS? Yes, the Lumia will do MMS and let you send pictures, but not videos. What of messaging? Nokia practically invented mobile messaging (Matti Makkonen, my mentor at Nokia, actually did invent SMS, but he did it at his previous employer, Telecom Finland ie Sonera). So many users, especially the youth and business users, heavily into messaging will tend to favor Nokia phones. Try to draft an SMS text message and save it? You can't. Lumia won't let you save message drafts! What of the FM transmitter you have had for years with Nokia phones so you can connect to your car without cables. There isn't one. What of the TV out you want to show friends your pictures or videos that you shot on the Lumia? Nokia has supported TV out for six year already. The Lumia doesn't do that either. The alarm clock won't wake up on the phone like it used to on all previous Nokia's - a really nasty problem to discover the first time. And so forth.

 

The sane CEO looks at these serious usability problems, which are all traced to the deficiencies of the Windows Phone OS and the design of the Lumia. The sane CEO decides this Lumia series is now more of a threat to Nokia's reputation - and long term damage to Nokia loyalty - than a way to succeed in the market and will at least limit its production and market launches. The sane CEO will explore less mature markets where the Lumia might succeed even with these deficiencies, like the USA, where far less advanced phones and often phones with crippled features are commonplace. The sane CEO will either end the development of Lumia phones or suspend their marketing in Nokia's main markets like Western Europe and advanced Asia-Pacific, until newer, better Lumia devices of far more modern design can be brought to the market.

 

The insane CEO pushes even more, even cheaper, even worse Lumia devices to the market to ruin what is left of Nokia's loyal customer base.

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

 

CUTE

 

Your company has built an application developer tools environment, called Qt. Qt is effectively an ecosystem. Developers can make apps via Qt that work on Nokia's Symbian, Maemo and MeeGo smartphones, today. These have an combined installed base of 300 million smartphones currently in use worldwide. That is the biggest installed base of any smartphone platform. Qt is far more powerful than that. Qt will enable development of apps to Nokia's proprietary 'featurephone' OS, called S40. That means that just on Nokia platforms, Qt reaches a potential of 1 Billion with a B-Billion pockets. Yes. On Nokia's own platforms, Qt is four times as big as Android, five times as big as all iOS devices ever shipped including iPhones, iPod Touch's and iPads, ten times bigger than the Blackberry ecosystem - and 100 times bigger than the Windows Phone 'third ecosystem'.

Qt is a true key for Nokia's global dominance. And I haven't even gotten to the good part yet. Qt also allows development to Android and Blackberry smartphones. Qt is tested to be faster by a whole order of magnitude in development time and development cost. It is by far the best way to develop apps to smartphones. Qt is also compatible (or will be) with other less common platforms such as Limo, bada and Tizen. Of all smartphones in use today, using Qt you have the ability to reach .. 83% !!!!!

 

And wait. Nokia's new upcoming low-cost smartphone OS, Meltemi - is also of course, compatible with Qt. The total potential reach of Qt is not just bigger than any other smartphone ecosystem - Qt potential reach today is bigger than the total installed base of Microsoft Windows based personal computers and all Windows family smartphones, combined. This is a juggernaut. And the only OS that Nokia currently supports, that is not compatible with Qt is.. Windows Phone. That Windows Phone which is not viable for 90% of Nokia's current market. (Not viable for the high end smartphones, not viable for low-cost smartphones, and utterly incompatible with the featurephone market segment). So Nokia will have to, into the foreseeable future, support systems other than Windows Phone - that are compatible with Qt. You get the picture?

The sane CEO will cherish this enormous power and  celebrate Qt at every stage he opens his mouth, repeating the amazing stats about Qt, and fully funds its rapid development so all the platforms will be soon also in production (Qt is not yet finished). The sane CEO will always favor any Nokia solution which is compatible with Nokia's Qt ecosystem, the legitimate 'first ecosystem' of the planet, and always try to avoid mentioning any rivals that threaten Qt.

 

Only a certifyiably lunatic CEO would waste incredibly valuable and rare media time and attention, by promoting a rival to Qt - the Windows Phone 'third ecosystem' - a product of a competitor company that is unsuited for 90% of Nokia's future. That is not just moronic and mad, it is a direct violation of his fiduciary duty to Nokia's best interests and an obvious conflict of interest. Whether Nokia buys and pays for Windows Phone OS or not, and whether Elop himself thinks Windows Phone might or might not succeed - it is Microsoft's duty to promote that OS, and as long as Nokia produces a rival ecosystem - Qt in this case - it is madness for the CEO to invest his valuable media exposure to promote a competitor to Nokia's ecosystem. He must be fired for this blatant breach of his fiduciary duty. The Nokia shareholders should demand a million dollars for every time he uttered the term 'third ecosystem' in front of a TV camera!

(But I'm sure it wasn't done on purpose, I mean, he'd be a criminal if he promoted Microsoft's interest ahead of Nokia's best interest, and still collected a Nokia paycheck.)

 

TO BURN OR NOT TO BURN

 

I think we see the picture. Now, I will end with a little comparison, to burn, or not to burn. Consider these facts.

 

In Q4 of 2010, just over one year ago, the first full quarter that Stephen Elop was in charge of Nokia, this is how Nokia performed under his watch: Nokia's smartphone unit - the unit of Nokia's handset future - grew unit sales by 7% from just the quarter before. Yes. You read it right. Nokia was not 'declining' smartphone sales when Elop took over. Nokia in his first quarter in charge, grew unit sales by 7%. Was that at the cost of price cuts? No! Nokia average prices of smartphones grew by 14% ! (When does that happen in economic theory, that you increase your price massively, and yet grow sales strongly?) Nokia's smartphone unit revenues grew by 22% from just 3 months earlier! And profits? Check this out. Nokia's smartphone unit profits jumped a Nokia-record of 65% from the quarter before!

Nokia smartphone sales were literally twice as large by unit sales than its nearest rival, Apple's iPhone. (Imagine how much Coca Cola or Toyota or Boeing would love to be twice as big as its nearest rival). Nokia's Symbian was the world's bestselling smartphone OS. Nokia's market share in Q4 of 2010 was 29% of all smartphones sold globally. Nokia's Ovi store was the world's second bestselling app store by downloads. Nokia's smartphone migration rate was 25%, ahead of the world migration rate to smartphones.

Nokia's Symbian OS had as its carrier partner NTT DoCoMo of Japan, the most advanced, most inventive and most innovative company of this whole industry, which not just launched this industry, it has literally invented about half of the total industry's inventions. This carrier was committed to using Nokia's Symbian in its radically futuristic phones for years to come. Nokia also had for the MeeGo OS as its carrier partner China Mobile, the world's biggest mobile operator/carrier. Thus Nokia had exclusive preferred access and market to both the most advanced mobile country and the biggest mobile country, where both NTT DoCoMo and China Mobile had explicitly said they do not want the iPhone! But They wanted Nokia's platforms!

Nokia's credit rating was an A. Nokia's brand was ranked the 8th most valuable brand on the planet by Interbrand. Nokia's shareholders so much loved Elop's first five months in charge, by early February, Nokia's share price had climbed 11% since he took over. That was Q4 of 2010.

 

Now lets move just 12 months ahead in time, the latest quarter for which we have Nokia data. Now in Q4 of 2011, this is how Nokia performed: Nokia's smartphone unit sales have collapsed 31% from where they were a year ago (while the industry grew 71%). Nokia average sales price has fallen by 10% - but this is by an accounting gimmick, where Elop assigns a Microsoft marketing support payment of 250 million dollars to the price. The real price (what consumers are willing to pay for Nokia branded smartphones) has actually fallen by 16%. Nokia's smartphone unit revenues have fallen by 38%. Instead of reporting a profit of 510 million Euros (663 million US dollars), Nokia's smartphone unit now generates a loss of 190 million Euros (247 million US dollars) per quarter. So Nokia has destroyed 757 million Euros (910 million US dollars, nearly a Billion dollars) of profits per quarter.  

Nokia smartphone unit sales now are half the size of the new market leader in smartphones, Apple's iPhone. Yes, Nokia went from being twice as big, to half the size of Apple in just 12 months! Nokia's market share has collapsed to 12%. Nokia's Symbian has fallen to third bestselling smartphone OS. Nokia's Ovi store has fallen to third bestselling app store by downloads. Nokia's smartphone migration rate is now 16%, severely behind the world migration rate to smartphones.

Since Nokia selected Windows Phone, NTT DoCoMo has abandoned Symbian and today runs Android as its primary operating system. Since Nokia selected Windows Phone, China Mobile has become miffed too and today strongly supports Android (and its Chinese variants). Nokia has abandoned exceptional and unique competitive advantages that had blocked Nokia's most dangerous rival.

Nokia's credit rating was downgraded three separate times and is near junk. Nokia's brand fell out of the top 10 for the first time since rankings were published. Nokia's shareholders so much hated Elop's next twelve months in charge, since its February peak, Nokia's share price had crashed 60%. This is Q4 of 2011.

 

The sane CEO would look at the situation one year ago, conclude Nokia was doing reasonably well, was healthy, profitable - and growing strongly in every single metric imaginable. That is where a sane CEO would say Nokia's platforms are "not on fire". And the sane CEO would say looking at today's situation, that if ever, today Nokia's platforms "are on fire".

 

The insane CEO looked at the situation a year ago when everything was growing including profits, Nokia smartphone sales and Nokia share prices, and issued a Nokia-wide memo claiming bizarrely that Nokia's platforms were on fire. And truly the Roadrunner cartoon Wiley Coyote moment, using Acme rockets, running over the cliff and then looking down into the canyon and starting to fall.. the insane CEO would look at the world today, and say he feels the platforms are no longer on fire (and that he need not fear Samsung as a rival, he can sleep soundly today).

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

THE SANE BOARD

 

The sane Nokia Board looks at its recently hired CEO, Stephen Elop, objectively and observes that since he took over, he did not focus on his primary task, to fix Nokia's execution. He issued damaging memos and statements that destroyed Nokia's market share, retail support, and trust by consumers and developers alike. He has continued to consistently act against Nokia's best interest and refuses to make obvious right choices such as releasing the two MeeGo handsets globally, yet continues to pursue wild goose chases like tablets. The board would use metrics such as plunging strongly profit-generating smartphones unit to losses, the crashing share price and the disasterous credit ratings and falling brand value. The sane Board would calculate the long-term damage of the wanton destruction of Nokia's previously mightly market share and observe that this year Nokia's market share is headed to single digits. The sane Board would evaluate the long term damage from destroyed partnerships with the leading companies of the industry, the devastation of the ecosystem and the abandonment of all sensible paths to a future from cloud computing to mobile money. The sane board concludes that no matter how clever Elop sounds like in his interviews, the con-artist is an utter fake and a madman who will destroy Nokia with his delusions. The sane Board fires Elop now.

 

The insane Board looks at the evidence of Lumia failing by every metric, and lets the delusional psycopath go on to ruin Nokia, to sell all its assets from patents to programing skills to the advertising unit to the Vertu unit while the Nokia share price continues to fall.

 

The criminal Board colludes with Elop or is criminally negligent in ignoring his blatant disregard of the CEO's fiduciary duty and conflict of interest. A criminal Board would face stock market regulator investigations on both sides of the Atlantic. Individual members of a criminal Board would face lawsuits and massive fines and be barred from any Board work in the future. But I am not suggesting the Board is criminal.

THE WAY OUT

The sane Chairman of the Board looks at all of this, understands the CEO has lost all trust and respect and sees the demoralized company on the brink of ruin. He takes the CEO aside, says, this won't work, and tells Elop to go back to Ballmer with an idea. Next the sane CEO manages a divestiture of only the Lumia unit, sell it yes, to Microsoft, and make them take Elop with them. Throw in a 3 year license to use the Nokia brand in the North American market with the Lumia but not for other markets. Pay back the several hundred million dollars so far that Microsoft has paid Nokia. Get rid of all of it. The split is relatively painless, as most of the hardware is from Compal of Taiwan with non-standard Nokia components, so few factories, designers, employees are involved. The Windows Phone software is obviously also mostly Microsoft so again, few Nokia staff would be involved.

The insane Chairman of the Board watches as the proud Nokia ship slowly sinks as the clown CEO, no, thats not fair to clowns. As the Microsoft Muppet CEO blasts ever more holes to the sinking ship, below the waterline and just boosts the speed by which Nokia sinks. And the proud legacy of the Chairman, thought by most in his home country as its greatest industrialist and even in European circles held in highest esteem, rapidly sinks along with it.

NOKIA CAN BE SAVED

Nokia can be saved. I am not saying Microsoft Windows Phones have to be discontinued (while it would be the best move right now, in my estimation). I am saying the magical MeeGo devices, N9 and N950 have to be sold globally now, now when they are hot, and can command a good price, and bring Nokia back to profits. The CEO has to commit to MeeGo also into the future and restore the damaged relations with China Mobile. Symbian is best suited for Africa and Emerging World markets until Meltemi is available. Qt is Nokia's smartphone strategy and the only OS that is incompatbile with Qt is Windows Phone. Lumia has been tried, it is failing now. Nokia had a superior ecosystem a year ago, now Elop is destroying it piece by piece. He has to be stopped while there is anything left. For Nokia to survive as an independent company, it must take drastic actions now. The first step is strong embracing of MeeGo and the N9 and N950, globally in every market from the UK to the USA. And Elop is utterly incompetent, he has to be fired!


UPDATE 28 March, 2012 - Nokia finally takes partial step in right direction! Nokia reported at Netbook News quoting info from Mary McDowell and Nokia's 'Next Billion Group' - that Nokia is now developing not one but two lower-cost MeeGo devices, (hooray! Finally! Some sanity at Nokia HQ! We celebrate!) aiming for the Emerging World markets. Note this completely reverses the idiotic statements CEO Stephen Elop said less than a year ago about MeeGo. Good move Nokia, more of this. Except why is CEO Elop not running at the front of this story? Why is he refusing to be seen near any MeeGo story about Nokia! And now, EVEN MORE WITH THIS DRAMATIC NEWS DEVELOPMENT, if there are new MeeGo devices coming - and there is unprecedented press support of the N9, why not release the N9 and N950 on MeeGo now, sold in every market now, to help support the interest in, and future sales of those upcoming newer and cheaper MeeGo devices.

 

UPDATE APRIL 11

For anyone still reading this blog, Nokia just issued its profit warning today and I have commented on it and crunched some numbers. In 2011 Stephen Elop set the world record for biggest destruction of a Fortune 500 sized company any one year. Now in Q1 of 2012, he went even better, producing the worst quarter results ever seen anywhere. Read my view of the Nokia Profit Warning and why things are even worse.

UPDATE APRIL 12

I have written a 'proper' and not very 'Elop sucks' type of posting, honestly, accurately, precisely, comphrenesively, with facts and stats, about what is not wrong, and what is wrong, and what must be done, if Nokia is to be saved. If you want to read it, it is here The Hearbreaking Fact is that Nokia Can Be Saved and within one Quarter at that. 

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) 

Elop, Nokia, Tablets, Location Based Services and Product Line

This blog does not treat everything Stephen Elop does as Nokia CEO as inherently wrong. I have supported enthusiastically some of his early decisions when he came to Nokia. I have been critical when I see mistakes, and I have been open about when I think Elop (and/or Nokia) has made the right choices. I concluded last summer that Elop's tenure was so full of mistakes that he is unfit to run Nokia and must be fired. But even after that, I have noted whenever he has made good choices, such as reinstating some of Nokia's long-standing features and abilities on phones (like second cameras, removable batteries, microSD support, TV out etc) and on Nokia strategy when for example Elop reversed his stupid decision to go to purely numbered phone names. Now we have Ashas and Lumias and PureViews and no doubt more named phones coming up in the future.

If only Elop could start to manage Nokia intelligently, with some sense and responsibility, I could stop the occasional critical blog articles about Elop's bumbling. But once again, at MWC in Barcelona last week, Elop was up to his usual madness, promising moronic strategies for Nokia. I am referring to his interview to Tech Crunch, which you can see at this link - and there are written summaries of his major points if you don't want to watch a video interview of Nokia's CEO talking about Nokia's future.

FOUR NEW STRATEGIC BLUNDERS

So, last year Stephen Elop caused the costliest damage to any market-leading brand in any industry ever with a pair of idiotic communications from Nokia. He issued the Burning Platforms memo, so full of mistakes that he has since walked back a dozen of the major assumptions, statements and major errors in the memo - nonetheless, that memo caused billions of dollars of damage to Nokia. This was akin to the infamous Ratner Effect. And Elop compounded his memo mistake, with the crazy timing of his announcement of Microsoft as partner, when he had no smartphones to sell, and when Nokia was not even going to release smartphones on the then-current version of Microsoft's Windows Phone OS. This was similar to the devastating Osborne Effect. The collapse in Nokia retail sales added to Nokia's billions lost in revenues and profits. Highly profitable Nokia Corporation just before those two announcements went into the red by mid-year and is producing losses still today.

I was among many who called out Nokia immediately on the strategic blunder of those two communication errors. I have since called the combination by Elop of the Osborne Effect with the Ratner Effect as the costliest management blunder of all time, and it now has a name: the Elop Effect. Obviously Elop himself has admitted that the effects to Nokia were far more damaging than he had anticipated (this alone is reason he should be fired) and Nokia's 34% market share for all of 2010 - when Nokia sold more twice the number of smartphones as Apple's iPhone - is now down to 12% by Q4 when Apple is almost twice as big as Nokia. Nokia was growing unit sales, growing revenues, growing average prices and growing profits just four quarters ago, in Q4 of 2010, the first Quarter with Elop fully in charge. Since then Nokia has seen collapsing unit sales, crashing revenues, dropping average prices and Nokia has swapped growing profits for growing losses in its smartphone unit.

How will Elop fix this? He told the Tech Crunch interview that Nokia was expanding its product line in the Lumia series powered by Microsoft Windows Phone. I have been most critical of that strategy in the past, and I explained as recently as February why even with its upcoming flagship smarpthone the Lumia 900, the Nokia Lumia strategy is failing and will not save Nokia. So this was not news. I understand Elop has to 'believe' his strategy no matter how doomed it is, Elop has burned his platforms explicitly with Symbian so he cannot go back anymore. No matter how much Lumia will damage Nokia, Elop is now committed to it. And this blog is not a repeated criticism of Lumia and the doomed Microsoft strategy. I am addressing four new statements of Nokia direction that Elop made now last week in Barcelona.

Stephen Elop said that Nokia was investing in the Nokia Reader and did not reject the idea of a Nokia branded eBook reader like Amazon's Kindle. When asked about proper tablet PCs like the iPad, Elop said "This is something really interesting to us." Then when asked about the next big thing for Nokia after this camera on the 808 PureView, Elop said "A big part of our strategy going forward will be location-based services." And finally, about Nokia's product portfolio and comparing it to the single-device strategy by Apple's iPhone, Elop said "We will be a lot more pared down going into the future. Its not a single device strategy, but there will be paring down."

These are all utterly mad strategies for the market leading handset manufacturer that is the market-leadering mobile phone handset brand on five of the six inhabited continents, and intends to recover its market leader position also on the sixth (North America) where consumer and market needs differ considerably from the rest of the world (being less advanced and needing more simplistic less sophisticated handsets, and where the carriers/operators set very high demands for customization and where carriers/operators often demand that particular features and abilities are stripped from standard phones). But lets examine each of the four stated strategic missions for Nokia and why they are wrong.

eREADER IS CRAZY

Elop did not commit to producing an eReader device like the Kindle. But Elop did not deny that either. Why is the Kindle successful? It is manufactured and sold by the biggest bookseller on the planet, as a super-optimized ebook reader. What is Nokia's Reader? It is (initially Symbian based by the way) eReader software so that smartphones can be used to read ebooks. Is that smart? Yes, that is smart. Is it yet another sign that Symbian was not dead, that this came to Symbian before Windows Phone, obviously. Is it good for Nokia to expand the market for its smartphones, whether on Symbian or Windows Phone or MeeGo, to be used occasionally to read ebooks, yes. But would Nokia be smart to produce an eBook reader? It would be a moronic move. Amazon is able to sell the Kindle because we already go to Amazon to buy our books and our ebooks. The Nokia (ex Ovi) store is not known as a major bookstore. Nokia's mobile phones are sold through custom mobile phone stores, ie carrier/operator shops and specialized handset stores like Carphone Warehouse. These are not offering eBook readers. The customers are different, the services (content) is totally different, there is no synergy between Nokia's existing sales organization, and the actual physical distribution is totally different. Furthermore the market sizes are completely different. Smartphones alone sell more than all types of computers combined (including yes tablet PCs) - even if we toss in Kindle eBooks to the pile, smartphones outsell the lot. And Nokia sells basic featurephones 6 times more than Nokia branded smartphones. What Nokia needs to do, is to market its primary goods efficiently, smartphones and featurephones - and bring the smartphone unit back to profitability, not waste any R&D effort into designing a 'better eReader than the Kindle'.

TABLETS EVEN WORSE

And yes, lets be fair, Elop did not explicitly suggest he is planning an eReader. But when asked about Tablets, he said he was 'really interested' in them. Really? Nokia to try to out-Apple on the iPad? Ex-squeeze me? Now. If you are a PC maker, and you see that the future of portable computing is headed to smartphones and tablets, it makes a lot of sense for a PC maker (like Apple) to launch a tablet PC. Makes perfect sense. In fact, makes more sense to launch a tablet for any notebook/netbook maker, than to launch a smartphone, because a tablet PC is more similar in every way to laptops and netbooks, than smartphones are.

For any handset maker, to launch tablets is utter madness. Witness Motorola and RIM. Tablets are a tiny market niche compared to all portable PCs which are a part of all PCs which are a smaller market than smartphones. Smartphones are bought, used, sold, marketed in similar ways to other smartphones, but tablet PCs are bought, used, sold, marketed in totally different ways to smartphones - in similar ways to PCs. So with tablets, we don't buy them at handset stores (even though a few are typically offered). We tend to buy our tablets at PC stores. The king of the hill in tablets is Apple with about 75% market share with the iPad. The rivals who have tried to compete from the smartphone side like Blackberry, have failed miserably. The only rivals who have had some success have been like Samsung who were PC makers already and had that sales channel already.

Any Nokia branded tablet would fall into the aim of the iPad. Can it be as good, of course not. Nokia has tried for five years now to match the iPhone and while the N9 with MeeGo came close, no Nokia smartphone, not even the Lumia 900 has matched the iPhone. Why would Nokia's tablet be better than the iPad. Of course it would not be. And where are the Nokia stores to sell them? Nokia abandoned its retail flagship stores. Nokia does not have any relationship with the PC sales channel. Why on earth would it invest any R&D to try to sell a new electronic gadget where the market is tiny and utterly dominated by Apple? This is madness.

 

The right strategy, is to take the N9 and N950, running MeeGo, the most desirable most highly praised Nokia smartphones ever, on Nokia's best OS platform ever, that already are in production, and immediately expand their availability to every Nokia market. Remember the German magazine who loved the N9 and MeeGo so much, it instructed its readers to drive to Switzerland or Austria to get their hands on an N9 (rather than buy the disappointing Lumia handsets sold in Germany at the time). Or see how the Guardian reported on how disgusted it was with the Lumia 800, that it was returning the handset. Nokia problems are not that it cannot make a desirable product. Nokia problems are that the CEO pushes an undesirable product on its customers and refuses to give the desirable product. That is why Nokia is making a loss in its smartphone unit. As we calculated here, even with no Nokia marketing support and selling only in far-away bizarro markets, the N9 on MeeGo was outselling all Nokia Lumia smartphones in Q4 - the launch quarter for both platforms - and how much was MeeGo outselling Lumia? By 3 to 1. What idiot CEO talks about launching a costly tablet PC while he has a hit smartphone in his pocket and refuses to sell that?

LOCATION, REALLY?

And then what comes after the 808 PureView superphone? Elop said a big part of Nokia's strategy was going to be location-based services. What? AGAIN he is committing the same error he did time and again last year. Elop has fired all competence inside Nokia who had the legacy knowledge. He is now listening to Microsoft and West Coast based experts who may be good about the PC based legacy internet and know about things like steam engines and the fax and carrier pidgeons, rather than the Finland-based mobile experts who invented much of the mobile internet. The location-based market opportunity is not only an utter failure. It is only - get this - the worst-performing part of the mobile industry ever. The. Worst. Performing. Part. In this industry's history. Nokia knew this. Elop probably fired all the staff who know this. In the past decade, when the mobile industry grew customers by 500% and grew revenues by 250% - most mobile service concepts grew from zero to several billions of dollars in value. Location-based services? Gartner measured that only 2% of the planet's mobile subscribers were using any kind of location-based services ten years later. Abi Research found the total value of location-based services at a measily 560 million dollars globally in 2010. This is THE. WORST. PEFORMING. PART. In mobile. And here Elop wants to focus?

Mark my words, Nokia will fail miserably with this. Nokia's successes will come from other areas, not from location-based services. And Elop will have to eat those words too, like he did with so many from last year. This is sheer madness. Only a complete ignoramus would commit the company on this futile journey, wasting millions in that pursuit. Elop is once again acting like the ostrich. The facts are staring him in the face, he simply hides his head in the sand and refuses to see the truth. He is substituting his own imaginary world, in place of the truth. This is textbook delusion. It would not be so bad, if Nokia was a filthy-rich hugely profitable company, that it could indulge its CEO in some silliness, but Nokia cannot afford this. Nokia has to focus on areas where the industry is strongest (cameras, music, gaming, social networking, advertising, mobile money), not where it is weakest (location-based). Note - Nokia HAD strong initiatives in cameras, music, gaming, social networking, advertising and mobile money. If Elop had bothered to do what he was hired to do - help Nokia execute better - he'd have big successes out of those. But thats too much 'work' for Elop. He would rather throw all of Nokia's efforts away in the areas where it has invested in - and often has established a lead - and rather pursue some silliness. Oh, I remember, the Windows Phone cannot support the supercamera of the 808 PureView. Windows Phone doesn't support NFC that is needed on mobile money, etc etc etc.. So Elop is making decisions that are to Microsoft's best interest, even where it is damaging to Nokia's best interest. Whose CEO was he, again?

PARING DOWN PRODUCT LINE

And the last bit of madness is probably the most costly and permanent damage to Nokia profits. I wrote in January 2011, just before Elop announced his Burning Platforms memo and the Microsoft strategy, what was wrong with Nokia and how to fix it. Part of that blog are things Elop has now, with a lot of reluctance done - such as fixing mistakes in handset design philosphy (annoying existing customers and recognizing the needs of Nokia markets globally, like removable batteries, microSD support, close-up camera focus, etc). In that blog I argued vehemently that Nokia needed to re-establish its lead in camera (something Elop now did with the 808 PureView). And another point I made adamantly was that Nokia cannot pursue Apple towards a limited product offering. Ford and Toyota do not look at the highly desirable (and profitable) Porsche 911 and suddenly decide to go 'paring down' its product portfolio and focus only on a few sportscars. The exact opposite is happening in every leading and highly profitable company in every industry (except Apple with the iPhone, where Apple has clearly been leaving profit on the table, a frightening thought considering Apple is the most valuable company already on the planet). Porsche does not 'pare down' its products. It is still expanding. We have seen the launch of Porsche cars into SUVs and the formerly 2 door sports coupe maker now also makes the 4 door sporty Panamera. Aston Martin, you don't get more exclusive supercars than that. And Aston what have you done for me lately? They have gone from making V-12 supercars to also cheaper (still super-expensive) V-8 powered sportscars and have expanded to a 4-door model. I could go on.

An engineer will be tempted to think that he or she can design a perfect device. A marketer knows there is no such thing and that we humans have differing needs and wants, often even irrational needs and wants. The more you, the manufacturer, can support the variety of customers, the more you can make a profit selling a gadget to a segment of the market where there is no rival. That is exactly what Nokia did with the 808 PureView or what Samsung did with the Galaxy Beam (the smartphone with the pico-projector). Elop contradicts himself later when he says in the interview that Nokia needs to offer "different things for different people in different markets". That is NOT one size fits all. That is not Henry Ford's 'any color as long as its black' (NB he actually never said that).

 

Nokia is uniquely positioned to flood the market with the most broad product portfolio possible, in every form factor and color and feature set and price point. Nokia can use this competitive advantage to drive its competitors into loss-making! Nokia can win this way. But already before Elop, under Kallasvuo, Nokia moved away from this position - the one where Nokia holds a competitive advantage against all rivals. Now its Samsung which offers the broadest portfolio and who grew market share in 2011 and who lost? Who made a profit in handsets and who made a loss? Samsung has taken Nokia's winning strategy and now is gaining in size and growing profits. Elop has taken the losing strategy - so damaging that Nokia factories are now idling and some are being sold.

Look at the Lumia range. It now has 4 handsets. Not one QWERTY amongst the four. Always before when Nokia released flagships, one of the top phones had a QWERTY version - as 30% of smartphone buyers will not even consider a smartphone that doesn't offer a QWERTY option (according to Motorola). When Nokia released the N8, it offered the sister model E7 with QWERTY slider. When Nokia released the N9, it had the sister model N950 with QWERTY. But Elop prefers to anger existing Nokia customers and drive them to rivals. Even 'failing' RIM sold an increasing number of Blackberries in Q4 - powered by QWERTY. Where is the legacy of the E-Series? This is madness by Nokia, to even talk about 'paring down' the handset range.

The needs of teenagers are different from adults. Business/enterprise customers have differing needs from consumers. The needs of handset users in markets where they do not use the English language (or even the English alphabet) are different. The needs of handsets are different in markets where 3G has not launched yet. The needs are different in markets where most users do not have all-you-can-eat data plans. The needs are different in markets where there is no regular supply of electricity. Etc etc etc. Nokia was able to become the world's biggest handset maker - and the world's biggest smartphone maker - by offering the widest range of handsets through the largest delivery channel, being on most networks of any handset brand. That advantage was voluntarily abandoned by Kallasvuo before Elop took over. Now Elop looks at how Nokia is struggling and rather than use winning strategies, he decides to further pare down his portfolio. This is madness again.

IN SUM

I do not want to make this blog a regular series of hating Elop. But when he does something blatantly stupid, I have to call him out on it. And he is doing it again. Elop is actively destroying the company we used to love. We saw what Nokia is capable if Elop steps aside. The magnificent N9 on MeeGo. The exiled N950 also on MeeGo. Any sane CEO whose smartphone division is generating a loss, would immediately launch those two smartphones to every market. And the 808 PureView on that 'obsolete' Burning Platforms Symbian - so full of super-high tech that Windows Phone cannot even support. Yes, Nokia can come back, and could come roaring back, if the CEO stepped aside and just let Nokia be Nokia.

But Elop rather talks of eReaders and Tablet PCs. These are to the advantage of Microsoft but would be suicidal for Nokia. He talks of Location-Based services being now the next focus area for Nokia where for example Google says its number 2 priority is mobile money. Nokia already not only has Nokia Money but differing from Google, Nokia has already launched Nokia Money commercially in several countries starting with the second biggest mobile market of them all, India. What is wrong with Elop? And now continuing this madness about further paring down the Nokia product line. He is incompetent to run Nokia and is not acting in Nokia's best interest. Elop must be fired now.

The State of the Union blog for Mobile Industry - all the stats and facts for 2012

The big statistics and numbers blog! Its that time of year, the start of a new year, and we have to update and memorize new numbers. For me this annual blog is a kind of honor, a bit like the US president who gives his 'State of the Union' speech to Congress. (The state of our industry is strong!) And the blog article will get very wide coverage throughout the year as the definitive collection of the big numbers in one place. 

So lets do a bit of the headline stuff. Two years ago we learned that the richest person on the planet was no longer from the PC industry, Mr Bill Gates of Microsoft in the USA, but that title had been taken over by Mr Carlos Slim, the mobile telecoms tycoon from Mexico whose America Movil network stretches across 240 million people and most of Latin America. Cool. This industry produced the richest person on the planet.

Three years ago I reported that mobile had passed the Trillion dollar level in annual revenues and in so doing, had become in fact the fastest new industry to reach that lofty level - television and radio never became that big, the PC industry and the internet even combined, are not that big today. Print media - all books, magazines and newspapers printed annually - never reached that level. Mobile is not just one of a handful Trillion-dollar size giant global industries like the automobile business or food or construction or banking or military spending; but mobile has set the record for the fastest growth from zero to one Trillion dollars in annual revenues. We have literally witnessed the setting of a world record in growth of any industry. Even as the world went through two economic downturns in the past ten years, mobile grew strongly through both of them.

Then last year we had Apple fighting for the lead for the most valuable corporation by market capitalization (which it has since seized and is now increasing that lead). But few remember that less than two decades ago, Apple was on the brink of bankruptcy. They brought back Steve Jobs to rescue the company, and he steered Apple to the mobile future. So much so, that the company whose official name was Apple Computer, and had launched highly successful new series of Macintosh PCs and the iPod music player and iTunes store - changed its name to only 'Apple' when Jobs announced the iPhone. Since then Apple has called itself a 'mobile' company. Today the iPhone delivers more than half of Apple's revenues and most of Apple's profits. Like I say in my seminars and workshops - Mobile is the Magical Money-Making Machine. This is very literally and factually the strongest industry on the planet, with the most robust growth, the strongest profits and thus it is the best place to be for any company or person to build a success.

But its no longer just the PC industry which is excited about mobile. Look at statements from various industry giants outside of technology. Visa said in 2011 that the future of payments is mobile. And they were not talking about contactless payment plastic cards. They were talking about mobile phones. Google's Chairman Eric Schmidt wrote on Harvard Business Review last year, that mobile money is one of Google's top priorities. What? The internet giant known for advertising intends to take on Citibank and American Express and Paypal? In mobile? Yes. Google has been mad about mobile for seven years now, and their internal mantra is 'Mobile First' - meaning that for any Google initiative today, they will deploy the mobile variant first. This from the company that set the record for fastest growth from zero to entering the Fortune 500. And they say the future of the internet and advertising (and money) is.. mobile.

Facebook and Twitter say the future of social networking is mobile. BBC says the future of broadcast is mobile. Tesco's the big UK retailer feels mobile is vital for the future of retail. Gaming is rushing to mobile (Angry Birds, anyone?) and music is already on mobile. Even print media are rushing to embrace mobile from MMS based highlight clips to Augmented Reality enhancements to print editions.

Its not just business. Government is increasingly turning to mobile. Politics is embracing mobile. Healthcare is providing assistance via mobile. Education is using mobile to help in learning. This is by far the most dynamic and most exciting industry to be in. And with that, lets start to dig into the numbers today. All data in this blog is current as of December 31, 2011 and yes, you may freely quote all the data on this blog (please list the source as TomiAhonen Almanac 2012).

5.9 BILLION SUBSCRIBERS

 

When I left Nokia ten years ago to start my own consultancy, the global mobile phone subscriber count was at 700 million - there were more fixed landline accounts (1 Billion) globally than mobile accounts. The leading countries like Finland, Hong Kong, Austria, Italy and Israel had passed 80% mobile phone penetration rate per capita, and one country, Taiwan was past 90%. Yes it was an exciting time, but even the mobile industry itself did not foresee this incredible growth. The industry expected the world to have 2 Billion mobile phone subscriptions by the end of the decade - a huge growth of tripling in size in one decade. The reality was quite different. By the end of 2010 we had 5.2 Billion mobile phone subscriptions on the planet (prepaid and post-paid, combined). All sensible analysts predicted that the growth rate would slow and nobody expected half of Africa to be connected. How wrong we all were.

Today more than 77 countries have passed 100% mobile phone penetrations per capita including the mobile laggard country, USA which finally reached that level last year. Meanwhile the leading countries continue to push past 150% and past 175% and even yes, past 200% mobile phone penetration rate - as the UAE did becoming the first country with literally two mobile phone accounts for every living person of any age.

 

The planet has a population of 7 Billion people alive. And now there are 5.9 Billion active mobile phone subscriptions. That is a global penetration rate of 84.3%. To put it another way, if we allocated all mobile phones to every living person by age, starting with the over 100 year olds, and then proceeded down every person alive getting one mobile phone subscription, today the ages we would cover comes down to everybody older than the age of .. eight! Yes, if the 5.9 Billion mobile phone subscriptions were distributed evenly, every single person on the planet age 9 or older, would have one.

Makes you think? In one decade this industry grew more than 8 fold. This mobile industry has sustained a compound annual growth rate of 24% year-on-year for a whole decade! (when measured in its paying customers, obviously, the revenue growth is not quite that dramatic while also good). Even the past year, we grew new customers from 5.2 Billion to 5.9 Billion, adding 700 million new customers in the past year. The whole mobile industry had only 700 million customers a decade ago! The growth rate of adding 700 million new customers to 5.2 Billion is still an enormous 13.5% in just one year.

Compared to the landline cousin, ten years ago fixed landline was the big brother of telecoms, at 50% bigger. Today, if a telephone rings anywhere on the planet the odds are 5 to 1, that the phone ringing is a mobile phone. Yes, the picture is so lopsided, that for 5.9 Billion mobile accounts, there are only 1.1 Billion fixed landline telephones worldwide.

When will we reach 100% per capita mobile phone accounts. Some have started to push early numbers now for 2012. I saw a Cisco projection claiming we'll hit that milestone this year. I think that is premature, but definitely by Spring of 2013, the world will pass that incredible milestone, that when measured per-capita, there will literally be more mobile phone subscriptions than people alive on the planet. I do not think we will see that number this year, but we will definitely see it by Spring of 2013.

4 BILLION UNIQUE USERS, 4.8 BILLION HANDSETS IN USE TODAY

A mobile phone subscription is not a unique user. Some still are astounded by the stats, but yes, increasingly we, perfectly normal people, are walking around with two mobile phones in our pockets. And in many markets the competitive situation is such, that consumers switch between carriers/mobile operators by swapping the SIM card, so you might have two or three or four mobile phone accounts and use one phone. Several manufacturers have introduced Dual SIM phones (mobile phone handsets with slots for two separate SIM cards, allowing the user to switch between two networks without swapping out the cards). The first Triple SIM phones have already appeared.

Just to be clear. Why two phones? Imagine having a phone from work - a Blackberry. But your employer has tight controls on what you can and cannot do on that phone. So you get yourself an iPhone as your private phone. You are now part of the population with two mobile phones (and two mobile phone accounts). If you have a data dongle for your laptop or netbook or iPad - that would be a third cellular mobile account..

I was the first telecoms expert to expose the bizarre concept of multiple phone ownership (because it happened first in Finland and it was first observed by my team when I was employed by the Finnish telecoms operator/carrier group Elisa/Radiolinja/Helsinki Telephone at the time in the late 1990s) and have been reporting on the phenomena ever since. So my consultancy has also provided the most accurate counts of how many of the planet's total mobile users are 'unique' users and how many of those accounts are second and third accounts. This is the far more relevant number to consider on a planetary migration to digital connectedness. How many 'unique' users are there on mobile, after we remove the second phones and the multiple subscriptions.

Its an easy number to memorize for this year - 4 Billion. That is the unique mobile phone user number. That is 57% of the total population of the planet, which very literally - not by statistical gimmicks - very literally do have an active mobile phone subscription (prepaid or post-paid) and at least one mobile phone handset that they use.

And you might ask what of the total number of mobile phone handsets in use. That number will be more than the unique users (some have 2 phones) and it will be less than the 5.9 Billion total subscriber number (because some only have SIM cards on rival networks sharing one phone on them). My consultancy now reports the 2011 number for total active mobile phone handsets in use and with a live paid subscription to be 4.8 Billion. Wow. 4.8 Billion pocketable digital communication devices that are in use on Planet Earth every day. Wow. That is huge.

MOBILE SUBSCRIBERS AND HANDSETS IN USE
Total mobile subscriptions (incl multiples) . . . 5.9 B
Total mobile handsets in use . . . . . . . . . . . . 4.8 B
Total unique mobile phone owners  . . . . . . . . 4.0 B

Source TomiAhonen Almanac 2012

This data may be freely quoted

How big is 4.8 Billion? There are 970 million cars registered and in use worldwide. There are 1.1 Billion landline phones. There are 1.3 Billion personal computers of any kind including desktops, laptops, netbooks and tablet PCs like the Apple iPad - all combined. There are 2.2 Billion internet users (including office use, home use, shared use at internet cafes and schools etc, and mobile internet users). There are 1.8 Billion television sets and 4 Billion radios in use globally. But 4.8 Billion actual mobile phone handsets in use! Wow, that is an enormous number. Or let me put it this way. If you take all television sets in use in the world, and add all personal computers of any kind including laptops and tablets, and add fixed landlines - their combined total - 4.2 Billion is still less than the 4.8 Billion mobile phone handsets currently in our pockets globally. Massive! Obviously much more on mobile subscribers, also regionally, and by age, and across the Digital Divide in the TomiAhonen Almanac 2012.

THE AVERAGE USER?

So with 4 Billion unique users and 5.9 Billion total mobile subscriptions, clearly there are 1.9 Billion 'second or third' (or fourth etc) accounts. How many of us therefore actually have more than one account? The number is now 1.5 Billion people or 37.5% of the total number of unique users, actually walk around with two SIM cards or more in their pocket. 400 million of those have three or more active mobile subscriptions (mostly pre-paid accounts).

And yes, 3.2 Billion people on the planet who have a mobile phone account, are satisfied (or can only afford) with one handset, but 800 million people already walk around with two phones in their pockets (some ultra-geeks like me have 3 phones, haha, but that number is too small to register in the big picture). So yes, one in five of us, literally 20% of anyone who has a mobile phone, walks around with two connected phones in his or her pockets (and/or purse in the case of the ladies..)

Its no longer 'weird' to have two phones. One fifth of all who have a mobile phone today, actually use two phones daily. Not just two accounts, two actual phones. This is a remarkably different reality from the one imagined by industry thought-leaders a decade ago, when they were planning mobile phone handsets for the future. The mantra was the perfect device, that would do 'everything' but now if we have two devices, we will of course optimize. One is great for texting - has a great QWERTY keyboard like a Blackberry, while the other is great for surfing, has a big touch screen like the iPhone. Or if we love our cameras, we have one camera-optimized phone in one of our pockets like the Nokia N8 or the HTC  Titan 2, etc.

SMARTPHONES

And what of the normal user? How many of those mobile phone handsets are smartphones then? Not that many actually. Globally the installed base is still 81% non-smartphones, what I call 'dumbphones'. Some are very advanced 'featurephones' that have cameras, big color screens, full internet browsers, and often improved input methods from QWERTY keyboards to touch-screens. These would typically cost in the 50 to 100 US dollar ranges without any handset subsidy ie no contract. Still others are of the ultra-cheap type that do only voice, SMS and have perhaps some rudimentary functions and facilities - a flashlight/torch, an FM radio and a clock. These can cost under 25 US dollars without subsidy. Many of the phones in use are older, often second hand, so there is a large pool of hundreds of millions of older Nokia models still in circulation especially in the less-affluent countries in the Emerging World. Also our younger kids often get hand-me-down phones which may be a two-year old Samsung or SonyEricsson or indeed an iPhone 3GS.

So 19% of the installed base of handsets globally are smartphones. That is an increasing ratio, last year it was 17%. The new sales of mobile phone handsets this year passed 1.6 Billion units, and 30% of them - 486 million - were smartphones. By the fourth Quarter, ie Christmas sales - a third of all mobile phones sold were smartphones. So we are well on the way on that transition which is now unstoppable, that eventually all handsets in the world will be what we now define as 'smartphones' (but the actual form factors and specifications will of course evolve).

Most who read this blog will have an interest in the Industrialized World, and with us in the most affluent parts of the planet, the migration to smartphones is well along already. In Europe the installed base of smartphones corresponds to a 41% penetration of smartphones per capita. In many individual countries like the UK, Netherlands, Switzerland and Finland, the tipping point has been passed where there is a smartphone now for half the population (bear in mind, with these 'per capita' calculations, we still have the dual phone phenomenon - so in reality some wealthy employed white-collar workers will often have two smartphones). North America passed the point last year where there is a smartphone for one third of the total population per-capita. In advanced countries of Asia-Pacific like here in Hong Kong or Australia and Singapore etc, the penetration rate of smartphones per capita is almost half, at 48%.

This tracks perfectly the sales patterns too. Last year the US market reached the point where half of new phone sales were smartphones. Europe was there a year earlier and advanced countries of Asia-Pacific were reaching the half-point of new handset sales by 2009.

But others of my readers are interested in the Emerging World (or the full global view). So lets not forget that. I can report that in the Middle East the smartphone penetration level per-capita is past one third, at 37%, slightly ahead of North America. Some of the leading countries like Qatar, UAE and Israel are well ahead of the mainstream Europeans and the Asia-Pacific region. Latin America has passed the point of a smartphone for one out of five people, the per-capita penetration rate is 22%. In the less-affluent countries of Asia, which includes most of the big population countries like China, India, Indonesia etc, the smartphone penetration rate is 12% per capita. And in Africa its still in the early days, with smartphone penetration rate of 3% per capita.

How many smartphones will be sold this year? I am projecting about 750 million, which would be about 44% of all new phones sold. The migration is continuing and the global smartphone installed base will pass the 1 billion level by the second quarter of 2012. We will end the year with something between 1.1 Billion and 1.2 Billion smartphones in use worldwide, which starts to approach the installed base of all personal computers of any kind including desktops, laptops, netbooks and tablet PCs like the iPad.

While everyone obsesses about the iPhone and Android (and Windows haha) the global installed base of smartphones by operating system is still dominated by Symbian. Not for long, because of Nokia's suicidally stupid move to end Symbian last year, while it towered over all rivals - and was growing new sales strongly - but yes, even now, more than one year after the infamous Burning Platforms memo that destroyed Symbian's (and Nokia's) future, this is the picture of the installed base:

Installed Base of Smartphones by Operating System 2011
1 - Nokia Symbian . . . . . 33%
2 - Google Android . . . . . 31%
3 - Apple iPhone  . . . . . . 16%
4 - RIM Blackberry . . . . . 12%
5 - Samsung bada  . . . . . . 3%
6 - MS Windows Mobile . . 2%
7 - MS Windows Phone  . . 1%
Others . . . . . . . . . . . . . . . 3%
TOTAL IN USE . . . . . . 910 Million

 

Source TomiAhonen Almanac 2012
This data may be freely quoted

 

If you want to see the actual market shares of new sales for the various smartphone handset maker brands and the operating systems for full-year 2011 or the latest quarterly sales numbers, please see this, my comprehensive blog article about smartphone market shares. And if you are interested in national smartphone penetration rates, I have that too. The top 3 for most smartphones per capita are Singapore, Hong Kong and Sweden. The chart for 42 country penetration rates in 2011 is here. Much more data about smartphones including regional data, market shares, handset features, age distribution etc in TomiAhonen Almanac 2012.

 

Last year 2011 was the first time that more smartphones were sold than all types of personal computers added together including desktops, laptops, netbooks and tablet PCs like the iPad. I have also been calculating the global 'computer manufacturer' market shares annually, when smartphone shipments are included in the overall numbers. The chart for last year for the biggest PC makers with smartphones included is here. And for those who need all the nitty-gritty about mobile phone handsets, feature sets, market shares, regional penetration rates, and market sizes for the major countries, the obvious total data source is the Tomi Ahonen Phone Book 2010.

 

WHAT DO WE DO ON MOBILE?

So what do we do on our mobile phones? The obvious answer used to be 'we make voice calls' and some smartphone users might say 'download apps' or perhaps that we 'surf on the web'. That is all fine and good, but the truth of the matter is that last year marked a major milestone in the 'mobile' industry, where the primary use of the mobile handset is no longer voice calls - and no, its not apps nor is it web surfing either. The primary use worldwide - and the one with most users today - is SMS text messaging. Yes, last year, only 18 years after SMS text messaging was first offered as a commercial service for consumers, our favorite messaging method has passed voice calls in total users. SMS text messaging is used by 85% of mobile phone users - 5.0 Billion people - vs voice calls that are only used by 83% of mobile phone users (4.9 Billion people). Apps and mobile web come far lower on our list of preferences. And its good to see that even the USA is finally embracing SMS wholeheartedly. Pew reported in 2011 that the active user level of SMS text messaging had reached 88% of US cellphone owners. That compares to 90% in Pakistan, 91% in Brazil, 91% in China, 96% in Indonesia. Most of Europe has passed the 90% user level years ago for SMS text messaging.

So its time to end calling it a mobile 'phone' (or cellular 'phone') - because voice calls are no longer the most used service on our mobile handset devices. I am trying to learn to call the device just a 'mobile'. But lets talk about SMS text messaging a bit. First how big is 5.0 billion? Compared to total email users - SMS is three times bigger. Compared to all landline telephones? SMS is 4 times bigger. Compared to facebook? Over 5 times bigger. Active users? SMS text messaging grew users last year from 4.2 billion to 5.0 billion ie 16% growth in total paying users. In just one year! The traffic in SMS text messages grew even more - by 18% and while the carriers/operators kept giving huge bundles of 'free' SMS messages in various pricing packages, the revenues of SMS globally? Still grew 5% last year reaching 126 Billion dollars worldwide! The SMS industry earns a fresh new million dollars every four minutes of every day, day and night, 7 days a week, 52 weeks a year. SMS alone is bigger than Hollywood movies and the global music industry and videogaming - all added together. Or to put it another way, SMS text messaging alone is bigger than the revenues of the global radio broadcast industry. Not bad for an 18 year old haha.

DON'T FORGET MMS

And then we have the other monster mobile messaging success, MMS picture messaging. The versatile MMS is exceptionally well suited for various media and advertising uses, but also has a growing user base in consumers who send pictures. The usage of MMS has now passed 43% of the total mobile subscriber base and at 2.5 Billion active users, MMS now has more users than the total of people who access the internet by any method (at work, at home, at shared computers at libraries, schools and internet cafes; and via mobile internet). MMS became the second most used data service on the planet last year. And what a service. MMS user base grew by 21%, and MMS revenues grew by 15% reaching 39 Billion dollars last year! Much of the premium revenues are generated by various media and advertising uses as media brands learn that MMS answers most media issues with SMS - MMS allows longer texts than 160 characters of SMS; and MMS allows adding sounds, pictures and video clips. MMS is also an increasingly popular transport vehicle for coupons, offers, tickets, boarding passes, receipts etc

WHAT OF MOBILE DATA?

You may have heard some say that soon there will be more users of the internet on moble phones than on the PC. Those 'experts' are severely misguided. We passed that milestone two years ago as reported widely from IBM to Nokia. Now we have the latest count of browser based service use on mobile handsets for 2011. Today the number of mobile internet users (including WAP) is 30% of all mobile subscribers - and thus 1.8 Billion total people worldwide - browse internet content on their mobile devices at least part of the time (in the Industrialized World most of us will also have access to a traditional PC). Still out of all 2.2 Billion internet users worldwide today, less than 400 million use a PC exclusively. Over 1 Billion use both a mobile device and a PC to access the internet - and in 2011, 800 million use a mobile handset exclusively as the internet access device. In six of the world's ten largest internet user countries the mobile use is bigger than traditional PC based use (China, Japan, UK, India, Russia and South Korea).

And what of news? An astonishing milestone also has now passed. The global user base of news and alert services on mobile is 1.9 Billion. Why is that a relevant number? Yes, its four times more than the total circulation of all daily newspapers worldwide - so even accounting for three readers per newspaper, mobile news still now has more (paying) users than total readership (paid and free-loading) of all newspapers printed. But that is not the astonishing number. Now mobile news has passed the total number of television sets in use globally! No wonder the Associated Press Managing Editors declared in September of 2011, that mobile was the future of news.

How about advertising then? Sure. That too is exploding globally. JP Morgan told us a year ago that the total value of all mobile advertisingin 2010 globally was 11.5 Billion dollars. I now have the update to that number, for 2011 that was 14.4 Billion dollars (including advertising on various new ad platforms such as the branded smartphone apps etc). How many people receive ads on their phones? 3.4 Billion people worldwide, or 58% of all mobile phone owners. Most of that is now banner advertising, with SMS text messaging based ads second, MMS third and the rest such as search, location-based ads, adver-gaming, branded smartphone apps, etc making up the rest. For those in the marketing and advertising (and perhaps media) industries who would like to understand mobile advertising more, please see Tomi Ahonen Pearls Vol 1: Mobile Advertising.

WHAT DO WE DO ON OUR PHONES?

Here is an abbreviated chart is exceprted from the brand new TomiAhonen Almanac 2012 of the types of activities we do on our mobile phones today, as a percentage of all mobile phone subscribers:

PERCENT WHO USE MOBILE SERVICE/FUNCTION

 

SMS text messaging  . . . . . 85% . . . 5.0 B
Voice calls  . . . . . . . . . . . . 83% . . . 4.9 B
Camera . . . . . . . . . . . . . . . 71% . . . 4.2 B
Received Advertising  . . . . . 58% . . . 3.4 B
MMS picture messaging  . . 43% . . . 2.5 B
News and alerts . . . . . . . . 32% . . . 1.9 B
Browsing (incl WAP) . . . . . 30% . . . 1.8 B
Premium SMS (incl voting) . 28% . . . 1.7 B
Download apps (incl Java)  . 18% . . . 1.1 B

Source: TomiAhonen Almanac 2012
This data may be freely quoted

Note for example the active user base of cameraphone based digital cameras at 4.2 Billion (or 71% of all mobile phone users). It is four times more than the installed base of all non-phone based cameras on the planet, including digital and film based stand-alone cameras and videocameras, combined. Much more such user info in the new TomiAhonen Almanac 2012 if you need more data.

The mobile has become indispensible for us. Its more than a communication device, it now has our clock and alarm, it has our calendar and reminders. We use the camera not just to take 'traditional pictures' but also as a memory tool taking pictures of what we should remember to buy at the store and where we parked the car. We store vital information at the phone book and we store valued SMS text messages with information such as addresses and parts numbers etc, to the romantic message that so touched us that we want to keep it forever. Nokia reported a year ago that the average person looks as a phone 150 times per day. For every waking hour, that means you and I look at our phone once every 6.5 minutes. Those heavily addicted teenagers do it even more - although they are so proficient at their phones, they often don't need to look at the phone to send their messages.

SO WHERE IS THE MONEY?

Ever since my second book (M-Profits the first business book for the mobile industry) my obsession with this industry has of course always been the money. Where are the revenues, how are the profits generated. And even while many still are hyping the smartphone apps space, that is not where the money is. The mobile industry is a juggernaut. The mobile industry is the youngest Trillion-dollar sized giant industry on the planet, and reached that level only three years ago. Last year the world economy grew between 3% and 4% in size. In the same period, the mobile industry grew revenues by 10%. The mobile industry is now worth 1.3 Trillion dollars (1,300 Billion dollars).

Most of those revenues are earned by the carriers/operators whose total revenues last year passed 1.02 Trillion dollars. 651 Billion of that was in voice call revenues and 186 Billion was in various mobile messaging service revenues. 179 Billion dollars was in premium data services. Beyond the operator/carrier revenues, there was also equipment sales consisting of handsets, networks and various accessories.

MOBILE INDUSTRY REVENUES 2011

Operator Revenues  . . . 1,016 B
 - Voice Revenues  . . . .   651 B
 - Messaging Revenues .  186 B
 - - SMS revenue  . . . . .  126 B
 - - MMS revenue . . . . .     39 B
 - VAS Data Revenue . .   179 B
Handset Sales  . . . . . .   185 B
Other hardware sales  . .    95 B
TOTAL INDUSTRY  . . . 1,300 B

Source: TomiAhonen Almanac 2012
This data may be freely quoted

So yes, the very first mobile telecoms service as we know it, on a cellular network service, was launched commercially (in Japan, by NTT) in 1979. It took this industry only 29 years to breach the 1 Trillion dollar level. So we have been witness to the establishment of a world record in the fastest growth of any new industry. No wonder the world's richest person is now Carlos Slim of America Movil and high tech companies from Apple to Google say their future is in mobile.

And what are the companies that lead this industry? I also provide the listing of the biggest global corporations - when their non-mobile business is removed. So after we remove the Macintosh PCs from Apple and remove the plasma-screen TVs from Samsung and remove the fixed landline business from Vodafone, who are the biggest companies on their 'pure mobile' business. The latest top 10 list of the biggest companies purely on their mobile revenues looks like this:

BIGGEST COMPANIES WHEN ONLY COUNTING THEIR MOBILE BUSINESS
1. China Mobile, China, operator . . . . . . . $ 77 B
2. Verizon Wireless, USA, operator  . . . . $ 72 B
3. Vodafone Mobile, UK, operator . . . . . . $ 66 B
4. AT&T Wireless, USA, operator . . . . . . $ 58 B
5. Telefonica Movil, Spain, operator . . . . . $ 55 B
6. T-Mobile, Germany, operator . . . . . . . . $ 49 B
7. Orange Mobile, France, operator . . . . . $ 48 B
8. Nokia Mobile, Finland, handsets . . . . . $ 45 B
9. Apple iPhone, USA, smartphones . . . . $ 42 B
10. Samsung Mobile, S Korea, handsets . $40 B

Source: TomiAhonen Almanac 2012
This data may be freely quoted

That is the Top 10. I published the Top 25 on this blog earlier if you want to see that, and to find out more about my quirky names for some of those imaginary companies, and how they would rank in the Fortune 500 etc.

ABOUT THOSE APPS

I have been monitoring the despair of the app developers in attempting to monetize the smartphone app space. Apple is about to celebrate its 25 Billionth iPhone app download but before you cheer that big milestone, bear in mind, Apple has only paid out a total of 4 Billion dollars so far. So Apple, the most successful app store, in its four years of existence, has only generated 5.7 Billion dollars of total revenues cumulatively (of which Apple kindly keeps 30%). Those 25 Billion downloaded apps have shared 4 Billion dollars of developer revenues in total or about 20 cents per downloaded app. Its not a way to get rich, if the median app gets under 1,000 downloads (meaning, half of all apps out there get even less than that). Obviously most apps on the App Store are free apps, so yes, the numbers are somewhat better for the paid apps, but this is no goldmine. I have been cautioning audiences globally to beware of the app store opportunity, it is a treacherous one, and its not anywhere near the easiest way to make money in mobile. And while we are on those numbers, the total smartphone app revenues in 2011 were now 12 billion yes, but those were not all 'app store' type of consumer apps.

Like in years past, the majority of the smartphone app revenues were still generated by enterprise/business apps, such as those for the Blackberry enterprise users, sold often with licenses counted in the thousands or more. Consumer apps associated with 'app stores' only were worth 5 Billion dollars last year, 2011, and enterprise apps were worth 7 Billion dollars, giving us the grand total of 12 Billion dollars last year for all types of smartphone apps. 12 Billion may seem big perhaps. But before you get excited about that number - all apps revenues formed only 4% of the total mobile data revenues opportunity last year. Yes, you are far better off going where the big opportunities lie such as in gaming, news, social networking, music, television related services (like TV voting) etc. That is why Coca Cola has a rule of 70:20:10 about their mobile strategy - they put 70% of their mobile dollars to SMS and MMS mobile messaging; they invest only 20% to the mobile internet; and only 10% in mobile apps. Or the simple way to say it, is like US food giant Kraft, whose mobile strategy is 'no mobile left behind.' They too start with SMS and MMS, then do mobile web (and WAP) and only after no mobile has been left behind, do they bother with the apps side of smartphones. Similar thinking is with Finnair the airline that invented the mobile check-in and a similar mobile philosophy is for example used by the German railway system.

Incidentially where is the strongest growth in profits and revenues, if not in apps? Its in mobile social networking (think Facebook and Farmville but on mobile). And conveniently, if you so desire, I have a book for you on that, with 50 case studies of excellence in user-generated content, citizen journalism, virtual worlds, dating, flirting, picture sharing, multiplayer gaming, social networking etc. The ebook is called called Tomi Ahonen Pearls Vol 2: Mobile Social Networking.

WHO IS THE LEADER? JAPAN OF COURSE

 

This is a difficult complex industry - far more complex than rocket science actually - and very difficult to fully comprehend. But the industry was launched in Japan, and for most of the commercially viable innovations of this young industry, Japan and Finland have taken turns in the leadership, with South Korea, Sweden and Norway often also playing major parts. But recently some innovation has come from the USA, especially relating to those smartphone apps (even though, some of the most successful - like Angry Birds by Rovio comes from Finland - or the most futuristic and innovative - like Layar the Augmented Reality Browser comes from the Netherlands). So it becomes difficult to know where to go to see the future in mobile. Where is the leadership? I have done the math for you. I use a formula which combines the four most used measures of mobile industry leadership (mobile subscription penetration rate, the generation(s) of the networks in use, the adoption of mobile data services, and the level of how advanced the handset installed base is, ie smartphone penetration rate). The world's leading mobile country once again was Japan for 2011, here is the Top 10 list as I calculated it:

1 - Japan
2 - South Korea
3 - Singapore
4 - Italy
5 - Finland
6 (tie) - Sweden
6 (tie) - Taiwan
8 - Austria
9 - Hong Kong
10 - Australia

Source: TomiAhonen Almanac 2012
This data may be freely quoted

If you were looking for the USA, it didn't make the top 10 but is ranked 17th (up from 19th in 2010). You can see the Top 20 list here, and the Top 30 list with far more information is of course in the TomiAhonen Almanac 2012.

IT ONLY GETS BETTER

But its not ending there. The world's largest lock-maker, Assa-Abloy is deploying locks for hotels and homes that can be operated by mobile phone. Google, Nokia, Vodafone and many more mobile giants are in a race to deploy mobile money solutions around NFC Near Field Communciations, a new technology coming to our phones - 19% of Japanese already make such payments.. daily. You may have heard of the border-crossing incident on the US-Canadian border where a stranded visitor had lost his passport, but had a scan of it on his iPad and was allowed to pass over the border. I have been saying for some time now, that in the future our passports will be on our phones. But today, I advise all friends and collagues to make scans of our passports and driver's licenses and save them on our phones, just in case you are in a similar situation. While such a scanned image is not necessarily legally valid, it is far better than nothing - and if you have a good cameraphone (5 megapixel or better) all you need is good sunlight, take a picture of your passport and driver's licence and save them onto your phone(s).

Meanwhile the innovation in mobile is relentless. Turkey became the second country after Spain, to accept SMS based signatures as legally binding in contracts last year. Estonia became the second country after Norway to accept SMS based tax returns! And after Sweden launched it, there is now a race for which country is the first to stop the manufacturing of coins and banknotes altogether - replaced by mobile money. Kenya has passed the point where 30% of its GDP is now going through mobile phone money accounts. The 'usual suspects' are in the race of course including Finland, Norway and Estonia; including Japan and South Korea; including the Philippines and South Africa; as well as some less obvious countries like the Netherlands and Somaliland. But the first country to give a target date for when they expect to eliminate cash is Turkey - and they said in November of 2011, that their target year is 2025. That is only 13 years from now!

If we go back 13 years to 1998, that was the year of the movie Titanic and when Bill Clinton had his Monica Lewinski scandal. Google was launched that year. Tony Blair was Britain's Prime Minister. And now only a similar amount of time into the future, we may see the first country to end the manufacturing of cash (and this being a race, it may actually happen a little bit earlier in some other ambitious country). Wow. After several thousand years, we will be the generation to see the end of cash as a monetary instrument, in our lifetimes. Killed by mobile. And yes, if you needed to read a quick book about mobile money and payments, check out my Pearls Vol 3: Mobile Money.

My dear friend and fellow mobile statistician and forecaster, the author Chetan Sharma says the world will change more in the next 10 years, than it has in the previous 100 years. The driving force in that change is mobile, as mobile is a robust, economically sound industry, not clinging desperately to some advertising-based revenues alone. This is the best economic opportunity of our lifetimes. And not just in strict monetery terms, obviously also if your passion is in education, please substitute 'learning' for profits; or if you are in m-health, consider healthcare benefits rather than revenues. And so forth. But this is the richest and most rewarding opportunity and the epicenter of creativity. No wonder Google's Chairman Eric Scmidt says 'Put your best people on mobile'.

UPDATE 29 FEB - I have announced the release of the TomiAhonen Almanac 2012. With that publication I added some exclusive data from the Almanac with four charts (out of 96) published in total and some other excerpted sample data from the Almanac. You may find the data useful especially if you are interested in the mobile internet, gaming, music, handset installed base, or the 'Digital Divide'. See more here TomiAhonen Almanac 2012 Released.

WHERE NEXT?

This article is using data from the brand new edition of my annual statistical volume for this industry, published in ebook format, called the TomiAhonen Almanac 2012. You may freely quote any of the data in this article, please mention the TomiAhonen Almanac 2012 as your source. And if you are interested, the Almanac has over 90 tables and charts, is a 184 page ebook. conveniently formated for the small screens of smartphones so you can carry all the stats in your pocket with you and only costs 9.99 Euros for immediate download. Please see more including sample pages at this link TomiAhonen Almanac 2012.

If you need more information about the handset side of the industry, my Tomi Ahonen PhoneBook 2010 is still very current with all the data about cameraphone resolutions, screen sizes, smartphone operating system market shares etc. Similarly formated and priced 9.99 Euros, also at over 90 tables and charts in an 180 page ebook, the sister volume to the Almanac, focusing only on the handsets side of our industry is the Tomi Ahonen PhoneBook 2010.

No Straight Lines: an open access participatory book

An invitation to come and read No Straight Lines: making sense of our non-linear world as an open access participatory book.

It looks at how we can build better more sustainable societies, organisations and vibrant economies through innovative practice.

It argues we need to design and create for the needs of humanity not industrial systems. You can read the entire book (open access) by clicking on READ THE BROWSER BOOK link on the No Straight Lines webpage

There is an entire chapter devoted to mobile.

I explore mobile from the perspective of what it can do at an organisational and at a societal level.

From the Achuar tribe in the Amazon rainforest using mobile and GPS enable digital technologies to challenge the Peruvian government and the mining companies trying to exploit their habitat and way of life to children using iPhones at school for learning in new exploratory ways - I make the point that mobile plays an important role in the evolution of every aspect of our society.

So NSL looks at education from Africa and India to the western world, it looks at how bricks and mortor organisations can become platforms and become part of a global economy, we look at how people living on $2 a day could be doubling their daily income by working on their mobile phones – we look at the politcal consequences of rapidly shared knowledge and information, we look at data and the impact on how commerce per se will evolve enabled by mobile. And we celebrate organisations like Ushahidi that are showing us the way in how innovation really works. In Japan we look at ground breaking business models that are already nearly 10 years old and we wonder why the fashion industry is not fully up to speed, nor indeed the media industries either.

I also argue that if organisations are not able to really design with mobile they could be missing a significant opportunity.

Here is a sample of the introduction.

Gutenberg is a moblogger: economic, organisational and societal transformation through mobile communications

There is another aspect of our non-linear world which plays an important role in what comes next. We are inevitably moving towards a society where our mobile devices become the remote control for our daily lives. Any technology that allows us to better connect, communicate, share knowledge and information and get stuff done will be widely adopted.[1] Some of the stories already presented suggest the changes to people’s lives big and small that mobile communications will usher in.

We are but at the beginning of our journey of transformation which will take some time, generations even, to play out. Vint Cerf, one of the founders of the world wide web, has a view that much has already been achieved to create a better world: ‘It has provided access to information on a scale never before imaginable, lowered the barriers to creative expression, challenged old business models and enabled new ones.’ He continues: ‘It has succeeded because we designed it to be both flexible and open. These features have allowed it to accommodate innovation without massive changes to its infrastructure.’[1]

 

Gutenberg is a moblogger

When discussing or teaching disruption, I ask the question whether the church ever saw Gutenberg coming. The church was a powerful monopoly controlling all before it did so by ensuring that knowledge, the protein for innovation and creativity, was safely kept out of the hands of feudal man and woman. Power was knowledge, and knowledge could only ever be accessed by joining the church. Gutenberg, busy in his garret in Mainz, had no idea what he was unleashing upon the world, yet were Gutenberg to be alive today, he would be creating technology so that he could be taking pictures and shooting videos with his mobile; he would be blogging and vlogging via his mobile, paying for his car parking spaces via his mobile, getting his library books renewed via SMS, dating on Flirtomatic and getting his healthcare from the 3G Doctor. When technology becomes successful, it becomes ubiquitously invisible and so our mobile devices become our personalised remote controls for life.

The numbers of mobile devices in the world, currently some 5 billion, with 80% of the world’s population living within range of a mobile network, including the Masai and the Bedouin, is extraordinary. Never in the history of the human race have so many people been able to connect to each other – the scale is simply unprecedented. In developing economies, people are finding innovative ways to use mobile technology. Grameen's microfinance and village phone programmes in Bangladesh and elsewhere are known and respected around the world, but there are many less famous examples. During the Kenyan elections, Mobile Planet provided its subscribers with up-to-the-minute results by text message. And in his Presidential election campaign, Barack Obama did not miss the opportunity to mobilise his supporter network through mobile connectivity. Writing in the Observer, Cerf states: ‘As the cost of mobile technologies fall, the opportunities for such innovation will continue to grow. We're nearing the tipping point for mobile computing to deliver timely, geographically and socially relevant information.’ He goes on to comment on how researchers in Japan have proposed using data from vehicles' windscreen wipers and embedded GPS receivers to track the movement of weather systems through towns and cities with a precision never before possible. ‘It may seem academic’, he adds, ‘but understanding the way severe weather, such as a typhoon, moves through a city could save lives. Further exploration can shed light on demographic, intellectual and epidemiological phenomena, to name just a few areas.’

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[1] Vint Cerf, ‘If you thought the internet was cool, wait until it goes space age’, Observer, Sunday, 17 August 2008.

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[1] McGuire’s Law: the utility of any activity increases with its mobility. http://mcguireslaw.com/.

Mo Mobile mAdness - Ecosystem-Elop Sells Nokia Mobile Ad Unit (??? - True!)

This makes NO sense. Nokia CEO Stephen Elop himself has said that the war in mobile today is one of ecosystems, not of mere handsets or their software. Elop himself has explicitly mentioned advertising as one of the key components of a mobile ecosystem. If Elop practised what he preached, he would not be selling his mobile advertising unit, he would be nurturing it, growing it - not selling it.

Google believes so strongly in mobile advertising, they bought Admob. Apple's Steve Jobs believed so strongly in mobile advertising, he launched iAd. The company that invented the cellular telecoms industry - and launched the world's first mobile internet service, NTT DoCoMo of Japan believes so strongly in mobile advertising, they created D2C the world's biggest pure mobile ad agency. Even Stephen Elop's past employer Microsoft believes so strongly in mobile advertising, they bought ScreenTonic, and today have mobile advertising a central aspect of the Windows Phone ecosystem. And what does Elop do at Nokia? He just sold Nokia's mobile advertising unit on Friday to a company previously known as Matchbin and now renamed Radiate Media.

CENTRAL TO ECOSYSTEM

I don't want to make this blog a monologue about Nokia. But if Elop does something this mad, at this time, then I do have to observe it. As it is Stephen Elop who has been lecturing the world about how the race in mobile phones is no longer one of hardware or software, it is about ecosystems. And Elop himself defined ecosystems as they relate to mobile handsets in general and Nokia explicitly, as: "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."

Advertising! One of the key components of a mobile ecosystem. And Elop has tried to rally his Nokia employees to engage in a battle of ecosystems. He warned that Nokia's competitors "are taking our market share with an entire ecosystem." He claimed last year in his notorious Burning Platforms memo that Nokia had fallen behind on this ecosystems war. He said that Nokia had "lacked accountability and leadership" and that Nokia "had not delivered innovation fast enough".

OBVIOUS MAJOR GLOBAL TREND

Apple decided to launch iOS in the summer of 2009, at a time when the total global shipments of all iOS based devices, iPhones, iPads and iPod Touch'es had not passed 50 million cumulatively (including devices no longer in use). Yet Apple felt mobile advertising was that important to the Apple iPhone and iOS ecosystem. Steve Jobs himself explained why the ecosystem would be stronger with an ad platform explaining that "developers have to find a way to make some money" and that the iAd platform was a way Apple could help its developers in its ecosystem.

Google decided to buy Admob in December of 2009. At that time, there were far less than 10 million Android smartphones in use worldwide. By 2011, Google's Chairman Eric Schmidt was saying that mobile advertising was delivering 2.5 Billion dollars of ad revenues to the company.

I mentioned that NTT DoCoMo created D2C together with the Japanese advertising giant Dentsu. Microsoft got into mobile advertising years ago with the purchase of ScreenTonic. Major mobile industry players from carriers/operators like Vodafone and Telefonica to equipment makers like Ericsson and Alcatel-Lucent offer solutions in the mobile ad space.

Mobile advertising (roughly) doubled in annual revenues in the year 2008 when the world economy crashed. Mobile advertising almost doubled again in 2009 and 2010 yet again. Early numbers say mobile advertising had again roughly doubled in 2011. By 2011 the global advertising industry had embraced mobile ads from Ford saying that mobile ads will be integral to every ad campaign they run on any medium, to US food giant Kraft saying 'no mobile left behind'.

If you believe in growth opportunities coming from those sectors of the industry that expanding most strongly, mobile advertising is that right now. Certainly Google, Apple, Microsoft, NTT DoCoMo, Vodafone etc see this and invest heavily in it. Is there any doubt, that mobile advertising is a key component in any ecosystem in mobile? None whatsoever.

WHEN DID NOKIA GO mAD

I happen to know the mobile advertising side of the mobile content and media industry quite well, as I was the first person to discuss commercially launched mobile ads at any international conference (in Austria) literally within weeks after they had launched (in Finland in year 2000). And I was honored to chair the world's first mobile advertising conference in London the next year. That conference had many pioneers of mobile ad space, presenting, as were some big advertising companies who had launched their mobile advertising units. But there was only one handset manufacturer presenting at the two-day conference on mobile advertising. That handset manufacturer was ...Nokia.

Nokia was studying the mobile advertising opportunity more than a decade ago, so much, that they had an internal unit looking at it (modest in size at the time) and Nokia had commissioned a global study about mobile advertising in 2001, long before most thought that ads served to our pockets were even commercially plausible.

Nokia monitored the space, and as mobile advertising slowly achieved acceptance beyond some of the most advanced markets like Japan and South Korea (and Scandinavia) Nokia then got serious about mobile advertising when it bought Enpocket. When was that? In 2007 ! Two years before Apple and Google got serious about mobile advertising. And since then Nokia had developed the mobile advertising arm at its Navteq unit, and bought other mobile advertising companies such as Acuity Mobile in 2009.

 

So is it factually NOT true (once again the Elop delusions) in this empirical case about fighting in ecosystems rather than handsets, that Nokia supposedly "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."

In reality, as it relates to mobile advertising (just like in mobile payments, location and mapping, app stores, videogames, music etc) Nokia caught the big trend, were indeed making the right decisions, and with the benefit of incredibly accurate foresight, once again, found itself years ahead. The truth is 100% diametrically opposite of what Elop has been saying (once again). Nokia was not years behind, Nokia was literally years ahead of all its rivals in this space.

BATTLE OF ECOSYSTEMS

Elop preaches about the battle of ecosystems. The Nokia Symbian platform, one of several Nokia technical platforms, and the one most suited for mobile advertising today, is not just the world's biggest smartphone operating system by installed base - and advertisers will equate installed base with 'audience' rather than new sales, where last year Elop's mis-management of Nokia smarpthones saw Symbian sales fall behind Google's Android and Apple's iPhone iOS. But lets just examine that potential advertising target audience a bit more. Here are the world's twenty largest countries by population, and the biggest smartphone OS as of November as measured by statcounter:

COUNTRY . . . POPULATION . . . BIGGEST SMARTPHONE OS

China . . . . . . . . 1.3 B . . . . . . . . . . . Symbian
India  . . . . . . . . 1.2 B . . . . . . . . . . . Symbian
USA . . . . . . . . . . 310 M . . . . . . . . . iOS
Indonesia . . . . . . 220 M . . . . . . . . . Symbian
Brazil . . . . . . . . . 190 M . . . . . . . . . Symbian

Pakistan  . . . . . . . 170 M . . . . . . . . . Symbian
Bangladesh . . . . . 160 M . . . . . . . . . Symbian
Nigeria . . . . . . . . 150 M . . . . . . . . . Symbian
Russia . . . . . . . . . 145 M . . . . . . . . . Symbian
Japan . . . . . . . . . 120 M . . . . . . . . . Android

 

Mexico . . . . . . . . 110 M . . . . . . . . . Symbian
Vietnam  . . . . . . .  90 M . . . . . . . . . Symbian
Philippines . . . . .   90 M . . . . . . . . . Symbian
Germany  . . . . . .   80 M . . . . . . . . . iOS
Ethiopia . . . . . . .   80 M . . . . . . . . . Symbian

Egypt . . . . . . . . .   75 M . . . . . . . . . Symbian
Turkey . . . . . . . .   70 M . . . . . . . . . Symbian
Iran  . . . . . . . . . .   70 M . . . . . . . . . Symbian
Thailand . . . . . . .  65 M . . . . . . . . . Symbian
Congo . . . . . . . . .  65 M . . . . . . . . . Symbian

(above adapted from statcounter data from November 29, 2011, as reported by browserrank.com)

 

Yes! Nokia's 'obsolete' Symbian is the biggest smartphone operating system in 17 out of the 20 largest countries on the planet by population. And its not just that Nokia has this incredible reach. Consider the other competing advertising mass media.

In the USA, the television market is the biggest advertising market and the biggest mass medium. In some of the more affluent markets on the above list, most households do have TV sets like in China and Russia. In all but one of the above countries, more people access internet content on mobile phones than on PCs (the exception being the USA where the half-point will be passed this year 2012). And in many of the less affluent countries on that list, even radio does not reach as widely as mobile phones. Like they say in Africa, mobile is not the 7th mass medium, its not the first mass medium; it is the only mass medium.

Nokia owns the smartphone OS platform that reaches the widest audience in 17 out of the 20 biggest countries on the planet. Where iOS and Admob and others face strong competition in advertising from legacy mass media like TV, newspapers, radio etc; and obviously internet advertising - Nokia's Symbian platform is the dominant smartphone platform in all countries where legacy media is not established as a true 'mass' medium reaching even half of the population and where mobile access to the internet exceeds PC based access to the internet.

Nonetheless, Apple's iPhone has an installed based (not cumulative shipments, but active users) of about 150 million smartphone users today. Remember, for any iOS media partner - including any advertising, we need to add the other iOS users, iPads and iPod Touch'es, so the total reach of the iOS currently is about 240 million. Google's Android reaches about 250 million active users today. Microsoft feels it worthwhile to continue building its mobile advertising unit even as its reach across both Windows Mobile and Windows Phone smartphones, currently, is less than 30 million. But Nokia's Symbian has currently over 275 million users worldwide. And the CEO who thinks its a war about ecosystems, and believes that advertising is a key part of ecosystems, doesn't want to keep Nokia's competitive advantage here, one that Nokia years ahead of its rivals in discovering and exploiting?

NOKIA TRUE REACH FAR WIDER

The above picture is not the full picture for a Nokia ecosystem. Nokia sells more S40 based featurephones, which use the proprietary S40 operating system (not part of Symbian) but which could be described as 'smartphone lite' - just like Symbian, S40 does allow full internet use, allows application downloads and the use of the Nokia (ex Ovi) store for content, apps and services. Nokia does not give us a breakdown of the S40 sales, but Nokia recently celebrated the 1.5 Billionth S40 cumulative shipment number. In rough terms the installed base of S40 currently is more than 700 million, so when added together, Symbian and S40 give Nokia an addressable market potential of 1 Billion mobile phone users worldwide.

(Note this does not include the ultra-cheap dumbphones that use the even simpler Nokia S30 OS, by which Nokia's total reach was last year estimated at about 1.7 Billion)

This ecosystem of Symbian and S40, plus Nokia's other current and past OS platforms like MeeGo and Maemo; plus Nokia's upcoming low-cost smartphone OS, Meltemi, are all supposed to be supported by the Qt developer tools of Nokia. So if we count Nokia branded Qt ecosystem potential reach, it is well in excess of 1 Billion pockets. And add to that the Android installed base (Qt supports Android) and potentially Blackberry (the new Blackberry OS will be compatible with Qt) - the Nokia 'first ecosystem' if built around Qt has a potential reach of more than 1.35 Billion mobile phone users (more than 5x bigger than the total iOS ecosystem or the Android ecosystem; more than 12 times bigger than the total Blackberry ecosystem and more than 100 times bigger than the Windows Phone). Yet Elop is doing everything he can to sink that Nokia-controlled first ecosystem and replace it with what Microsoft tries to call the 'third ecosystem' ie Windows Phone, which only reaches the pockets of less than 12 million people in the world, and is legitimately called at best, the 8th ecosystem.

 

ELOP DEFINITION OF LEADERSHIP

We have seen it time and again. We saw it with the Ovi store, we saw it with Nokia developer relationships, we saw it with mobile commerce and NFC (the Lumia series does not support NFC while Nokia's own MeeGo and Symbian both of course do support NFC). And now once again we see it with mobile advertising. Elop discovers a significant Nokia advantage in its ecosystem. Even as it is an element of genuine leadership, that is supported by essentially the whole industry as an obvious trend, Elop goes against the trend. He damages the Nokia version (or in this case sells it). This destroys a Nokia native advantage 'in a war of ecosystems' and instead brings Nokia ever more to the full control of Microsoft, as its slave.

Before this action, Nokia could control how advertising might appear on Nokia branded smartphones. Nokia could sell advertising to its own smartphones. Now Nokia branded smartphones, when using the Microsoft Windows Phone OS, will be subject to Microsoft advertising concepts and spyware. Microsoft will also be selling the ads irrespective of Nokia's own brand. Its quite feasible for Samsung or HTC to spam Nokia branded smartphones via the Windows Phone ad platform. Is this the sensible way to go?

ONLY BECAUSE OF ELOP

This desperation move is purely due to mismanagement and mistakes by Elop. I am not claiming all was hunky dory at Nokia prior to Elop. I have written time and again, that Nokia was struggling in 2009 to 2010, and fired its CEO Kallasvuo, replacing him with Elop. I am not in any way suggesting that all was perfect at Nokia when Elop took over. But the first five months at Nokia, when Elop was in charge, saw the Nokia smartphone unit sales grow strongly, Nokia smartphone sales revenues grow dramatically, and Nokia profits at the smartphone unit jump at a Nokia record level. Nokia overall corporate profits grew. In the first five months of Elop's stewardship, Nokia's share price had grown by 11%. I am not saying all was well, but Nokia had passed the worst part, and was on the road to better. Nokia was 'on the mend'. And Elop was hired - as then Chairman of Nokia Jorma Ollila said when introducing Stephen Elop - Elop was hired to fix Nokia problems in execution.

From February 2011 to today, Nokia has set a world record in destroying its market share. In smartphones Nokia's market share fell from 29% in Q4 of 2010, to 12% of Q4 of 2011. Nokia very literally scared away six out of every ten customers it had a year ago. For the full year 2010, Nokia was twice as big as its nearest rival. By Q4 Nokia had shrunk to nearly half the size of its strongest rival, Apple's iPhone.

This carnage has all been a self-induced wound, and it started with the Elop Effect, but Elop has added to the problems continuously ever since. Elop himself admitted the damage to Nokia market share took him by surprise and admitted later to more surprise that Nokia plunged from generating profits to generating losses. It did not surprise any real experts of the mobile industry, many of us said days after Elop announced his mad Microsoft strategy last February, that this would be the result, like I did on this blog, correctly forecasting that Nokia's market share would crash to 12% by the end of the year, and Nokia's strongly growing profits in its smartphone unit would reverse into loss-making, and the damage to all of Nokia would be so severe, that all of Nokia would generate a loss by the end of the year.

Elop had a company that had growing sales, growing revenues, growing profits, and a growing share price - and turned that to losing sales, losing revenues, generating losses and a massively crashing share price (Nokia's share price fell to less than half in the next five months). This damage is not only the world record crash of market share of any mobile phone handset maker. Its not only the biggest fall ever witnessed in any one year by a global brand leader in technology such as computers or home electronics etc. It is literally the biggest fall of a global customer base, in any one year, of any company, in any industry - ever.

And Elop did not see it coming, and did not manage his company wisely. That is all water under the bridge. Yes it was the biggest management failure in the economic history of humankind, that we witnessed last year. Because of it, Nokia now is in deep trouble and has to try to sell assets just to remain alive. Elop has been trying to sell the NokiaSiemens Networking unit and is currently trying to sell the Vertu luxury phones unit. He has sold various Nokia assets from several sets of Nokia's prime patents, to a whole handset factory in Romania. And now he sold Nokia's advertising arm.

I can understand that the CEO of a company that is massively generating losses (no matter what the cause) is now resorting to desperate moves such as firing tens of thousands of employees and selling assets.

RATHER THAN SELL AD UNIT, WHY NOT ALLOW SALES OF N9

What I cannot understand, is if Nokia is in the business of selling mobile phones, and its most profitable smartphones are currently on the undersirable Lumia brand (where sales representatives at stores find that in 11 cases out of 12, a customer who buys a Nokia branded smarthpone refuses to take a Lumia) and the highly desirable MeeGo platform (where sales representatives find that one in four customers who buys a Nokia smartphone, will buy an N9 which uses the MeeGo operating system) - why is Elop not willing to sell the N9 (and its sister phone the N950) in every market!

Elop would rather sell Nokia assets, such as Nokia's patent portfolio, its factories, its staff, and now, its mobile advertising unit - than allow the MeeGo based N9 (and its sister, the N950) to be sold worldwide!

Elop's priorities are wrong. He looks at global trends where the whole industry is in agreement - like now with mobile advertising. And he goes against it. He finds a genuine Nokia asset where Nokia was years ahead of the rivals - like now with mobile advertising - and rather than fix that unit's execution to deliver massive profits for Nokia, he prefers to sell it. Google just told us last year that Google makes 2.5 Billion dollars of advertising revenues out of its mobile advertising arm. Why doesn't Elop fix this at Nokia, Nokia has a far wider reach in countries where mobile advertising is often the only mass market advertising medium.

The decision to sell the mobile advertising unit at Nokia may have been necessary because Nokia is so badly generating a loss. That loss is solely due to Elop's mismanagement of Nokia last year. Before February, Nokia's profits were growing strongly. And Elop himself admitted he miscalculated how badly Nokia smartphone sales would collapse, and he also admitted surprise to the sudden massive losses that obviously resulted. The reason Nokia is now conducting a fire sale of its best assets is only due to incompetent management by its CEO, causing self-induced damage to Nokia, its products, its carrier relations, its customers and its brand.

Nonetheless, to sell a mobile advertising unit for a major handset maker goes totally against the grain, where rivals are investing more in advertising, not less. And this is how Nokia's CEO actions speak the opposite of his words. This selling of a key Nokia ecosystem component is how Nokia's CEO communicates to his staff how his new management stops the competition from "taking our market share with an entire ecosystem." This selling of the mobile advertising unit is how Nokia's new CEO indicates "accountability and leadership". This sale of Nokia's pioneering mobile ad unit is how the CEO rewards those parts of Nokia that did indeed "deliver innovation fast enough". 

The decision to sell the mobile advertising unit at Nokia was certainly not to the best interests of Nokia and Nokia's ecosystem. But the decision to sell away Nokia's own mobile advertising arm, and turn Nokia hostage to Microsoft's advertising, is in the best interests of Microsoft.

Nokia CEO Stephen Elop is once again acting in the best interests of Microsoft, and against the best interests of Nokia. He is in breach of stock market regulations and clearly has acted with a confict of interest. His actions must be investigated as a breach of his fiduciary duty to Nokia shareholders. He must be fired for cause and any Nokia Board Members who do not support an immediate investigation of Elop should be themselves investigated for collusion, neglect or incompetence.

Gutenberg is a moblogger, Martin Luther is coding and the Medici are using MPesa

In No Straight Lines there is an entire chapter devoted to all things mobile. It is called Gutenberg is a moblogger: economic, organisational and societal transformation through mobile communications.

It maybe that a certain Mr Ahonen - has much of this covered on the CDB blog.

I explore mobile from the perspective of what it can do at an organisational and at a societal level.

From the Achuar tribe in the Amazon rainforest using mobile and GPS enable digital technologies to challenge the Peruvian government and the mining companies trying to exploit their habitat and way of life to children using iPhones at school for learning in new exploratory ways - I make the point that mobile plays an important role in the evolution of every aspect of our society.

So NSL looks at education from Africa and India to the western world, it looks at how bricks and mortor organisations can become platforms and become part of a global economy, we look at how people living on $2 a day could be doubling their daily income by working on their mobile phones – we look at the politcal consequences of rapidly shared knowledge and information, we look at data and the impact on how commerce per se will evolve enabled by mobile. And we celebrate organisations like Ushahidi that are showing us the way in how innovation really works. In Japan we look at ground breaking business models that are already nearly 10 years old and we wonder why the fashion industry is not fully up to speed, nor indeed the media industries either.

Why? Because they fail to see what is right in front of them - they are stuck in an ambiguous world.

I also argue that if organisations are not able to really design with mobile they could be missing a significant opportunity and this is NOT about apps.

It just might get you or your clients thinking differently about the future potential of our mobile society

No Straight Lines on Amazon UK. Amazon US.

 

Related articles

• 6 challenges for a non-linear world (no-straight-lines.com)
• The last of the Kodak moments (no-straight-lines.com)

The No Straight Lines challenge: be realistic imagine the impossible

What do these have in common?

A car company built around a global community as an organisation, enabled by combining flex manufacturing techniques, open source platforms, open legal frameworks and social communication technologies premised upon cooperation, fuelled by the desire to be a great company and green; that can build cars 5 times faster at 100 times less the capital costs. A crisis management platform and organisation born out of the Kenyan post-election crisis of 2008 that can record critical information of events unfolding on the ground via a blend of location-based data, eyewitness accounts and mobile telephony, from often hard to reach places which visualises those unfolding events so that others can act and direct action at internet speeds. And now utilised for free in many parts of the world. Or, the largest organic diary farm in Britain, that has evolved a methodology that allows it to remain autonomous, profitable and sustainable in a market that is acutely volatile, because large-scale agricultural farming is mostly run on an oil-based economy, plus diary farmers are at the calculating mercy of the marketing needs and whimsies of large chain supermarkets.

A new social / organisational / economic model

They are collectively representative of a new reality of living, working and organising. These organisations or companies have quested to find a means to serve humanity better, to search for meaning in the work that they and others do, and offer up new viable alternatives for the ways that, in the past, these things were done. They seek an outcome that is more distributive of wealth, ideas and resources. In fact, one might argue an outcome that is more humane and community centric. Rather than premised upon the extraction of wealth, and resources, whether they be physical, mineral or otherwise, these very different initiatives represent both moral courage and a collective purpose, if you will. And why is that important? Because it does not matter if you are an employer, a worker, VC fund, an NGO, an organisation, a local council or a government, you will miss out on the energies and capabilities of your people who will increasingly seek those new realities to discover a better way of living, working and being, when better and viable alternatives are on offer. And the fact is we now have the possibility to truly transform our world, to be more lightweight, sustainable and humane, through the tools, capabilities, language and processes at our fingertips. As Tony Judt argued: ‘Why do we experience such difficulty even imaging a different sort of society? Why is it beyond us to conceive a different set of arrangements to our common advantage?’

The opportunity and the design challenge

Which brings me on to the title and the challenge of this project. Be realistic, imagine the impossible is taken from a poster from the 1968 Paris riots. In making sense of its meaning for our time, I would argue that what we face at the tail end of our industrial society is a design problem. The reason is that we are witness to a systemic failure of many of the institutions that have brought us so much prosperity and it is this convergence of failures that requires us to understand the challenge from a whole systems approach.

Many of the institutions, organisations and systems that we still use were designed and built for a less complex world, the increase in the complexity of our world is placing an unsustainable load upon those institutions, organisations and systems. One could argue our industrial world has reached the edge of its adaptive range. Consequently, fault lines are running through our society which present a trilemma based around interlocking social, economic and organisational tensions and questions. The design challenge involved in resolving these questions comes because the non-linearity is causing a comprehensive restructuring of society at large, breaking old models of organisation, and the trilemma heralds the coming of the age of uncertainty. All three tensions are in flux, and cannot be addressed without considering the other two. So each and every part of this story reflects upon and relates to this trilemma: the relationship of the individual to companies and other organisations and forms of power, economically, socially, politically

Now is the time when we need a way of evaluating of what comes next, when we face a world that has gone in a very short period of time from seemingly linear (simple) to complex and non-linear (chaotic). When we move into a world that is inherently more complex, the result is concussive, its disorientating effects surround us, and our responses either individually or at an organisational level result in reflexes and perspectives that can be dangerously corrosive or inappropriate. And yet, this chaos seems to be, if anything, accelerating. At this very moment, great debates are raging. The spanners are in the works, defined by 9/11 (we now talk about asymmetrical warfare) and the near collapse of the world banking system (and its asymmetrical impact on every single one of us). And, as the global centre of economic gravity moves east, this has set off a series of events that are having significant asymmetric economic effects on societies around the world. These are but three examples of fault lines creating battles, ideological or otherwise, that are exploding and imploding at the same time. They all surfaced in a single decade. Though it is important to add that their gestation period has been much longer and is indeed multidimensional. These challenges are highly interlinked and interdependent, so a one-size-fits-all response just won’t do. There are no longer simple problems; what we face is the trilemma of a complex world. This book does its best to face them, because we are in more than just an economic crisis; it is equally political, educational, spiritual and moral.

The cultural challenge

The biggest challenge we face is cultural. How we contextualise (make sense of) the world around us determines how we engage and what action we take. Those actions then determine the outcomes we must live with and this requires a change from our industrial mindset and behaviour to one that is more cognisant of what is now seen as a non-linear world. This is where I want to return to the idea that what we face is a design problem, where answers exist not at an unattainable theoretical level but on the floors of our factories, in the streets of our towns and cities, the classes of our schools, the waiting rooms of our hospitals. These answers will manifest themselves as true acts of creation, originating new ways of getting stuff done, informed by the decisions we collectively take. So in re-designing the world, we need human creativity in the sense of the capacity to ‘make’, we need visionary leadership in the sense of making a difference. And we seek the craftsman’s critical eye, steady hand and creative mind. It is this process of seeing – realising new pathways to success, by bringing two ‘unlikes’ (new information, tools, processes etc.) together in close adjacency – that we create, and make new things. Then we can meaningfully apply that capability.

 

The coming age of the Craftsman

Why is the idea of craftsmanship significant at this epochal moment in time? Because it is about shaping our future and the ‘engaged’ craftsman brings the full power of humanity to bear upon his work. His hand is guided by his eye, informed by his creative mind; his productivity the act of unique creation. Indeed, the master craftsman is adept in using a philosophical framework, as well as tools and materials, to deliver useful things to the world. But more than that, the craftsman must be open constantly to new ideas; he is essentially always in beta. Therefore, we cannot engage with our uncertain non-linear world with the linear and inflexible orthodoxy of logic alone. The craftsman’s critical eye and creative mind is vital to evaluating new possibilities; he must be open to new ideas, information, tools and materials to make things that enable humanity to flourish. This approach is inherently more creative in that it synthesises all aspects of what make us truly human. But the 21st century craftsman does not only exist in the dusty workshop of a forgotten age; a games designer is a craftsman, a Linux programmer is a craftsman, innovative organisations like Local Motors and Ushahidi, which are discussed in more detail in Chapters 3 and 8, embed craftsmanship into everything they do. These are well designed responses to what real life previously perceived as intractable as the plot line in Catch¯22.

And so I come to this project with a strongly held belief, that there is an opportunity to bring a way of thinking to many of the seemingly intractable problems that confront us today. But this requires us to think and act as craftsmen and women and apply our critical thinking to understanding our non-linear world, which is in part shaped by participatory cultures, open, complex and seemingly ambiguous systems that are highly interdependent of each other. We need to be inspired to be epic, to seek epic wins – to design for transformation, to make informed choices and co-author innovative new possibilities that can enable humanity to lead a life not constrained by the crushing reality of industrial-age thinking but one designed around the primary needs of humanity. We need to explore our non-linear world, not exploit it.

I believe there is much evidence demonstrating the possibility of this society. It exists in philosophical frameworks, language and literacy, legal frameworks, tools and technologies, and real stories of how others have been motivated by a real desire to create new and better answers to what others would call unsolvable, wicked problems. And it has been my mission to bring together these separate component parts to offer to you a vision of the world which is both realistic and eminently possible. But to create this regenerative society requires us to take a voyage of discovery and to look upon the world as Proust would say with fresh eyes. This is the world of no straight lines and this project is how we make sense of this non-linear world, and then act in it.

No Straight Lines at Amazon

 

Related articles

• No Straight Lines: making sense of our non-linear world (communities-dominate.blogs.com)
• The NEXT Silicon Valley is not a place it's a platform (no-straight-lines.com)
• 6 challenges for a non-linear world (no-straight-lines.com)

Mobile and Money: Dave Birch thoughts from Forum Oxford Conference

This is one of the blogs that has waited on my to-do list for a long while, but I had to get to it. And I think Alan Moore's new book No Straight Lines is a perfect opportunity to talk about mobile money. And on mobile money we should listen to the master on that topic, Dave Birch of Consult Hyperion, whose book Digital Identity Management is also a must-read. So yes, Dave spoke at the Forum Oxford Conference last year and I really wanted to post a blog about his thinking about mobile and money and perhaps a few other related things too.

WHEN EVERYBODY HATES EVERYBODY

First of all, Dave has been studying the digital money opportunity for many years and observed the evolution of the mobile money ecosystem. He said of the mobile money industry that "The mobile wallet market structure is basically that everybody hates everybody else." So in mobile this just like the mobile industry in general (of its usual mutual distrust that can degenerate into hatered and back-stabbing) but with far more global players. It includes the mobile network operators/carriers, who hate the handset makers, who hate the operating system providers, who hate the payments providers, who hate the plastic and contactless payments system providers, who hate the credit card providers, who hate the banks, who hate the retailers; and then all of whom then together hate each of the related regulators which now means banking regulators, telecoms regulators and consumer protection regulators (plus competition regulators ie anti-monopoly watchdogs).

Spot on Dave! This is a quagmire haha, and it seems to only take off, if either the market has a very strong player who can do it alone, like NTT DoCoMo in Japan or Safaricom/Vodafone in Kenya etc; or else if after years and years of collaboration, the industry players can come together like in South Korea.

So if you thought mobile money is 'obvious' and has such superb benefits it has to happen immediately, and now as more and more players from Nokia to Google to Visa to Vodafone to Coca Cola to Tesco to Paypal to many big banks are talking mobile money, don't think it will happen overnight. Remember, Turkey is the first country to issue a target date for the end of cash, and that year is 2025. So don't throw away your credit cards just yet haha..

EVERY PHONE CAN.. RECEIVE PAYMENTS

The Dave talked a lot about mobile in the money opportunity, with great insights. Dave said first of all, that "The point of mobile payment is not that your phone is your card, but that the phone is your terminal." Brilliant, absolutely true Dave! I've been saying this for a while too. Totally true, yes. The easy thing to notice, is that you can use your phone to make the payment, to replace the plastic card or banknote or coin, to pay for your parking or your Coca Cola at the vending machine or your train ticket. That is an evolutionary shift, from one electronic gadget in our pocket (the plastic card with the magnetic stripe and the security chip) to another (our mobile phone). But the radical shift is the other side, receiving payments. The average person cannot receive payments from a plastic card like a Visa card or Mastercard or a banking card. We have no way to verify that card is valid, and that it has a balance, and to deduct the paymnt from it. But any mobile phone can act as the receiving terminal for payments. We consumers can become 'merchants' in that way, to handle payments, and real merchants can upgrade to digital payments without the expensive credit card handling equipment. This is what is powering so much of the mobile retail in countries from the Philippines to the beaches in Brazil.

And that is something Dave talked about as 'Mobile Enhanced Retailing'. Its not that mobile will replace the retail shop - which it can do in some extreme cases like the internet did with music, books, travel etc. Sure in some extreme cases in retail, an m-commerce site can replace the retail store; but in most cases, the mobile is best suited to enhance our retail experience in anything from driving footfall to the stores, to adding to the experience within the store such as treasure hunts and getting more information about the goods, to speedier handling of the payments etc.

BETTER TO LOSE PHONE THAN WALLET

Then the usual problem most of us 'Luddites' have about mobile payments, is that we fear the single point of contact problem. That it would be dangerous to have our full wallet on our phone, and what if we lose our phone, or its stolen, or it is broken, or the battery runs out. Haha, yes, true, but the same problem is also with our plastic, what if your Visa card or American Express is lost, or stolen, or broken in an accident, or wears out so that it cannot be read anymore, etc. Dave made the very relevant point that we all in mobile money make almost daily - a payment solution is far more secure and far easier to recover from than any other payment mechanism. Yes its true. Dave said it this way: "Its much better to lose your phone than your wallet." Why? First, if you lose your wallet, all the cash in it will usually be gone no matter what, in most countries and most situations. So even if you are lucky to get your wallet back, you'll probably have lost the cash that was in it.

But what of the credit cards and banking cards and your driver's licence and other identity cards, etc. How tedious is it to replace those. How long will it take for you to be rush-delivered a replacement American Express card? And then imagine how much worse that all can be if you are travelling and where is the next place where you will be long enough for a Fedex delivery of your rush replacement credit card can even be delivered. Compare that to mobile. On mobile, your mobile wallet solution can have user-set limits that you can alter when you want, on what levels of payments (if any) can be authorized without security pin codes etc - so the mobile can work like a contactless card like Octopus, Oyster etc. But this is far more safe, because you can lock your phone with a password (that you cannot do for the contactless card) and you can further protect your banking access with its own limits and security.

Then take your credit card and banking card, with their "chip and PIN" security etc. That all is already built into the phone, but actually your mobile phone is far more secure natively than the best chip and PIN card. And this is before you then set your own limits if you want, that an be altered by the user, and the further security that can be deployed in the handset, in anything from thumbprint readers to retina scans to voice pattern recognition - all things that a plastic card cannot hope to match. And this is before we take the power from the network - like location-based security and proximity based security. If the network knows you usually move from your home to your office to the school of your children and the shopping center near your home it can provide minimal security at that level. If suddenly the mobile phone moves to another city - then it can be set to notice the unusual travel pattern - and only then ask for a verification password etc. Same for proximity, so imagine a family travelling. As long as the phones are together, no passwords are needed (its almost impossible for a pickpocket to steal simultaneously all phones from the pockets of four family members at the same time) but the moment one of the phones moves away from the group, the password protection is enabled. Etc etc etc.

HOW TO REPLACE MOBILE WALLET

But that was on the security side, actually the bigger benefit is if you lose your mobile. If you lose your cash, or contactless payment card, that money is gone. If you lose your credit card or banking card, you may lose some of your money and you have to call the bank to cancel the cards and then it takes at least days, may take weeks, to have your cards replaced. It will typically be even more of a hassle to replace identity cards like your driver's licence or passport.

But on mobile, the replacement is the fastest and most convenient. If your mobile wallet is enabled with your operator/carrier, all you need to do, is borrow someone else's phone, call your operator/carrier, tell them your mobile phone is lost or stolen (or broken, fell into swimming pool at your hotel). They will ask your usual security words etc, and then they can enable your full mobile wallet - including all your credit cards and bank accounts and payment systems exactly as they were - onto any other phone on any other SIM card you designate. So imagine the family dad having a bit of a show-off moment at the hotel, and falling into the pool, and finding that the phone is ruined. He just uses his child's phone, calls the operator/carrier, and has the mobile wallet functionality transferred to that child's phone (which daddy will borrow for a day before they can go to a phone store to buy a replacement phone for daddy).

This is BY FAR the most convenient way to replace lost or ruined or stolen or destroyed payment methods. It is far better to lose your phone, than to lose your wallet. And you are far better off, having your credit cards and banking accounts enabled onto the mobile than on any other forms like plastic cards. Now, obviously the retail world will need to catch up to this reality, only a few countries so far can do full payments in anything, in mobile, but that will soon evolve too.

Dave gave some interesting facts, like that Google has 750 people only in their payments team, this is far more than any telecoms operator and far more than any bank has in its mobile payments unit. No wonder Google Chairman Eric Schmidt said last year that mobile money was one of Google's three highest priorities.

MOBILE BECOMES STORING MECHANISM FOR REPUTATION

And the most far-reaching thought Dave expressed that I think comes to the core of what Alan and I have been writing about in our book Communities Dominate Brands and Alan in his follow-up book Social Media Marketing and now obviously in his latest, No Straight Lines, is that thought of the power of the data collected. What Alan called the new Black Gold for the 21st Century. Dave said it like this: "Mobile is the mechanism for storing your identity and reputation." Its more than payments. Its more than money. Its on those themes that Jonathan MacDonald writes about 'Advocurrency' and companies like Qustodian now are working on to help us manage our identity and reputation and its value, via mobile. Imagine how much information a retailer loyalty card will collect about us. Imagine how much information a credit card or bank account will collect about us. And imagine how much Amazon for example knows about our preferences and purchases.

Now imagine a near future when all of those data points get collected via a single point, our mobile phone. And our consumption behavior can be combined with our communication behavior. Its not just that Tomi likes James Bond and will see SkyFall the next 007 movie, but how many people did Tomi talk to about the movie before and after? Did Tomi influence others to go see the movie. The power of mobile money will be multiplied when we understand the value of influence, and that mobile, will merge with money, will merge with identity, will merge with communications, will merge with influence. That is why Google is in mobile money haha..  That is why this is such a huge race.

Excellent presentation Dave, truly excellent with great insights. 

No Straight Lines: making sense of our non-linear world

Coming home:

This is something of an emotional milestone for me, an emotional coming home.

As Tomi wrote - we set up Communities Dominate Brands - the blog when we published the book of the same name. We had no idea what would happen - but it became an extraordinary platform to connect with a global community. And in fact is now voted in the Forbes No.1 read blogs on mobile.

There came a point however where I felt I could not continue for reasons that were personal as well as professional. My dismay over 6 years of watching media / mobile and business organisations systemically destroy themselves (Tomi has a point of view on this) as we migrated from a linear to a non-linear world was overwhelming.

My turning point was an infamous meeting with the largest regional newspaper group in the UK, plus multiple engagements with Nokia and other major mobile and media players - where one could see these incumbents were driving down the road to oblivion. And of course they were not the only ones. Why I asked myself should I run a business trying to help those that can't help themselves?

So I went on a journey

A road less travelled

As I continued to research the evolution of the media and the commercial communication environment, I had a dawning realisation that what I was witnessing was something deeper, more profound and epochal. It was in fact a communications revolution with deep social undercurrents that are having and will have a profound effect on every touch point of our society and our daily lives. And there is no doubt that technology, particularly communications technology, can be wielded as a powerful agent of social and political change. But we seem to have arrived at a crossroads, and this makes me fearful that too few truly understand the underlying reasons for what’s happening now or the implications of what happens next. Too many companies are locked into a linear system, a framework and model that only allows them to look at and engage with the world in a particular fashion. And this communications revolution is not about just companies and organisations; it is about us – you, I and society per se.

The death and life of eco-systems

We are witnessing the death and life of two very different eco-systems - one which we started to describe in Communities Dominate Brands - and which is now truly redefining our world.

No Straight Lines: making sense of our non-linear world

The result of that journey is the publication of a new book NO Straight Lines: making sense of our nonlinear world -

In brief I explain the project

We have arrived at the edge of the adaptive range of our industrial world. At the edge, because that world, our world is being overwhelmed by a trilemma of social, organisational and economic complexity. We are in transit from a linear world to a non-linear one. Non-linear because it is for all of us socially, organisationally and economically ambiguous, confusing and worrying. Consequently we are faced with an increasingly pressing and urgent problem, WHAT COMES NEXT? And also we are therefore presented with a design challenge: HOW do we create better societies, more able organisations and, more vibrant and equitable economies relevant to the world we live in today? No Straight Lines presents a new logic and inspiring plea for a more human centric world that argues we now have the possibility to truly transform our world, to be more resilient, to be more relevant to us both personally and collectively, socially cohesive, sustainable, economically vibrant and humane, through the tools, capabilities, language and processes at our fingertips.

You can find the book online at Amazon.

Jo Pine author of The experience Economy and Infinite Possibility writes  ‘Anyone worried about where business is going in today’s chaotic world – and everyone concerned with where it should be going – must read No Straight Lines. Alan Moore has captured what is happening, but more importantly provides prescriptions for what individuals, companies, and society should do about it to create a better world’.

A little intro:

  

Its good to be home.

you can follow me on twitter @alansmlxl