Communities Dominate Brands

Nokia Surprises Us by Releasing Q4 Smartphone Results Early. So 3% for Q4 and 5% for full year 2012? And they think this is 'good' ???

So here we go.. Nokia surprised a lot of Nokia-watchers by releasing its official smartphone shipments numbers today, well before the final Q4 results are due. So we can do the Nokia part of Q4 Bloodbath analysis and also the full year for Nokia. As Nokia is the last vendor left providing Symbian, we can do Symbian for Q4 and full year, and as Nokia does the vast majority of Windows Phone, we can also do preliminary estimate for Q4 and Full Year 2012 results for Microsoft's Windows Phone ecosystem. Is it the promised 'third ecosystem'...

NOKIA Q4 SMARTPHONES

Nokia smartphones shipped 6.6 million units in Q4, up only 5% from Q3 when it sold 6.2 million smartphones. This is down from 19.6 million one year ago when Lumia first launched and 28.8 million when Nokia sold only Symbian based smartphones.

Nokia preliminary market share for Q4 is 2.8% (on my target market total unit sales number Q4 of 240 million smartphones). This is down from 3.6% in Q3 and 12.4% one year ago. More ironically, as Nokia's market share was 28.8% in Q4 the last quarter before the Elop Effect and Nokia's new strategy, Elop has managed to scare away literally 9 out of every 10 customers in just 24 months. This is a world record in market failure - not just in mobile phones, in any industry ever, by a global market leader of a Fortune 500 sized company. Literally a world record failure!

For the full year 2012 Nokia has shipped 35.0 million smartphones and end the year with 5% market share. That is a collapse from 2011 when it sold 77.3 million smartphones and held 16% market share, which itself was a collapse from 2010 when Nokia still saw massive growth in its smartphone unit and sold 103.6 million smartphones and had 35% market share.

So currently Nokia's smartphone unit holds 3% market share with essentially flat unit sales and declining market share. Its current ranking for Q4 in the Top 10 is definite to be worse than Samsung, Apple, Huawei, Sony, ZTE, LG, Lenovo, HTC and RIM. Yes. Nokia's best possible finish in the Top 10 is ranked 10th. Nokia was on top of the Top 10 when Elop took over two years ago. But Nokia may have tumbled out of the Top 10 smartphone makers altogether like Motorola did last Quarter. The company chasing Nokia into the Top 10 is Chinese Yulong who sell smartphones under the Coolpad brand and they are expected to sell between 6 and 7 million smartphones this quarter, so it will be very close whether Nokia falls out of the Top 10.

Meanwhile for the full year its not quite as bad for Nokia, as they had early 2012 quarters with healthier sales to help boost their rankings. Nokia's 35 million smartphones sold for the year 2012 puts them ahead of Lenovo, RIM, LG and HTC. Nokia cannot finish lower for the full year than 6th biggest smartphone maker, but also, we know it can't catch Samsung, Apple or Huawei, so Nokia cannot be better than 4th. The race is now between Sony and ZTE for whether Nokia finishes 4th, 5th or 6th. Nokia was twice as big as its nearest rivals when Elop took over.

LUMIA, WINDOWS PHONE, SYMBIAN

So Nokia also announced it had sold 4.4 million Lumia smartphones (they didn't give a split of how many of the new Lumia 920 running Windows Phone 8, and how many of the older obsolete Lumia series, hopefully we will have that split in the official Q4 results). But we can obviously calculate the Symbian/MeeGo split out of that, at 2.2 Million non Lumia Nokia smartphone sales. 

So Symbian sales are down 37% from Q3, to 2.2 million. Lumia sales now with the new Windows Phone 8 finally launched, are up 52% from Q3 ie up from 2.9 million to 4.4 million. The 'boost' from Windows Phone 8 is a measerly 1.5 million Lumia units - a true catastrophic disaster when we compare for example to 2010 when Nokia launched a new version of Symbian, S^3 and a new flagship, the N8 (like the Lumia 920 now) and Nokia in the Q4 quarter sold 5 million new Symbian S^3 devices including 4 million N8 devices. And the smarphone market has more than doubled since then. If Elop knew what he was doing, he should have sold at least 8 million Lumia 920 units now - yeah, if the consumers were willing to buy Lumia and the carriers/operators and distribution were willing to sell it haha. The news we had earlier this week via Fortune was that a consumer survey of smartphone owners in the USA and Europe by Bernstein found that the Windows Phone customer loyalty is in the toilet, only 37% of Windows Phone owners are willing to buy another Windows Phone smartphone (compared to 95% for the iPhone or 75% for Android smartphones. No wonder Nokia is now suddenly willing to consider shifting to Android).

So for the first time in five quarters of sales side-by-side, Lumia series finally outsells the remaining Symbian smartphones. And now Symbian does tumble to 6th in the ranking of smartphone operating system sales in Q4 behind Android, iOS, Blackberry, bada and Windows Phone. The end is truly in sight now, Symbian Q4 market share is under 1%.

What of Windows Phone? Nokia has been shipping about 75% of all Windows Phone smartphones recently and there is no reason to think this would have changed for Q4. If we use the same ratio, the preliminary estimate for Q4 Windows Phone total shipments would be 5.9 million smartphones and a market share of 2.4% for the quarter. Yes, bigger than Symbian but nowhere near Blackberry, and very close to losing to bada as well. Windows Phone may be currently either 4th or 5th biggest smartphone OS in Q4. For the full year 2012 it isn't that pretty.

For the full year Symbian sold 18.5 million smartphones and Windows Phone will be somewhere between 15 million and 17 million. bada is going to be bigger than Windows Phone but will chase Symbian. Blackberry is nearly twice as big as Symbian at 33.5 million smartphones and Android obvously won the year and iOS is second. So the rankings of the full-year 2012 look like this: 1 Android, 2 iOS, 3 Blackberry. 4th is race between Symbian and bada. 6th is definitely Windows Phone at 2% market share. So much for your promised 'Third Ecosystem' that was supposed to have 20% market share or better by now haha by so many 'experts'.

MY FORECAST? HALF RIGHT, HALF WRONG

Some Tomi-haters are jeering me for that Kantar numbers analysis I gave. I gave the numbers as Kantar reported, and projected from those what it would mean for Nokia and Windows Phone and Symbian. I said the finding was surprising and I flipped my balance of Windows vs Symbian from what I said in November (two thirds Lumia, one third Symbian) to the other way around. Still, I predicted 6.8 million total smartphones for Nokia, it delivered 6.6 million. Thats almost spot on. I did originally have the mix almost perfectly for Lumia/Windows in November but now did alter it to the wrong mix. Yes. That was a bad call. Still, on the big picture I was very close.

As to Nokia actual performance we have the full story now: Nokia sold smartphones in the following pattern since Elop took over:

NOKIA SMARTPHONE SALES COLLAPSE UNDER ELOP
Quarter. . . . Smartphones . . Market share
Q4 2010 . . . 28.8 million . . . 29%

Q1 2011 . . . 24.2 million . . . 24% (Elop Effect) 
Q2 2011 . . . 16.7 million . . . 15%
Q3 2011 . . . 16.8 million . . . 14% (N9 MeeGo launch)
Q4 2011 . . . 19.6 million . . . 12% (Lumia Windows Phone 7 launch)

Q1 2012 . . . 11.9 million . . . . 8%
Q2 2012 . . . 10.2 million . . . . 7%
Q3 2012 . . .   6.3 million . . . . 4%
Q4 2012 . . .   6.6 million . . . . 3% (Lumia Windows Phone 8 launch)
Source: Nokia quarterly data and TomiAhonen Consulting Analysis
This table may be freely shared

Do you really WANT to go back to all those rosy promises of the Third Ecosystem back in February, March and April of 2011, when so many experts promised Nokia and Microsoft would make magical success together becoming the third ecosystem and have over 20% market share? If you remember, my first official forecast in May of 2011 for the year 2012 smartphone sales suggested Nokia would end the year 2012 at 7.4 million smartphones sold and 3% market share. I did expect Nokia to have migrated 7.0 million Windows Phone sales by Q4 and Nokia only was able to do 4.4 million.

Still, from Spring 2011, I was by far the most pessimistic of any analysts making Nokia or Windows Phone forecasts at the time. Now look at the results? I was TOO OPTIMISTIC. Nokia did even worse than I was able to forecast and NOBODY had published a forecast worse than mine. Do I prove value on this blog?

Then when I had seen how much Elop had mismanaged the Nokia Lumia launch and first Lumia handsets, I did offer a revised forecast for year 2012 sales in June of 2012, where I downgraded my forecast to 5.3 million total smartphones (ok, that was too pessimistic, it was 6.6 million, but the average of these two forecasts was almost spot-on) and my forecast for Lumia sales in Q4 - with the stated clarification, that two Windows Phone 8 based Lumia phones would be launched by November 2012 - said Q4 Lumia sales would be 5.0 million units (was 4.4 million). For the full year 2012 I predicted 19.0 million Lumia shipments (the most pessimistic view in the industry) and Nokia only managed 13.9 million. Again, from June 2012, that was THE most pessimistic Lumia forecast by any forecaster or expert in the industry, and AGAIN I was too optimistic on Lumia.

No forecaster gets it 100% right, that is not possible. But the professional forecasters amongst us try to offer better insights and also - very importantly - to revise forecasts when facts change - AND to EXPLAIN WHY their forecasts have changed. I have done so diligently on this blog, and if you trusted what I said, you were closer to the truth than any other published expert at the time. During the summer of 2012, looking into Windows Phone 8, many of my peers were promising 8 million to 10 million Windows Phone Lumia sales levels. I said 5.0 million, was crucified here for being too pessimistic - and yet, I was the closest to the truth and even I was too optimistic on how incredibly poorly Nokia would perform in Q4.

With that, open for discussions and debates. But people commenting - if you come here to gloat that I was 'wrong' - I will delete your comment without a moment's thought unless you can provide any analyst whose forecast at the time - by May of 2011 or by June of 2012 - had a better number than mine. That Kantar projection was a warning on a usually-reliable early number, and I clearly state now, my revised mix, based on the Kantar numbers, was wrong; but my earlier mix of Lumia/Symbian was spot-on (I should have stayed with the November forecast haha).

PS what will Nokia and Windows Phone look like in smartphones for 2013? The market share will linger in the 2% to 3% range, it will not somehow magically now bounce up to 12% or 16% or 20%. That will not happen. I trust I have enough of a track history of being the most accurate Nokia smartphone sales forecaster that you can trust that prediction. If I'm off, I'm more likely to be too optimistic on Nokia than too pessimistic, but even if I'm off by 100% then Windows will be no bigger than 6% this year. And it won't be that big. And even 6% won't make Windows Phone anything like the, ahem, 'third ecosystem' haha.

For those interested in our crowd-sourced forecast competition from one year ago, those who were guessing Windows Phone to be around 2% or 3% are now the front-runners such as Eldar Murtazin and Jonathan MacDonald. See all contestants in the Twitter-based guessing game here. 

Also don't forget my new series of blogs, telling each Nokia management mistake on this journey to the world record of management failure by Elop, in simple, one problem per blog postings (short ones, honestly) each illustrated with one picture

Part 1 - the Nokia smartphone unit sales collapse following Elop Effect  

Part 2 - The competition during Elop's tenure - Nokia vs Samsung vs Apple iPhone 

Part 3 - the Nokia smartphone sales collapse compared to biggest failures in handset history (Palm, Motorola, Siemens etc) 

And to those who might suggest this disaster was not foreseeable, actually Nokia itself acknowledged all these problems we see now, in its SEC Form 20-F filing to the New York Stock Exchange in March of 2011. All the problems they said might happen - actually did come true. This is the worst disaster in any industry, ever. And if every risk that Nokia anticipated with its high-risk Windows strategy DID come true already, then don't expect any kind of speedy - or even slow - recovery. Nokia is doomed. Or at least, is doomed if Nokia's own risk assessment was this accurate. You judge for yourself, read the updated analysis of Nokia Form 20-F and the truth (with statistics).

The Engagement Marketing Primer for 2013 - E Equals M 2 C - Engagement Equals Mobile To Community - Or how to get 30% response rates with your next campaigns

I want to talk about Engagement Marketing today. I have been planning this blog article not for months, for years, and I always put it off, as I find my draft has gone out-of-date and I never end up finishing my primer about this radical advertising concept. But I took advantage of the holiday season and updated all of this again and now finally am ready to post my definitive blog about Engagement Marketing and mobile. You may want to bookmark this blog. And yes, this is a chapter-length article, runs about 9,000 words on the cutting edge of mobile advertising with tons of stats and astonishing case studies and I promise you, massive response rates. Massive. Nothing you ever get online, ever ever EVER.

 

SHOCKING STATS

And I like to start with the stats. This spring mobile phone subscriptions on the planet will grow past the total human population alive. That means, yes, 7.1 Billion active mobile phone accounts on the planet with a population of 7.1 Billion people alive from babies to great grandparents. Yes the Mobile Moment is nigh. But that is not shocking (not to readers of this blog anyway) nearly 100 countries have passed 100% per-capita mobile penetration rates, even the USA joined the club two years ago... No, lets look at the addiction level. T-Mobile USA reported that the average cellphone user in America looks the phone 150 times per day. The Guardian published a stat last year that for smartphone owners in Britain, its 200 times per day. If you look at your phone 200 times per day, its once every 5 minutes of every waking hour. No other media has ever had this level of addictive behavior. And even this is not shocking to my regular readers on the Communities Dominate blog. Lets get to mobile marketing..

SMS RULES

 

The Digital Marketing Association reports that 97% of messages sent via SMS are read, compared to only 20% of emails that are read. Ofcom, the UK telecoms regulator reports, that SMS text messages are read on average within 5 seconds of receipt (and I always add, that email stats say average emails are read within 24 hours). The Mobile Data Association reports that SMS text messages have an average response rate of 26% compared to 5% for email. Did I get your attention?

 

And how does the UK, the country where the world's first SMS was sent, take advantage of this lightning-fast media format, that reaches every pocket and has massively higher 'open' rates than email? 26% of UK businesses still in this day and age, literally 20 years from the first SMS, never use SMS, based on the 2012 survey of UK businesses by Textlocal 2012. Of the 74% of UK businesses that do use SMS, check out this experience:  88% found SMS marketing effective vs 11% not effective by the same Textlocal survey.

Now for the sickening part. An October 2012 survey of UK consumers by Textmarketing found that 89% would like to receive parcel delivery notices via SMS, but only 26% in Britain had received any. 84% would like appointment reminders like from doctors, hairdressers, dentists etc, but only 29% had received any. 68% of British consumers would like to receive offers and discounts from the brands they use, but only 12% had received any! What a massive, massive gap between what consumers want, and what UK businesses deliver, in the country where SMS was first enabled, and a country that passed 100% per-capita mobile subscription penetration level ten years ago.

Before you Americans snicker at those British statistics, don't forget that the USA lags Europe in mobile, so its actually worse in the USA. For example, a November 2012 Pew survey found that while 80% of Americans use SMS text messaging, only 9% had received any kind of alerts from their health providers. I delivered a keynote to SOCAP the biggest international customer relationship management association in the USA, the audience was stunned and shocked by what all I told them about mobile and SMS. These were customer relationship VPs and directors for Fortune 500 companies, and they were not aware of how massive this opportunity is today. So yes, don't snicker there across the Atlantic..

 

DON'T COPY WHAT IS HATED

So we know that consumers hate interruptive ads on TV and on the internet. We have created perfect mobile clones of those hated ads, but now deploy them on the most personal, the most intimate mass media ever, the mobile. And we find that people hate banner ads and pre-roll video even more on mobile than they do on TV and the internet. A brand new December 2012 Forrester survey of consumers found that mobile banner ads and pre-roll video interruptive ads on mobile are hated more than TV ads! 62% found mobile banner ads annoying, and 73% found pre-roll video ads on mobile annoying! Whereas SMS text messaging that had been opted in, scored consistently better than any other ad formats and - get this - 47% of US consumers in 2012 - felt that opt-in based SMS ads were useful !

 

So we copy what is hated, meanwhile there are mass media communication formats that are beloved by consumers, that reach a far larger audience, and achieve far greater satisfaction and far less rejection than interruptive ads - ie SMS and MMS - mobile messaging - and in countless uses, the consumers hope, ask for and even expect to be communicated with by using this method - and the brands hide their heads in the sand. What is wrong with this picture? I am so frustrated reading the surveys and analysis of big brands and ad campaigns conducted in 'my backyard' ie in mobile media, where the giants utterly misunderstand this media opportunity and proceed to wantonly destroy consumer satisfaction and affection.

 

E EQUALS M 2 C

My very dear friend and one of the earliest pioneers of mobile advertising and marketing is Spanish mobile maven, Agustin Calvo. He ran Movidreams in Spain and founded Qustodian to specialize in mobile marketing. He just tweeted a few weeks ago a funny formula playhing on Einstein's famous law of relativity:

 

E = M2C

 

Engagemement = Mobile To Community

 

I very much love this formula, it encapsulates so much of what should be done - and so painfully often is not done - in mobile advertising and marketing today. Engagement equals Mobile to Community. Just look at a banner ad or pre-roll video ad today. They are 'Mobile To Consumer' not 'Mobile To Community'. The ads are interruptive in nature and are not in any way built to entice consumer engagement with the consumer's community of interest. That may result in 'interaction' of a consumer clicking on the banner ad or link - and if the video is funny, it might even become 'viral' but it is not Engagement Marketing. It may even be 'engaging' with a consumer, but is not 'Engagement Marketing' to empower a community. Where is the distinction and difference. I will spend this blog discussing the depth of Engagement Marketing to the best of my understanding of it.

 

ALAN MOORE INVENTED ENGAGEMENT MARKETING

 

So we go to the source. Alan Moore, yes 'our' Alan Moore the co-author of the signature book to this blog - Communities Dominate Brands - the British veteran ad industry guru who has written several books on mobile and tech (not to be confused with the 'other' Alan Moore the science fiction writer). Alan coined the term Engagement Marketing more than a decade ago and has been teaching the world about it ever since. Lets take the defiition here to be very clear:

 

DEFINITION OF ENGAGEMENT MARKETING

 

Engagement Marketing is the process of involving consumers in the co-creation of brand experiences.

 

Engagement Marketing is not 'Engagement Advertising' alone. It can involve the advertising side of marketing, but marketing as a science and discipline covers far more than marketing communications ie advertising. Marketing according to classic Kotler involves the Four P's of Product (design), Place (distribution channel), Price and Promotion (which includes but is not limited to advertising; promotion also includes other actions such as public relations, publicity etc).

INTERACTIVE IS NOT SAME AS ENGAGEMENT

Interactive Advertising (or Marketing) is not the same as Engagement Marketing although very many who talk about making their advertising or marketing campaigns 'engaging' will think that making them interactive is the same thing. The definition says 'co-creation'. If I click on a link to your web page, and go to your product catalog and select the particular color of the t-shirt I want to buy, that is all very interactive, but it is not engagement marketing, because I was not involved in the 'co-creation' of that brand experience in any way. I navigated the brand's tightly controlled environment. It was interactive but not Engagement Marketing.

Compare to this example - if it is Nike's T-shirt design page, and I am allowed to upload my own photo to paint onto the Nike T-Shirt which will still carry the Nike 'swoosh' logo - now we have co-created something together. Only then is it 'Engagement Marketing' - but you understand how much more this is now a 'process' issue for Nike. What if I upload a picture of myself strangling a picture of President Obama, and that T-Shirt is manufactured by Nike with their logo and I wear it - they could be sued as a corporation for enticing race hatered... Just because your website or internet or mobile campaign is 'interactive' does not make it Engagement Marketing. But Engagement Marketing has to be interactive. So in a Venn Diagram, Engagement Marketing is a small circle wholly inside the far bigger circle of Interactive Marketing. All Engagement Marketing is Interactive but not all Interactive Marketing is Engagement Marketing. One common misconception is now cleared.

VIRAL IS NOT SAME AS ENGAGEMENT

A second common mistake about Engagement Marketing is the confusion with Viral Marketing. Yes, often a good, 'engaging' campaign can become viral - and in most cases becoming viral is very good for a modern digital interactive campaign - but being viral is not the same as Engagement Marketing. Why? Co-creation. Engagement Marketing is not simply the process of echoing what the brand sent out, even if one does to a wide 'community' through modern social media means like Facebook, Twitter, etc. A great viral video can yes, help promote the brand - look at Psy and Gangnam Style - but that is not 'co-creation'. Lets take this case and explore. If Psy allowed his fans to co-create variations and versions of his music video - and help spread those - only then would it become 'Engagement Marketing'. This is what for example another rap artist Seeda of Japan did with his new album. Seeda created a sound-based treasure hunt across Japan. Follow the trail to find Seeda's favorite places, at every place you get Seeda tell in his own voice why that place is special, and hear at that location one track from the new album. When the album was finally released, it debuted at number 1.

 

So while often successful Engagement Marketing tends to have viral elements and can go viral, not all viral campaigns are Engagement Marketing. And its possible to have Engagement Marketing without any viral element to it. Thus in a Venn Diagram, Viral is a big circle, partly overlapping Engagement Marketing the smaller circle. Most of Engagement Marketing is inside the Viral Marketing but not all. Most viral marketing is not Engagement Marketing, but most Engagement Marketing does have Viral elements in it. That is why it is easy to confuse the two.

 

ENGAGEMENT IS NOT SAME AS USER-GENERATED ADVERTISING

 

This is perhaps the most difficult part. We all know of stories where passionate fans of some brands have gone to extraordinary lengths to create original advertising or marketing or branding to their favorite brand, from Harley Davidson motorcycle fans physically branding themselves with Harley tattoos, to many Apple fans doing iPhone ad tributes onto YoutTube to the guy who made furniture out of Fedex boxes (And was sued by Fedex for damaging the brand, haha, what morons at Fedex)

User-Generated Advertising can be very compelling and deeply involving and obviously very 'engaging' to that individual consumer or fan. It is not what Engagement Marketing is all about, because the brand is not involved and usually is wholly ignorant of this activity, until the video suddenly pops up on YouTube. Remember the definition, Engagement Marketing is 'co-creation' of the brand experience. Not User-generated, but 'co-created' both with the consumer(s) and the brand.

ENGAGEMENT IS NOT PERSONALIZATION

 

And while very often Engagement Marketing results in the personalization of the marketing experience ie to my model car, its color, etc - that personalization is not by itself 'Engagement Marketing'. We have had these abilities forever in marketing. Car makers - even in the time of Ford's Model T - allowed us to customize our cars to at least some colors, and often more premium cars offer wide ranges of colors, Aston Martin for example will match the color of your Aston to any color you bring in. Personalization by itself is not Engagement Marketing, but often Engagement Marketing does allow us to personalize our experience. Only when the marketing itself allows our co-creation, then it becomes Engagement Marketing. So for example Coca Cola in Australia, which now allows consumers to order custom cans of Coca Cola with your name spelled in the Coca Cola script on the side of the can - that is Engagement Marketing. Why? Because the Coca Cola drink did not change, it was the packaging - ie the marketing - the branding - which is now co-created. Tomi-Cola with Coca Cola...   Those packages of the soft drink - the cans - are now co-created. This is definition Engagement Marketing. When I bring a six-pack of Tomi-Cola to the party at my friend's house, I am actively marketing Coke by co-branding it with my name. That is Engagement Marketing using personalization. Not all personalization is Engagement Marketing, but Engagement Marketing can be powerful if it includes personalization.

SO THIS IS ENGAGEMENT MARKETING

 

So Engagement Marketing is the process of involving consumers in the co-creation of brand experiences. Now that we know what is not Engagement Marketing, lets start to look at a few famous examples to get clear view of what it can be.

 

Co-Creation of Product Design. Lego invited some of its most passionate fans as an experiment in 2005 to join together and design a new Lego toy. The fans sat together, had all the manufactured Lego bricks at their disposal, and created the ultimate Lego toy kit, a train engine they called the Santa Fe. Lego launched the toy with its standard first-set run of 10,000 kits and sold out in two weeks as the best new Lego toy launch in Lego history. This brings us to the lesson Alan Moore regularly drills into the heads of his audiences - we embrace what we create. When you have your fans co-create the brand experience, they are involved, embedded in that process and will embrace it. They will then go and tell the world how great that new thingamajig will be, that they were involved with, to help it become a success. Note this happened at the dawn of social media. Today with Facebook, Twitter etc, the opportunity for fans to celebrate what they co-created will be far bigger still. As we say on this blog, Communities Dominate Brands.

Now, not every industry can do this, have its consumers come in and start to collaborate in product design, but did you know Boeing's 787 Dreamliner included inputs from over 10,000 Boeing fans, non-aviation engineers, who helped co-create the design. And Lays the potato chips has run the campaign now successfully on several continents, inviting fans to make suggestions of the new flavors - suggestions sent in of course via SMS text messages. Best flavor suggestions voted, top 3 test-marketed and most successful of those will be fully launched. The person who suggested the winning flavor earns 1% of every Lays package of that flavor sold ever since. By the way, the idea was first run in India and since done in South Africa and Guatemala in Latin America etc.

 

PROCESS IS NOT ONE AD

And lets understand Engagement Marketing at its heart. The world's first company built from ground-up to run on Engagement Marketing principles, had by happy coincidence Alan Moore as one of its Board Members advising them. It was the innovative mobile service provider in the UK called Blyk, a few years ago. Blyk got a lot of attention early, with some high-powered founders including the ex-Nokia President Pekka Ala-Pietila who had been expected by many to be named Jorma Ollila's successor back when Nokia was the mobile industry giant. Blyk then seemed to vanish very suddenly and a lot of false stories spread about how it ended. Blyk did not die in the UK market, it was so successful, they were brought in by Orange one of the big 4 networks to run their in-house mobile advertising and marketing as a platform provider. Meanwhile Blyk has since expanded to many countries from the Netherlands to India repeating the same successs they had in the UK.

The gimmick with Blyk was not that the youth could get free calls and free messages in exchange of some ads. The gimmick with Blyk was Engagement Marketing. By using Alan Moore's Engagement Marketing principles meticulously, Blyk achieved the ultimate in advertising - and as the first mobile company to do so - their process was so powerful, compelling, relevant and beloved, that their consumers requested more ads!

 

Go back to the survey I reported on the top. People hate ads on TV so much, they buy TiVo and PVR boxes to be able to skip ads altogether. And when some clueless advertisers run barrages of spam and banner ads and interstitials and preroll video and force consumers to be interrupted on their phones to be bombarded with ads, of course the consumers hate those mobile ads even more than the TV ads.

Then compare to Blyk. Consumers 'love' ads? So much so, that they ASK for MORE ads? Yes they do. This is no anomaly. We did the analysis here on this blog and with support from the experts over at Forum Oxford, we found that Blyk ran over 2,600 individual mobile ad campaigns over a year for 200 of the topmost global brands like Coca Cola, Ford, Mastercard, L'Oreal and Levi's. The average brand loved the Blyk experience so much, they ran yes - on average 13 campaigns on Blyk per year - more than one per month. That will not happen on any brand new media unless it is highly - incredibly - unbelievably - unprecedentedly successful.

Check this out. The average Blyk users - a youth user between ages 16 and 24 - was bombarded by 6 marketing messages on average every day (they did not have to consume them daily, they could take them whenever they wanted, that is part of the beauty of mobile, we can cut the linear relationship between content and its advertising. I can have my free Blyk call today and watch 6 ads on Saturday to pay for it. This only works on mobile where our mobile phone numbers are as near to unique and personal, as being the nearest thing to a global ID number. In many parts of Africa, people will identify their house number by their mobile phone number listed on the door, not the house number on a street where the streets might not be named, and many people can't even read...)

So back to Blyk. You are bombarded by six mobile marketing messages per day. How much will you hate that? Its 42 ads seen per week, 180 ads you have to watch per month, every month, to get the modest free minutes and free messages allowance from Blyk. How much did the youth hate these ads. After 2,600 ad campaigns to 200,000 youth consumers in Britain, Blyk sustained an average response rate of... 29% !!!!!

TWENTY NINE PERCENT

That is not twice as good as on the internet. Its not five times better. Its not ten times better. Its about 100 times better response rates than we see on banner ads on the internet! Yes, that is no misprint. 29% response rates - not click-through rates mind you, even better, these are actively wanted engagement, responding to an ad, often answering a question or poll or giving an opinion. 29% response rate after 2,600 ad campaigns while the youth received 2,200 mobile marketing messages per year.

If I promise you 29% response rates on average (some easily above 45% if the campaign was better designed and well targeted on a highly popular brand etc) and the option is to do mobile banners that are hated and get in best cases something like 3% or 4% click-through rates on mobile (still 10x better than online, obviously) then WHY would you even consider the stupid banner ads. And this.. and this before... (drumroll)

BIGGEST COMPLAINT BY USERS - WANT MORE ADS

I am not making this up. Jonathan 'JMac' MacDonald now known as the mobile marketing guru and author, back in the day was 'just' an ex Ministry of Sound music guy who had joined as Blyk's UK Sales VP. He said in 2008 that the biggest complaint the Blyk calling center was getting from the 16-24 year old users, the number 1 complaint was .. how can I get more ads? After bombarded by over 2,200 ads per year, and voluntarily, willingly responding to 29% of those - the youth users loved Blyk ads so much, they wanted MORE OF THEM? How is this possible? This was built on Engagement Marketing principles. Now we will go through the process, I show to you, how teenagers will become so in love with Blyk mobile marketing messages, they will crave for more and will rush to open them immediately. This is the how.

HOW TO DO ENGAGEMENT - BLYK'NAM STYLE

Imagine two girls, teenagers, 17 year olds. BFF's Best Friends Forever. They like the same bands, eat the same foods, dress the same, use the same colors in makeup. And they both have joined Blyk. One of the girls is totally honest, tells Blyk everything she likes - fashion, makeup, rock music. The other, thinks she'll 'game' the system, and not reveal all about herself, and thinks she'd just like some makeup advice and coupons and tells Blyk she only likes makeup.

So one of Blyk's advertisers, L'Oreal notices two girls with interests in makeup and sends the first contact communciation, asking if they would like more info from L'Oreal, and also - asks in an MMS message, showing some colors of lips, asking which color of lipstick the girl favors.

MUST BE OPT-IN

One. Lets stop right here to start with. The reason any true Engagement Marketing campaign can get 29% or 35% or 45% response rates is that Engagement Marketing starts from the premise of 'Opt-in'. It has to be opt-in. There is no spam in Engagement Marketing, ever. You have to ask for permission. This is a painful step to many who prefer to shotgun their advertising via television or other imprecise mass media channels, but the unique abilities of mobile start with unique benefit number 1 - mobile is the first truly personal mass media channel. So ask for permission. There cannot be Engagement Marketing without opt-in. Learn this, internalize this, or be condemned to the scrapheap of advertising history soon as an obsolete dinosaur. All Engagement Marketing is opt-in based.

Lets return to the two girls. Blyk sends the MMS message with six pictures of lips. Both girls respond the same way - they don't pick fiery red or pink or dark maroon or natural, they pick black. These two 17 year old girls are what is known as 'Goths'. Girls who dress in black-and-white, look anemic every day, seem angry and depressed and listen to Gothic rock music like say, Finnish rock band Nightwish.

Today L'Oreal has sent these two girls one MMS ad, got both to respond saying yes they'd like more messages from L'Oreal, and both picked lipstick color of black. The two girls will still need to see five more ads to fulfill today's quota. L'Oreal accepts their responses - and now the magic starts to happen. L'Oreal adjusts ALL of its future marketing messages to these two girls to only feature black-and-white fashion images, in Gothic styles.

Two days later, the second message comes from L'Oreal to both girls. L'Oreal asks which is the supermodel the two girls most admire. Again it is an MMS with six pictures of fashion models that are under contract for L'Oreal. Note - every one of the six models are pictured of course wearing black lipstick... And the girls both have identical tastes, they both select the actress Eva Longoria (from Desperate Housewives).

Two messages, and L'Oreal now adjusts all future marketing messages to always use pictures of Eva Longoria, not the other 5 models, and always use Eva in colors of extreme gothic Black-and-white.

After two iterations, the 'personal' marketing channel from L'Oreal to these two girls has become far more representative of their personal tastes than anything in any print magazine could ever be. Vogue, Cosmo, Elle or Seventeen in print format could never, EVER have such highly targeted ads as L'Oreal can now do for these two girls. And obviously, a class-mate of their who uses pink lipstick and prefers Kate Moss will never see Eva Longoria in black, she will get the same 'campaign' messages, but dressed up as Kate Moss in pinkish tones... This is co-creation of marketing messages. This is the very heart of Engagement Marketing. This is why in only a few steps, the marketing can become highly appreciated and personal and beloved. And we haven't gotten to the good part yet. Lets do message number 3.

BEGGING FOR MORE ADS

L'Oreal has measured its Blyk user base and found that there are a lot of goths in its opt-in database. And the clever marketing department execs at L'Oreal dig into their consumer insights and notice that yes, the Goths seem to like the Finnish rock band Nightwish. And so, when Nightwish does its next tour of Europe, L'Oreal decides to sponsor the tour. And as sponsor, it gets 200 tickets to the opening show at Earl's Court in London. L'Oreal decides to reward its fans on Blyk.

L'Oreal digs through the Blyk database and its opt-in users, and finds all those L'Oreal opt-in fans who selected black as their lipstick color (are likely Goths) and who also said they like rock music. And finds 2,000 such teens in the system. L'Oreal sends a surprise message just to these 2,000 lucky ones with an MMS message with Nightwish doing a short snippet of its latest music video - and promises L'Oreal treats the first 200 of its Gothic rock fans to free tickets of Nightwish at Earl's Court.

Girl 1 gets this message, opens it, watches the video in deep entrhallment - remember both girls love Nightwish, how could L'Oreal know that this is their fave band? - and after the videoclip embedded in the MMS, L'Oreal offers the fastest to respond, FREE tickets to the opening night? The girl sends her response immediately.

Notice what happens. The system learns ever more accurately what we want, and then feeds us what we'd most prefer, and teaches us to react immediately, to open the messages and respond fast. Pretty clever eh?

Now. If you are truly a fan of Nightwish and Eva Longoria and dress in black, and your makeup brand has started to communicate with you using your fave colors (black) and using your fave actress (Eva) and now gives you the chance to win free tickets just by responding fast - you will LOVE this brand more than anything you could imagine. The girl does not have to win the ticket today to love L'Oreal for it.

What of her friend? They were both sitting at Pizza Hut. The BFF sees this message coming on Blyk from L'Oreal with the Nightwish video clip. They both watch it on the friends' phone, but this other girl is still waiting. The other girl has already sent in her response to try to be among the fastest 200 to win, but the best friend has not received this offer! Why not? She becomes despondent. She calls up Blyk demanding her offer too.

Blyk tells her, that because she did not tell Blyk - and L'Oreal - that she likes rock music, she will never be bothered with anything about rock music. After all, she might prefer rap music or country music or jazz for all they know. They will only send rock music ticket offers to those members who said they like rock music. That this girl tried to 'game the system' by witholding real opinions from Blyk will only harm her, not benefit her. She adjusts her setting immediately and is served the L'Oreal offer within seconds thereafter. She learns her lesson the hard way as her friend gets to go to the concert on the ultimate free ticket...

This is truly textbook Engagement Marketing. Co-creation of the marketing communications between the brand and the consumer. When we analyzed the Blyk traffic together with Forum Oxford, we found that the average Blyk campaign had about 6 ot 7 of these interactive steps back-and-forth, run for about a week or ten days, with then about two weeks of silence, until the next such campaign ran again.

29% response rates. Consumers loving the ads so much, they beg for more. 2,600 such campaigns run by 200 of the biggest global brands in England just over one year, loving it so much they ran on average 13 such campaigns per year. Why are you not using Engagement Marketing today?

This is not a UK specific anomaly. The Blyk model has been successfully copied from Croatia to Malaysia. Alcatel-Lucent's Optism runs on these principles. OutThereMedia runs its opt-in mobile marketing on these principles. Blyk has a million audience just in India alone, on these very same principles. Once you go Engagement Marketing, you never go back.

E = M 2 C

That is how engagement marketing can be done today. Now lets go into the future. What if you have your fans help co-create your brand, participate in it and help decorate the most popular teen fashion magazine for girls? Lets examine Girlswalker, ie Tokyo Girl of Japan. This is where engagement marketing can bring you.

TOKYO GIRL

Girlswalker starts off as a standard teenage fashion magazine for girls. It gives advice on what to wear, makeup and of course, how to pick up the boys, make relationships last etc.. Rather than the print magazine out perhaps once per month, Girlswalker has two issues per week. They are smaller in content, formated for the small screens of the mobile phone and have fewer articles per issue. But over a month, you get about the same amount of magazine content as you might on Glamour or Vogue or Seventeen or whatever is your fashion magazine of choice. But rather than the paid paper-based print edition, Girlswalker comes to the favorite device of the teens - their mobile phones - and is totally free. We are right off with something better.

 

Then the content. There are normal teen-magazine articles written by professional journalists. And there is plenty of make-up and fashion dressing advice. Except.. that the pictures of the models in Girlswalker are all genuine Tokyo girls, shot on the streets of the most fashionable steets of Tokyo. Quite literally this fashion mobile magazine is up-to-date, it shows this week what real Tokyo teenage girls are wearing this week (twice per week). There are no supermodels featured in Girlswalker, only genuine Tokyo teens.

And the next point, while yes, the audience of Girlswalker includes of course, the Tokyo teens, its target audience is.. the rest of Japanese teenage girls who don't live in Tokyo. The girls in Osaka and Kyoto and Sapporo and any towns, villages and rice farms along the way. The girls who would want to be as cool and sexy and glamorous as the Tokyo girls.

So? To pay for the free mobile internet based magazine, how do you monetize it? Two ways. You have the freemium content which more than pays for the publication. About 10% of the teens pay about 2 dollars per month for the premium edition. It enhances the standard free content with longer articles, more pictures and of course.. videos. If the free magazine offers ten tips to keep your romance hot, on the premium edition you get 20 tips, etc.  And then there is the super-VIP edition, which includes all the premium content but adds super benefits such as free access to the twice-annual fashion shows with the hottest new fashions modelled on the catwalk by, not supermodels, but rather, yes, the hottest girls from the pages of Girlswalker.

Now the kicker. The advertising. Tokyo Girl advertising is relevant and personal to the tastes of the reader and highly appealing. What happens? Alan Moore reported in his book No Straight Lines, that Girlswalker ads achieve, on average.... (wait for it...) ... 45% redemption rates! Not 'click-through rates' or even 'response rates' but 'redemption rates' - actual money purchases generated per ad view! 45% redemption rates? That is the holy grail of advertising! We know exactly which ad generated what sales and nearly half of the targeted (obviously already opt-in) ads get nearly half to produce sales? You, the CMO of your Fortune 500 corporation stop all TV, radio, print and other ads instantly when you see this number. Gosh. Yes, if 10,000 girls saw that one blouse advertized by Zara in this week's issue, then 4,500 blouses were sold directly from that ad! Who gets 45% redemption rates? This utterly obliterates the 'efficiency' of shotgun advertising such as TV ads. For every 100 ads seen, 45 actual paid purchases result ! This utterly remakes the total print industry - and ad industry, it goes without saying.

Girlswalker ad rates have skyrocketed and today an ad in the current issue costs more than an ad on television in prime time in Japan. And how is this possible? Each issue has only a few ad slots and they are auctioned to the highest bidder, of course... As a consequence, Girlswalker the media empire is ridiculously profitable.

And let me just mention where does this all go 'next' - now Tokyo Girl has its twice-annual fashion shows - so immensely popular (only to Platinum level members) they are booking sports arenas that get filled by teenage girls. And the mobile commerce involved? Get this - when the girl in the audience likes something the Tokyo Girl walking on the catwalk is wearing, she only points her phone at the model on the catwalk, and selects which item from the girl she wants (the skirt, the shoes, the handbag, whatever) and clicks to buy. The system already knows this users size so no other info is needed. Point-to-buy convenience - at a fashion show! Truly to be first in your neighborhood to wear the latest fashions, just like a proper Tokyo Girl. Wow. This is the future of retail. (oh, and the magic in point-and-buy tech? Its not location-based, its time-based. They just know which model is currently on the catwalk, you could point your cameraphone at the toilets, and it will still offer you that Hennes & Mauritz silk scarf in pink and silver... :-)

WHILE IN CANADA

And I just read only the headline finding from Canada, from Coca Cola's latest campaign. They ran a global campaign across many media, TV, print, web and mobile. They had several mobile elements to it from QR Codes to mobile web to smartphone apps, but at the epicenter of the campaign was SMS text messaging and a deeply engaging advertising concept. The result? 45% of the target audience responded and engaged with the campaign ! It can be done, not just in Japan but if even the usually laggard Canada (which has yet to even pass 100% mobile phone penetration rates, where several countries have already passed 200%) can do it, you can do it in your country.

SO ITS LOCATION?

So whereas Engagement Marketing was the first totally new advertising concept native to mobile (earlier mobile ads were all copies of previous media, such as banner ads, spam emails and location-based ads.) You thought Location-based ads - like say FourSquare - are new? Far from it. LBS ads were invented for the third mass media - Cinema, yes Cinema has had those 'near this cinema' type of restaurant ads for nearly a century now. And their success is a good precursor to how poorly LBS is performing today. A Nielsen survey in December 2012 found that 10 million Americans are active users of FourSquare. While 10 million looks like a big number for many in other media like print, 10 million is peanuts in mobile. Thats only 3% of American cellphone owners! Thats nothing. Don't focus on Location, its a red herring. Focus on the 9 unique aspects of mobile to build your market success.

THE NINE UNIQUE ASPECTS OF MOBILE AS A MASS MEDIA CHANNEL
1 - Mobile is personal

2 - Mobile is always carried

3 - Mobile is permanently connected

4 - Mobile has a built-in payment method

5 - Mobile is available at the point of inspiration

6 - Mobile measures the audience most accurately of any media

7 - Mobile captures the social context of consumption
8 - Mobile enables Augmented Reality

9 - Mobile offers a digital connection to the real world
Source: Tomi Ahonen book The Insider's Guide to Mobile, 2011

 

When the first TV ad was developed, it was a Bulova watch ad in the USA. It was like a newspaper ad, lifted from the print issue and broadcast to the television screen. Yes, imagine a TV camera showing 30 seconds of a still image newspaper or magazine ad. It was a still image. An announcer read a voice-over of the exact print copy seen on the black-and-white still image on the TV screen "America runs on Bulova time." Even the second-hand on the clock on the picture did not move. A still picture was broadcast for 30 seconds with what sounded like a radio announcer reading the same text that was displayed on the TV screen. BORING !!! That was it. No jingles, no moving images, no smiling kids or happy dogs. And no drama, no comedy, no action, no emotional involvement. That was not using the abilites of television and such an ad would be camp if run today. I find a similarity to most mobile ad campaigns or mobile elements to cross-media campaigns. They only copy older less-efficient media, so mobile is severely underperforming. Use those nine unique benefits to deliver better advertising performance than was possible before mobile became the 7th mass media.

NEXT COMES AUGMENTED REALITY

Which brings me to the future. Augmented Reality, ie AR. I have been exploring the use of AR as a unique ability of mobile, but today AR is spreading past mobile, to tablet PCs, to Playstation Portables, and very shortly, to goggles/glasses such as Google's Project Glass ie the Google Goggles. AR was immediately embraced by advertising, from the iconic first Ford Ka ads in Europe to the Ikea catalog made available via AR (So you can virtually test furniture in your home, just by looking at the item through your cameraphone viewer aiming the furniture to any room in your home).

AR is inherently interactive and very easily becomes fully engaging too. The Ford Ka ads four years ago were famous for having live people step into the camera view, to be pictured next to the virtual Ford Ka which did not exist in reality, at that point. AR invites people to want to participate. A French website, DirectOptic, has added AR based virtual trials to selling their sunglasses and eyeglasses, to enormous gains. The visitors to the website who use the AR feature have a 41% higher conversion rate than visitors who do not. And the buyers who make a purchase and who used AR will spend 12.5% more than those who didn't. So the total gains to DirectOptic from using AR are 45.6% more revenues from the AR users.

Oh, if you don't really know or understand AR the 8th Mass Media (mobile was 7th, internet was 6th, TV was 5th) or perhaps doubt it can be a viable ad medium etc, you might want to watch my TEDx Talk about Augmented Reality last year. Its like all TED videos, short and snappy, and I have tons of AR media examples in it. See the video at Tomi Ahonen TEDx Talk About Augmented Reality.

OBAMA 2012

Then Senator Barack Obama Presidential campaign in 2008, run by David Axelrod, set new standards for using mobile in US elections, from announcing his VP choice by SMS, to the innovative Obama app for the iPhone. In 2012 his re-election campaign run by Jim Messina turbocharged all they had learned, from getting donations directly by one click via SMS to this, perhaps the ultimate 'force multiplier' in the history of elections.

Obama's campaign had used digital and social media very effectively and had for example recruited 311,000 volunteers for election day (compared to 34,000 that Mitt Romney's campaign had recruited). Messina had assigned 200,000 volunteers to phone duty on election day, who placed 11 million phone calls to voters.

Lets explore this a bit. Obama's total vote total was 65 million, so about one in six Obama voters received a phone call on election day to remind them to vote, and remember, 29% had already voted before that day. The campaign knew who were true Obama supporters - they didn't robocall districts without focus, and didn't hit Romney supporters. So only 46 million Obama supporters voted actually on election day, and thus, the campaign reached nearly one in four who voted that day. (They also made another 6 million personal visits knocking on doors on election day, and used obviously all other activation methods from Facebook and Twitter reminders to more traditiona emails and mailers). But here is the sweetest part.

As the Obama 2012 campaign had gone through the trouble to collect mobile phone numbers and permissions - and personal info into a monster database called Narwhal. They had permissions. They had the mobile numbers. And they knew who was a nurse, who was a retired Marine Master Sergeant and who was still a student at the local community college etc. Plus they knew who had voted and who had already been contacted personally on election day. So they built the ultimate engagement campaign.

Every registered Obama supporter with a mobile phone who had given permission, received an SMS text message early on Tuesday election day with one question: 'Would you be willing to make one call to an undecided voter, on behalf of President Obama today?' Remember the campaign already knew this person was an Obama supporter and that this person had already voted that day or before. Now they were not asking for money - at that point the campaign was awash with cash, they needed volunteers to 'turn out the vote'. And if the same ratio of support for this SMS campaign occurred as they reported for their Facebook campaign (they didn't reveal the SMS campaign effectiveness, which I believe was far stronger, but lets use the FB stat as the reference) then of the 24 million Obama voters who said they had been contacted by the campaign (by voter polls after the election) if we assign the 8% rate of activation as on FB, it means 1.9 million bonus volunteers made an extra phone call on behalf of President Obama on election day.

So the campaign, by sending out 24 million SMS text messages at perhaps 2.4 million dollar total cost, achieved 1.9 million more calls, in addition to the 11 million their army of volunteers produced. And for contrast, the Romney campaign volunteers didn't even try personal calls, they only made Robocalls (Recordings, like Donald Trump endorsing Romney and encouraging people to vote for Romney). The Romney campaign made a total of 6 million Robocalls on election day, of which only 3.1 million hit Republican voters who had not yet voted on that day. Obama's SMS based mobile gimmick did more than half that level - with personal calls, a laid-off factory worker calling another factory worker, a teacher calling a teacher, a retired housewife calling another retired housewife, etc. This is the very essense of Engagement Marketing, performed to brilliance by the Obama campaign. I expect when the final analysis is done and reported, the SMS-volunteering 'would you make one call for the President' message will go down as one of the most cost-effective election day activation methods ever devised. But it required permission, careful engagement over time - the average Obama supporter had been personally contacted 5 times during the 2012 election season, by personal visits to the home or personal phone calls, in addition to countless SMS text messages, emails, Facebook and Twitter contacts, YouTube viral videos etc. (and for those who want to see the inside scoop on Obama's data mining edge and all the numbers of the Narwhal vs Orca battle of voting databases in 2012, my full stats and analysis is here)

That is how you build an Engagement Campaign, and how you use it. Remember what Alan Moore teaches, people embrace what they create. Let your consumers co-create your marketing experience with you. 

 

So when you consider your next campaign with mobile, lets take the lessons from Alan Moore, Jonathan MacDonald and Agustin Calvo, from examples pioneered by Lego, Seeda, Lays Potato Chips, Blyk, L'Oreal, Girlswalker, Ford, Coca Cola and the Obama Campaign. Don't just interrupt your audience, respect them and ask for permission. When you do create your mobile marketing, do make it interactive and viral, of course, but make it also engaging. Remember Agustin Calvo's formula, Engagement = Mobile To Community. E = M2C.

WHERE NEXT?

 

So yeah, obviously if you want or need, I do these kinds of workshops all around the world for my clients and I'd be delighted to prepare a workshop or seminar for you about Engagement Marketing and/or other mobile media, mobile advertising, viral marketing, mobile money, Augmented Reality etc. While I'm not a mobile advertising specialist, I did chair the world's first conference on mobile advertising 13 years ago, I was the first author to discuss mobile marketing at chapter-length in a book, each of my twelve bestsellers includes mobile advertising and one of my books was completely focused on this aspect of the mobile industry. Yes, I am regularly used by big ad agencies, national advertising associations etc to run workshops and do seminars, but seriously, I am an expert on the mobile industry overall, that covers anything from youth messaging to farming irrigation systems, from mobile money to smartphones, from mobile gaming to international voice call roaming, and from MVNO profits to SIM card loyalties. I am not your expert on mAd as in Mobile Advertising. So this is not about me. Who are your best resources whose day job is purely mAd and who are my gurus into this specialist area that is one of the fastest-evolving ever seen in media history.

 

If you want to really learn Engagement Marketing there can only be one man for that, its the guy who invented the concept and has thought about this the longest and done it the most, and that is Alan Moore the CEO of SMLXL out of Cambridge UK.

But there are several superb experts and gurus who have mastered Engagement Marketing and who do it in their daily work and are excellent guides for you. I am not an advertising dude myself, so I don't know all who now are the best at this craft, but here are my favorites who do know what they are doing and would be excellent guides for you on your journey from interactive digital marketing to Engagement Marketing. There is JMac, Jonathan MacDonald, of course, the author and guru from Britain. There is Agustin Calvo the author and former mobile ad agency CEO from Spain. Then I'd add the American, Kim Dushinski, the author of the wonderful Mobile Marketing Handbook (now in its Second Edition, make sure you buy the new version, not the first edition). I have to add my first guru into the world of advertising and mobile merging, the Finnish grand old man of digital media, Antti Ohrling. We also have to remember Kerstin Trikalitis of Out There Media who is very active here in Asia, and the author Peggy Anne Salz of Mobile Groove, based out of Germany. And I'd be remiss to ignore my dear friend Rory Sutherland of Ogilvy in Britain or another dear friend, author Russell Buckley, the past CEO of the MMA previously with Google and Admob who lives in Germany. Lastly I'd add Richard Ting of R/GA out of New York. I know there are at least a dozen more truly world-class experts in Engagement Marketing, but these are people I know, whose work and writing I follow, who are behind award-winning concepts and campaigns, who really know what is Engagement Marketing and what only pretends to be that.

ABOUT YOUR CAREER

Let me end with a different view. I know for some who have an illustrious career in advertising and a wall full of awards, the concept of yet another digital miracle cure to advertising may seem like all hype and no hope, and a massive intrusion into the world they know and have mastered. Nobody taught this Engagement Stuff at university, and isn't it just a tired old refrain of what we learned with the internet or now see in social media? There is an inbuilt resistance to all things new, and even more, one that might threaten the livelihood, and one where older experts seem out of touch and the youngest in the industry seem more knowledgable. A lot of veterans in the advertising industry - including often the bosses - will resist the change.

 

The worse problem is television. Currently the ad industry global awards are all TV oriented. The money in the advertising industry is disproportionately geared to television where ad deals often get a percentage cut of TV ads placed, and that is big money. If you go to your ad agency and ask for a cross-platform campaign, they will always pitch TV in it, whether TV really works or not. And just watch what happens if you, the client, announce that you want the other parts but lets not do TV this time? The best team will not work on your campaign! The best teams want the TV stuff, because thats the fame and glory bit, thats how you win your awards and perhaps get to go to Cannes etc.

The problem is, of course, that TV viewing is not increasing anymore, it has plateaued. TV ads are seeing ever less efficacy, due to TiVo and other PVRs and consumers viewing content in other ways to avoid the ads altogether. That means, the most attractive audiences are increasingly avoiding the ads, and ever less attractive parts of the TV viewing audience - like the poorest segments in that country - are left to aim ads at.

Meanwhile, the disparity with our media use of mobile is totally out of proportion to the miniscule ad spend on the media so far. And most of that ad spend is the pointless spam messages and annoying banner ads and interstitials etc. So many ad execs will point to the unfulfilled promise - arguably disappointment - of mobile ads, and go again to work on the next TV ad campaign. Contrast that with successful mobile ad campaigns. A well designed, opt-in, engagement marketing campaign will be delivering well in excess of 25% response rates and usually well above 30% rates, in any country, from England to Egypt, from Croatia to Canada, from Spain to Singapore, from South Africa to South Korea.

Some creative types at ad agencies will 'get it' that as the mobile is the most personal, most sensitive and private media channel, and the screen space is so limited, and our attention span to the medium is often divided - we multitask often when we consume mobile media - the challenges to creating a successful mobile ad campaign are far greater than doing that on a magazine or billboard or radio or TV. The challenges are greater on mobile than on the web. The challenges are greater, the rewards are potentially huge. For any truly creative mind, this is the best kind of opportunity. A new media channel with massive reach and enormous potential, that most rival creatives do not fully understand! This is where careers are made.

I think there will be primarily two types of advertising professionals this decade, those who embrace mobile with a passion, putting it dead-center into everything; and those who resist 'the dark side' and try to remain with the more familar legacy mass media - which yes, today, includes the web. Yes, the internet is now a legacy mass media that is no longer the cutting edge of new and cool. Where would you rather be? Which brings me to a few closing thoughts. Google, the world's biggest internet company and world's largest web advertising company has been saying for years, that mobile is the future of the internet.

MOBILE MOVES TO MIDDLE

Ford was the first major advertiser to commit to making mobile part of every campaign they run across any media. Coca Cola now puts mobile to the center of their campaigns. Visa goes even further, saying mobile is the future of payments too! And Kraft the US food giant gives its simple mobile philosphy, 'Leave no phone behind' when they advise their partners and audiences that any mobile ad campaign should start from SMS and then build out from that with MMS, QR, mobile web, etc long before you bother with such tiny niche audiences as individual smartphone platform apps. Coca Cola puts it in their inimitable way, with their famous 70:20:10 rule, put 70% of your mobile budget to mobile messaging, only 20% to mobile web, and 10% to all others including smartphone apps, Augmented Reality, etc.

Thats my primer on Engagement Marketing. I would be very interested to hear your thoughts (and please, I know many of my readers obsess about the smartphone races, this comment thread is closed to smartphone discussions, I will only allow discussion about advertising and marketing here, not the usual iPhone vs Android debates or what becomes of Nokia next). And if you want to see how we are now using mobile in media, advertising and retail, you might enjoy my video in Rotterdam at the end of the year when I gave a keynote to the Emerce Day about Mobile and eBusiness.

Allow me one plug, if you want to see my favorite list of 50 best mobile ad campaigns from the birth of mobile ads to the end of the first decade of it, including several pioneering Engagement Marketing successes, please consider my ebook Pearls Vol 1: Mobile Advertising (with a Foreword by Russell Buckley). More info including its ordering links are here.

Quick notes from the smartphones battlefield and announcements from CES

Am at an airport now, in a rush, but a few quick notes about some interesting developments in the smartphones space

I talked about Japan leading, and that all major innovations that we now have in our phones, originate from Japan. Once again that proves to be true, as Sony now is bringing to other markets their waterproof smartphones - not for the beach, but for shower and bath use. And talking about Sony? They now aim to become the 3rd biggest smartphone maker - behind Samsung and Apple. Currently number 3 globally is Huawei. Sony famously left the Symbian and Windows worlds and concentrates now only on Android.

Of Huawei? They are expanding product portfolio and spreading around the world. And if felt that the Samsung Galaxy Note screen was too small - Huawei has now broken past the 6 inch barrier in our pocket, the Android based Ascend Mate offers a 6.1 inch screen.

Then Lenovo? The company that crashed into the global top 10 for the first time in Q3 of 2012? The company that previously bought IBM's PC business? Lenovo is now pursuing a strong growth strategy in smartphones, launching a series of smartphones and spreading to several countries. Expect their growth path to continue (on Android, obviously).

What of Pantech? Never heard of them? They are South Korea's third phone maker. They have a series of Android phones they are now using to expand well beyond Asia, aiming for USA for example.

What of Salora? Don't be confused with the former Finnish TV and radio maker Salon Radio out of the town of Salo, no, there is a new smartphone maker out of India that coincidentially uses that name as brand, and they have Android phones including one which they claim has the biggest battery at 3200mAh.

Then back in the former giants, Nokia CEO laid a major bombshell yesterday acknowledging that Windows is not necessarily forever for Nokia, and an Android path is a possible future, but he claims Nokia is not currently pursuing that path. Bear in mind, Nokia and Microsoft seem to have fallen out and are no longer BFFs, with Microsoft launching its tablet, threatening to launch its own smarpthone, and at major Windows Phone 8 events, was featuring HTC, not Nokia smartphones. And at Nokia's corner, they have already been recruiting Android engineers...

And another Nokia surprise. Now the company is backpedaling on the previous statements that Symbian is coming to an end and is already in 'maintenance mode' ie no more updates to the operating system. Today Nokia revised that statement, promising more development of Symbian? Is this now Plan B (and Android Plan C) - which all suggest that the disaster that is Lumia and Windows Phone is worse than Elop ever expected...

Why is that? Well, Windows Phone is failing the consumers too. We just learned via Fortune, of a Bernstein survey of US and European smartphone owners, that reported that iPhones have 95% repurchase intent in 2012. Android comes in second at 75%. Blackberry owners still pass the mid-point where 56% are willing to purchase another Blackberry. But Windows Phone? Only 37% are willing to buy another smartphone using Microsoft's system. This is totally in line with the 2012 Yankee Group survey of Lumia owners that found that four out of ten Nokia Lumia owners rated the phone so bad, they gave it the worst rating in the survey. So yes, Windows Phone is not just a failure by carriers and retail not supporting it, and the Lumia series designed to fail Nokia consumer expectations, now we have survey data that those poor saps who were tricked into buying a Windows Phone based smartphone hate them so much, almost two thirds intend to buy any other smartphone! No wonder Nokia CEO is hectically exploring his remaining alternatives and even Burning-Platforms Symbian and Pissing-in-Pants-in-Winter-to-Stay-Warm Android sound good to Nokia now. I should note, that just prior to Elop's Burning Platforms, the Symbian-based Nokia smartphones were so highly rated by its users, it was the second highest loyalty rating of European consumers behind only the iPhone, in 2010. Yes, 'Burning Platforms' Symbian. Nokia smartphones that Elop killed, were rated second best loyalty behind only the impossible standard, the iPhone. And far far ahead of the Blackberry or Android or Windows. That, Mr Microsoft Muppet destroyed and selected this consumer-hated platform of Windows Phone instead. What a moron!

Samsung? Reported record profits driven by record smartphone sales, no surprise. Samsung's Galaxy S4 is expected during Q1 and Samsung has confirmed several Tizen-based smartphones will be launched during 2013. One of the first customers committing to Tizen is Japan's biggest network, NTT DoCoMo, who famously do not offer the iPhone. If we remember Tizen's predecessor, Nokia's MeeGo, being the only system that was regularly called better than that on the iPhone and the Nokia N9 being called a better phone than the iPhone - no other Nokia phone have ever before or since beaten the iPhone regularly (the N95 and the E90 Communicator did that occasionally) - so this bodes very well for NTT DoCoMo's first Samsung Tizen-based smartpohnes later this year. Keep your eyes on Tizen (with among others, Huawei among its handset manufacturer partners and Sprint and Telefonica among its carrier partners)

HTC reported ever shrinking profits with its struggling smartphone business. But at least its still making some profits. HTC CEO said the problem has been marketing and advertising in the past year.

And finally this is not in the news category, more of an iRumor, but the iCompany is now increasingly rumored to give us iFinally the iPhone iNano, that iTomi has been iBegging for iYears. It would be targeted at Emerging World markets (as I suggested) with an unsubsidised price around 200 USD rather than the $650 that the current model retails for; and rumors suggest it could be made from plastic rather than metal and glass in part to help lower the production costs (and to clearly differentiate it from the flagship model, and prevent the cheaper model from cannibalizing the top end sales). But yes, this is still only a rumor, but it would be high time, Apple should have had the iPhone Nano out two years ago, and it would still be competing with Samsung for the global crown in smartphones. Now Apple has lost that battle and the iPhone Nano would be more a defensive move against Huawei and the others in the pack, to try to keep Apple at least as number 2 in the smartphone races as we head into the Bloodbath Year Four, Smartphones Galore

Thats the quick update, I'll be blogging more as news comes in from the bloodied battlefield of smartphones. But if you needed the latest stats, here are the full Top 10 smarpthone manufacturers currently based on the latest reported data ie Q3, as we await Q4 numbers.

And anyone who needs more than the top line numbers on mobile phones, smartphones, operating systems etc, see my TomiAhonen Phone Book 2012 for all the stats, numbers and facts.

The Seven Biggest Collapses in Mobile Handset or Smartphone History - this is part 3 in the Nokia Disaster analysis series

I started last week with a long analysis series of the individual problems relating to the Nokia mess. Each article will deal only with one aspect of Nokia's current malaise and will include a picture to explain it. I am trying to keep the articles short and readable. If you want to read what Nokia itself identified as the risks to the new Windows strategy, the risks were all itemized in the official filing Nokia did to the USA Securities and Exchange Commission (SEC) and the New York Stock Exchange, using the form 20-F. I visited some of those risks and how much the nightmare scenario has in fact come true under Elop in the past two years. Then I started this series of short single-issue blogs. First I showed how Nokia growth had turned instantly into collapse in February 2011, and then I wrote about Nokia vs Competitors. But this is a blog about just one topic today. The world record in market collapse in the handset industry.

So I did the math for you, and collected the seven biggest collapses in the handset industry, so we can see how Nokia's smartphones now in 2010-2012 under Elop, compare to previous bankruptcy-resulting disasters that forced the company or unit to be sold - Motorola, Palm, Siemens - and the equivalent total failure of Windows Mobile (replaced with no migration path by Windows Phone). And the two that survived their big scares, LG (definitely survived) and RIM (the jury is still out, but currently most think the worst is over). Thats our context, the six worst market failures ever. I will compare all seven, including Nokia where the starting point is harmonized. This is the 'clean' version of the graphic. I will provide one detailed variant, same graph, but with the seven reasons why, at the end of this blog. Use whichever you like (or both) if you feel like writing or speaking about this set of notorious mobile industry collapses.






This graphic may be freely shared 


First a few notes about the graph. The metric is market share. As the industry growth per year has fluctuated greatly from one year to another, as we faced two global economic crises in the past 12 years that faced zero growth (by some measures even slight market decline year-on-year) the best measure to compare collapses in different periods is the market share metric. Also the starting point is very different, Nokia started at 35%, Motorola at 21% compared to the collapse of Palm and LG which started at 9% and Siemens at 8%. So I have harmonized the starting point to year zero. At Year Zero, the starting point of Nokia at 35% market share in 2010, is harmonized to Siemens in 2001 having 8% or RIM in 2009 having 19%.

Then I have used the fall in market share points, converted to a standardized rate of annual decline - counting from starting point to ending point, by number of years. So when Siemens fall from 8% to 2% in a three-year period, that means Siemens market share collapsed by 3 out of 4 it had (ie 75% as a rate of total fall). In other words, Siemens fell in half in 18 months, and in half again, in the next 18 months. Its average rate of decline per year was thus 35%.

Or Windows Mobile which started at 12% in 2008 and after the period was down to also only one fourth the size it started with, ie 3%. But Microsoft's smartphone operating system achieved that fall of being cut in half, in 12 months, not 18 months, and again in the next 12 months. So WinMo also lost 3 out of 4 market share points it had - but did it only in two years, compared to Siemens who did the same damage in three years. So Microsoft's average annual rate of collapse was 50% per year. 

Finally, note that these are not strictly apples-to-apples comparisons, this worst-of-handsets record holders notorious list includes pure smartphone makers RIM and Palm; full-feature handset makers in the time to shift to smartphones Motorola and LG; a full-feature handset maker Siemens when the smartphone market was in its infancy and of no significance to the fall; a pure smartphone OS provider Microsoft Windows Mobile; and of the Nokia fall, this is only of its smartphone unit, which when this fall started, had become Nokia's biggest revenue unit and obviously generated more revenues than its dumbphone unit. So please note, this is not a measure of 'all Nokia mobile phones' including dumbphones/featurephones. This is purely the smartpone unit where Nokia's future - and the future of the industry - lies.

With all that, lets examine each of the seven to see how they fell, when they did it, and why. Here are the Seven Worst Collapses in the history of mobile phone handsets, and their stories:

LG - 2008-2011 - FELL FROM 9% TO 4% IN 3 YEARS - AVERAGE FALL 24% PER YEAR: SURVIVED
(Was ranked number 3 in market of all mobile phone handsets)
Cause of collapse - Microsoft partnering

At number 7 we have LG with its ill-fated Microsoft misadventure. In 2008 LG was growing strong had grabbed 9% market share in mobile phones globally, was the number 3 bestselling phone in the USA, number 4 in Europe and seeing strong growth fuelled in part by its iconic LG Prada series of featurephones that in 2007 had outsold the similar-appearance 'original' Apple iPhones (what were later to be called iPhone 2G ie the featurephone before Apple turned the iPhone into a proper smartphone starting with iPhone 3) worldwide.

LG made the always-costly mistake of a deep partnership with Microsoft, and where most legacy handset-maker rivals used either Symbian or Android very successfully, to battle the rapidly growing iPhone and Blackberry at this time (2008), LG decided to rather partner deeply with Microsoft and believed the marketing BS that Windows Mobile would win over the iPhone (and Blackberry). The Windows market share went into deep dive the more Microsoft's product was obviously not competitive against iOS and Symbian (such as Nokia N-Series) in the consumer markets, Blackberry OS and Symbian (ie Nokia E-Series) in the enterprise markets. LG was then burned by Microsoft suddenly 'Osborning' the whole Windows Mobile line - announcing it will be terminated, and a new incompatible platform would be built on Windows Phone instead. This was soon after LG had joined as the strategic partner to Windows. LG lost a little over half its market share in all phones as the vital top-end flagship phones were utterly unsellable, and LG went from profits into deep losses. LG rapidly abandoned the doomed Microsoft path, and joined the Android family to great additional cost and delay, but LG survived the damage, and today is back to profits.

RIM - 2009-2012 - FELL FROM 19% to 5% IN 3 YEARS - AVERAGE FALL 34% PER YEAR: SURVIVES
(Was ranked number 2 in market of smartphones)
Cause of collapse - entering tablet market as pure handset maker

Blackberry-maker RIM saw promising profitable growth in 2008 as it battled the new iPhone (yes, thats true, RIM was not in any way damaged by the strong growth years of Apple, RIM was essentially immune, serving the most opposite distinct market: where the iPhone served affluent consumers interested in web surfing and later, apps; Blackberries served enteprise/business users and their emails and in consumer markets, the youth addicted to messaging). RIM management in Waterloo then embarked on the disasterous market exploration that all but destroyed the iconic Canadian smarpthone maker. They decided to try to do a tablet PC. I've explained on this blog many times, that a tablet PC makes perfect sense for any PC maker (like HP, Dell, Acer, or yes, Apple or Sony or Samsung) but it does not make any sense for a pure handset maker like Motorola or RIM (or as now rumors suggest, Nokia). The tablet market is vastly different, tablets are sold and priced differently than PCs. The tablet market is far smaller than smartphones, and dominated by Apple's iPad. An intelligent smartphone manufacturer CEO will resist the temptation just because superficially, on its appearance, a tablet looks like an enlarged smartphone. The smartphone market is fiercely competitive, regularly half of the big manufacturers report losses in the smartphone market even as the market grows at breakneck speeds usually more than 50% per year. The smart CEO focuses efforts to win and keep on winning in the far bigger smartphone market, and explores new smartphone opportunities but leaves the tablet PC market to the legacy PC makers who have to move there anyway as their own desktop PC market is stagnating.

Well, RIM obviously did not listen to my advice and right as they were stretched to the limit in supporting their global expansion marketing in smartphones - as Blackberries very bizarrely became the bestselling smartphones in unanticipated countries at the time like Thailand, Venezuela, South Africa, Nigeria etc - RIM actually admitted in public, the consumer love of the Blackberry took them by surprise and they didn't really know even fully why it was the bestselling smarpthone in such differing markets. Instead of learning why it is growing strongly in so many large emerging world markets, RIM took the eye off the ball, and launched an iPad competitor instead, now forcing most of its marketing effort to go into launching RIM into the PC market where it had never competed, on that distribution, sales, pricing etc market. The Blackberry tablet failed and drained massively RIM resources, forcing it to retrench globally from the growing consumer market, and into the receeding corporate market (where BYOD Bring Your Own Device policies were now allowing iPhones and Android smartphones to eat into RIM's traditionally 'safe' enterprise market).

Worst of all, the efforts into the launch of the Blackberry tablet drained precious software development skills needed for the next generation Blackberry OS, the one with full touch integration, that we now know as BB!0, that is scheduled for first handsets out this first calendar Quarter in 2013. The BB10 project was critical to keep Blackberry competitive, and any delays to BB10 would severely drain RIM's growth and market prospects. As RIM cut staff and costs fierecely in the Blackberry tablet launch disaster aftermath, the BB10 project got postponed and postponed again. However, RIM survived (or is surviving) but just barely. Last year saw a lot of rumors of RIM going bankrupt or being bought.

SIEMENS - 2001-2004 - FELL FROM 8% TO 2% IN THREE YEARS - AVERAGE FALL 35% PEAR YEAR: SOLD THE HANDSET UNIT
(Was ranked number 4 in market of mobile phone handsets)
Cause of death - market shirt from enterprise to consumer handsets (killed by Nokia)

Siemens was the first big casualty of a Top 5 manufacturer to die in digital age of consumer cellular phones. Siemens missed the big shift from enterprise oriented 'business phones' to the much larger consumer market. Siemens's phones tended to be quite technical and capable, but big and bulky and ugly and unfriendly to users. Where Nokia focused on consumer fashions and interests (replaceable colored covers, downloadable ringing tones) and made consumer services and features more easy to use (adding the clock and games, and making all Nokia phones very easy to use on SMS text messaging, adding a big phone number library capacity etc) Siemens missed those trends and found its high capacity in phones falling into loss-making and under-utilized. Siemens sold its handset unit to BenQ.

MOTOROLA - 2006-2009 - FELL FROM 21% TO 5% IN THREE YEARS - AVERAGE FALL 41% PER YEAR: BANKRUPTED AND SOLD
(Was ranked number 2 in market of mobile phone handsets)
Cause of death - iPhone and Nokia N-Series stole top end market of Razr

Motorola was enjoying the windfall gains of being Nokia's biggest rival, when the global carrier community decided to punish Nokia the last time for severe disgressions (These were the 2003 launch of the consumer-oriented smartphone Nokia N-Gage with its nasty concept of 'app store' that allowed apps to be sold and downloaded to N-Gage smartphones by 'sideloading' ie bypassing the carriers and their billing and traffic; plus the coincidentially timed Nokia push to the early version of Nokia's consumer marketing afforts around Club Nokia. The carrier community revolt caused Nokia to see global market share loss of a third in a two-year period).

This timing was very fortuitous for Motorola, timed with the launch of the Razr series, at the time the sleekest most sexy-looking featurephones on the market in 2004-2006. Powered by the Razr, the severely declining Motorola handset sales turned into strong growth over those two years (matched by almost exact decline in Nokia sales). After Nokia made peace with the carrier community in 2006 and withdrew the hated N-Gage and refocused Club Nokia to be delivered via the carrier networks - Nokia was able to recover completely. But why did Motorola now suddenly lose its share (and others did not for example Samsung etc).

Motorola's Razr was the first big scalp taken by the iPhone. In those markets where Apple was strong, mostly the USA and Europe - markets where Motorola also was usually strong - the slick sexy iPhone stole Motorola's lollipop and ran away with it. But in other markets, where Motorola also was strong but the iPhone was not to be seen, like China, Latin America and the Middle East (and parts of Europe too) - it was in fact Nokia's N-series, in particular the hugely popular Nokia N95 (a smartphone that vastly outsold the iPhone by the way) that destroyed Razr's markets. Motorola was then still in that typical USA-mindset thinking of smartphones as primarily enterprise-oriented ie business phones and made several smartphone design mistakes including ill-fated Windows based smartphones that failed to succeed right as the iPhone was proving to the USA market what Nokia had already years before proven to European and Asian markets - that the consumer market for smarpthones was far bigger. What focus Motorola did in 2008 and 2009 was into the wrong market segment (enterprise) and on the wrong platform (Windows). Motorola went from huge profits to massive losses in the collapse and then retrenched from markets, and tried to survive by shrinking such as selling its networking unit to Nokia. Motorola did not survive, went bankrupt, was split, and the handset unit was sold to Google.

PALM - 2005-2008 - FELL FROM 9% TO 2% IN THREE YEARS - AVERAGE FALL 42% PER YEAR - SOLD
(was ranked number 2 in market of smartphones)
Cause of death - iPhone

Palm was the second largest smartphone maker in the world behind Nokia, running also the second-most used smarpthone OS behind Symbian. Palm became purely a victim of the iPhone in 2007 and being in essentially the same markets where Apple is strong, especially the USA, and with poor carrier support even there, Palm died very fast. It did join the Windows ecosystem in an attempt to fight back, but that only drained further the funds Palm had and caused more headaches Palm didn't need, which meant its own radical and many felt possibly even iPhone-beating OS, WebOS, being severely delayed. Palm had focused on the enterprise market when the laggard US market finally followed the trends we had seen in Europe and advanced countries of Asia-Pacific to the consumer market, so Palm's response to the early iPhone was misunderstanding it and not reacting to it appropriately. Palm had never been strong in profits, was making ever bigger losses as its market share collapsed and lingered on for a while generating ever more losses in the 1% market share range before being bought by HP (and since, terminated, but possibly parts of what was Palm now might be resurrected via WebOS, as HP re-examines its interests in mobile)

WINDOWS MOBILE - 2008-2010 - FELL FROM 12% TO 3% IN ONLY TWO YEARS - AVERAGE FALL 50% PER YEAR - WAS TOTALLY REPLACED BY WINDOWS PHONE
(Was ranked number 2 in market of smartphone operating systems)
Cause of death - iPhone and Osborning of the Windows Mobile line

Microsoft's Windows is a kind of widow-maker in smarpthones. Its launch (Windows's ie Microsoft's launch I mean) itself resulted in killing the mother it was supposed to have, British smartphone maker Sendo. Microsoft plundered all the insights from Sendo, then went to another 'partner' it had, HTC, and instead launched Windows with HTC instead. Sendo claimed in the lawsuit (that it won) that Windows had been stealing Sendo intellectual property which it used to help HTC. Of the biggest failures on this list, most had decisive or contributing damage from attempting a Microsoft cure to their troubles. Windows is to winning in smartphones like water is to fire. LG, Motorola, Palm and Nokia on this list have felt damage from attempting a Microsoft cure. Note - nobody has ever used Windows to gain significant sustainable share in smartphones. Even HTC shifted away from Windows to Android the moment that became possible and HTC had at that time sold half of all Windows phones ever made.

Well, Microsoft did collect at one point six of the ten largest smartphone makers (Samsung, HTC, LG, SonyEricsson, Palm, Motorola) to support Windows but that didn't help. Every one of the major smartphone makers complained, some more openly than others, that Microsoft was always the worst partner they had seen in the smarpthone market, whether saying that explicitly, or indicating it via their emphasis by product portfolio, or complaining that consumers and carriers didn't prefer this platform. Every one of these makers had supported at least one other smartphone platform (Symbian, Android, Palm, LiMo) and those who ever attempted to prioritize Windows ahead of the others (LG, Motorola, Palm) had found the company immediately going from profits to losses, or the losses only becoming bigger, after Microsoft's Windows versions had been launched. HTC on the other hand, struggled with losses until it found profits out of Android..

The ultimate irony is, that after six years of pretty steady growth for Windows Mobile, it suddenly 'went over the cliff' and fell by a then-world-record fall in the handset industry, losing 50% per year on average, for two years, collapsing from 12% to 3% in yes, 24 months. Windows Mobile collapse was due almost exactly due to the iPhone, as WinMo's significant markets were almost exactly those where Apple's iPhone was growing strongly in 2008 and 2009. Whereas Windows Mobile had seemed reasonably competitive in 2006 against its then-rivals Symbian, Palm, Blackberry OS and Linux Mobile, once the iPhone appeared, Windows Mobile was instantly obsolete. It could not even take advantage of advanced features that Symbian supported, such as multiple screens, genuine multitasking, advanced cameras, advanced screen resolutions etc. Where Symbian (and Blackberry OS) did just fine during early iPhone market rise, Windows Mobile (and Palm OS) utterly collapsed.

Why Windows Mobile collapse turned so severe, 50% per year compared to its close compatriot Palm OS that only fell 42% per year - was the Osborning of Windows Mobile by Steve Ballmer. In a bizarre twist on history, compared to Microsoft under Bill Gates who provided a migration path from DOS to Windows on the PC side, that ensured Microsoft's giant market share edge on the basic text-based DOS personal computers would be held as the market transitioned to the modern mouse-input-based Windows environment; why didn't Microsoft do the same from Windows Mobile to Windows Phone? Windows Mobile was the smartphone equivalent of DOS, a mostly text-based input (or stylus) but after the iPhone, we've seen the touch-based input that Windows Phone epitomizes. If Steve Ballmer had offered a migration path from Windows Mobile to Windows Phone, rather than Osborning the whole Windows world, he might well have kept 10% or 8% of the Windows market for today (Windows Phone currently has about 2% market share).

Also just for those who don't know, the Osborne Effect is when a provider promises a new platform in the future, incompatible with the current ones, but does not have those new items to sell now. All current sales collapse as obsolete. This bankrupted the Osborne Computer company, and Ballmer Osborned his Windows Mobile platform which pushed the speed of collapse to a world record. Yes, in only 2 years, Microsoft's market share in smartphone operating systems fell from number 2 to number 6, his market share collapsed from 12% to 3% and this was the world record collapse in the mobile handset industry. Windows Mobile did not survive this transition, it was completely replaced (by a new OS, Windows Phone that is such a poor replacement that it has not peaked above 3% in any single quarter since its release in 2010) 

NOKIA - 2010-2012 - FELL FROM 35% to 5% in TWO YEARS - AVERAGE FALL 62% PER YEAR - IS CURRENTLY ENDANGERED SPECIES AS FALL CONTINUES 
(Was ranked number 1 in market of smartphones)
Cause of death - Elop Effect ie Osborne Effect combined with Ratner Effect - resulted in instant carrier boycott and retail boycott against Nokia, these furher damaged by another Osborne Effect by Elop and yet another by Ballmer, and the purchase of Skype by Microsoft causing a Microsoft-targeted sales boycott

Nokia invented the smarpthone so it started with 100% market share. It is predictable that Nokia would see market share erosion, gradually, over time, as the market drew new competitors, as happens with any new market. The Nokia average rate of market share decline had been historically be about 4% or 5% per annum, and guess what it was in 2010? Exactly to form, in year 2010, Nokia market share (annually) fell from 39% to 35% ie a fall of 4% in market share points (incidentially, there was some shenanigans with that, Nokia's previous CEO was caught buying market share ie boosting it by artificial prices that cut profits severely, an unsustainable problem which was part of why he was fired in the summer of 2010). Obviously Nokia's annual market share erosion was so mild, it would not register in this Top 7, in fact nowhere near the Top 10 biggest falls in handsets.

This quite gradual and modest decline in market share was suddenly boosted in 2011. To say boosted is an understatement. The floor fell off. Nokia set a world record by suddenly collapsing smartphone sales by 62% per year, for two years running. Note, this has nothing to do with the iPhone. The iPhone grew its market in the early years of the iPhone from 2007 to 2009 at a time when Nokia's smartphone sales grew more than Apple's. Since then, the iPhone sales stabilized and grew barely faster than the industry on a whole. Nokia's fall didn't start until after the iPhone's growth period had ended.

Something very drastic happened in the first quarter of 2011 that turned a strongly growing Nokia smartphone sales into the world-record biggest fall. I explained this pattern in the blog earlier in this series. (Note, I was not talking about market share there, I was talking about absolute unit sales. While Nokia's market share was eroding very gradually, as more and more new rivals were entering the hottest tech space, smartphones, Nokia's total smartphone sales grew 53% in year 2010 - and grew more than Apple iPhone or Samsung smartphone or any other smarpthone maker sales that year). Then suddenly, in Q1 of 2011, there is a massive drop in sales, and then a continuing collapse that continues to today.

NOKIA FALL IN MARKET SHARE ANNUALLY 2009-2012
YEAR 2009 - 39%
YEAR 2010 - 35%
YEAR 2011 - 16%
YEAR 2012 -   5%
Sources: Nokia quarterly data, industry analyst consensus, and TomiAhonen Consulting 2013
This table may be freely shared

NOKIA FALL IN MARKET SHARE QUARTERLY 2011-2012
Q1 2011 - 24%
Q2 2011 - 15%
Q3 2011 - 14%
Q4 2011 - 12%
Q1 2012 -   8%
Q2 2012 -   6%
Q3 2012 -   4%
Q4 2012 -   3% (est)
Sources: Nokia quarterly data, industry analyst consensus, and TomiAhonen Consulting 2013
This table may be freely shared

That is a world record, folks. A world record in market share fall in the mobile phone industry. A world record in failure. And how ironic, that Nokia would take this record, from previous record-holder Microsoft, by switching to a Microsoft-based strategy, and hiring a Microsoft guy as CEO. Yeah if you really want to fail spectacularly in mobile, you kind of need that Microsoft Windows power to really ruin your life, as we learn from such mobile industry failures as Sendo and Kin, who never even had the chance to get into the big time, or the falls of LG, Motorola and Palm, which all were fuelled partly or completely by Microsoft.

ELOP EFFECT

So what happened in Q1? There was no fire at a Nokia factory or a strike by employees or sudden collapse of some critical Nokia component supplier. There was no Tsunami causing evacuation, no nuclear power plant disaster causing electricity shortages and no volcanic cloud causing delivery distruption. There was no catastrophic component disaster like Sony had with exploding laptop batteries or Apple had with 'antennagate' (you are not holding your phone correctly). There was no sudden emergence of a rival phone that changed the market economics like the iPhone in 2007 killed Motorola's Razr and Palm and Windows Mobile. In fact, in 2011, Apple's iPhone 4 was delayed at launch, from June to September, so Nokia had even more room to succceed, not less. 

At the end of 2010, Nokia had released its most successful handset - the N8 - and most successful Symbian operating system upgrade, S^3 ever seen, with 4 million N8 sales powering a total of 5 million of the new Symbian S^3 device sales in Q4 of 2010. This hot new flagship phone with its 12 megapixel camera and full touch screen was winning awards globally and still two years later is on the charts as one of today's best smartphones. Yes, running 'obsolete' Symbian. The uptake of N8 was so strong, it set a Nokia-record for biggest jump in Nokia smartphone sales, Nokia smarpthone average sales prices, Nokia smartphone profits, and Nokia profitability! And that N8, was about to see its 'sister phone' the E7 with the QWERTY keyboard slider and even larger screen (at the time, a giant 3.9 inches, far bigger than the iPhone of the time) to be launched in January 2011 (to huge initial success and accolades, especially from China, the world's largest smartphone market).

Anyone who says Nokia was 'losing' the war to Apple and RIM and Samsung and HTC simply is living in the lala-land of fantasy. In 2010, Nokia was more than twice the size of its nearest rivals and grew more in year 2010 than any of its rivals, so the gap to Nokia and the pack chasing it was not closing, it was growing. It so dominated the global smartphone market, Nokia was increasing the gap between it and the rest of the challengers. This is a fact. So, then, why the sudden comprehensive collapse of this massive success? Something happened in Q1 of 2011.

ELOP EFFECT FEBRUARY 2011

Yes, it was the Elop Effect, the costliest management error of all time. We already heard of the Osborne Effect. Before that, lets talk briefly about the Ratner Effect. Ratners was a successful discount jewelry store chain in Britain. Its CEO was asked why do they sell so much jewelry, to which he replied they sold so much because it was crap. He badmouthed his own products. This caused an instant collapse of Ratner jewelry sales, the company went to the brink of bankruptcy and the CEO was fired and the whole retail store chain totally rebranded. Imagine rebranding a retail chain like Ikea or H&M or Walmart or 7-Eleven... Ratners had to invent a new identity and fire the CEO just to survive. Thats the Ratner Effect.

That happened in year 1990. No CEO had since been as foolish to try this suicidal trick to ruining your market, until a certain Stephen Elop, new CEO of Nokia, who decided to pen his infamous Burning Platforms memo - in which he did, yes, call his own products rubbish to the degree they were in his words uncompetitive in the market and in his words had fallen behind such rivals as the iPhone. So this was as if to celebrate the 20 year anniversary of the Ratner Effect, Stephen Elop's 'homage' to that corporate suicide attempt by repeating it. Except that Elop decided to be even more Ratnerish, than Mr Ratner himself. Ratner was telling the truth, when he said his jewelry was cheap because it was crap (it was, a very poor low-grade quality of gold mixture, etc).

Elop called Nokia's products uncompetitive - when they were beating the competition globally. Yes, I know what you think and what you may have read at some very misguided 'tech' press. But we deal in the real world and real numbers here on this blog. Nokia was not losing, far from it. Nokia not only was winning, Nokia was dominating the smartphone market more than Toyota or GM has ever had the luxury of dominating the car market! Just in the world's largest market for smartphones, China - Nokia had over 70% market share! In Africa (a Billion people, thats three USAs) or in the Middle East (another USA by population, but partially overlapping Africa, obviously) Nokia's smartphones had 80% market share. In India, the worlds' second largest mobile handset market even as smartphones were not yet highly sold, Nokia had over 70% market share in all phones.

Nokia was not losing to Apple's iPhone and other rivals, Nokia was more than twice as big as the iPhone in smartphones (thats excluding the real race, where Nokia was 8 times bigger in all types of phones, which is how Nokia's CEO also should have looked at the race, not by Apple's SteveJobs-colored glasses of conveniently excluding 80% of the handset market in 2010). And yes, Nokia's gap to its nearest rivals was INCREASING in 2010, not decreasing. Nokia was beating the rivals like a rented mule. Who looks at the iPad today, in tablets, and says Apple is 'losing' the tablets war? Come on. Nokia sold 103.6 million smartphones in 2010, as per the final revised numbers reported by Nokia in its Quarterly numbers. And Apple sold 47.5 million iPhones. Who was winning? (keeping in mind, both companies did this profitably, and both companies were growing in a healthy way, and both companies had said in 2010 that smartphones were the strategic future of the company's total product portfolio).

Elop took the Ratner Effect, where Ratner honestly called his products rubbish - which collapsed his sales. Elop looked at his winning smartphone products that were increasing the gap to rivals in 2010, and decided to destroy that sales growth, by 'doing the Ratner' - he Ratnererd Nokia's reputation. With the Burning Platforms memo. And don't say it was an internal memo that was leaked, of course it was leaked, Elop released to all staff and when it was leaked, Elop instantly jumped on the media to claim ownership of the memo. He intended it to be released. He was very proud of it back then. (He has since expressed regret and retracted many of the dumbest statements in the memo, and admitted to the Nokia shareholders' conference in April 2012, that yes, the Burning Platforms memo had hurt Nokia smartphone sales - something he now seems to suggest, he had not anticipated at the time?)

Add to that the Osborne Effect. Elop also decided in February to demolish Nokia current strong smartphone sales growth by Osborning the whole line. Note, this has NOTHING to do with the 'decision' to shift away from Symbian - that decision was made long ago before Elop. This was the sudden change, that the new operating system for Nokia's smartphones would not be one made by Nokia, ie Symbian and MeeGo, the new operating system only months from launch, but rather, Nokia would abandon its own operating systems altogether and join the Microsoft family supporting Windows Phone. What was wrong in the Elop Effect is the timing. Elop announced his end of Symbian in February, when the first Lumia smartphones using Windows Phone would not be available until November 2011 (in tiny numbers, in volume starting January 2012). This is the classic Osborne Effect. Announcing a new, incompatible platform that instantly makes current products obsolete. It is what destroyed the Osborne Computer Company. It is what previously helped set the world record in market share collapse in handsets, by Windows Mobile in the immediate previous two years. Before the Elop Effect, Nokia had a market share of 35% in 2010. After the Osborning of his products, up until Windows Phone based Lumia smartphones were available broadly and in volume, ie at Q4 of 2011, Nokia's market share had fallen to 12% !!!! (yes, it was obviouly both the Ratner Effect and the Obsorne Effect, but still..).

CARRIER BOYCOTT AND RETAIL BOYCOTT

Stephen Elop totally voluntarily, with no reason whatsoever, caused the Ratner Effect by spreading lies and falsehoods about how bad Nokia products are. That caused an instant collapse of Nokia retail sales. I was on this blog immediately reporting it, and since Nokia CEO himself has admitted to the Nokia shareholders meeting in April 2012, that Nokia retail is often refusing to sell Nokia branded handsets, even when they have them in stock in the store. Nokia never had this problem before, Nokia was proud of the world's best retail and distribution network in the industry. Immediately after the Elop Effect, Nokia's retail revolted and put Nokia into what I call here a 'retail boycott'. It is not explicitly all stores or all store staff, it is far more random, where given sales reps simply refuse to show or sell (and increasingly store managers even refusing to stock) Nokia phones. Not just smartphones - all Nokia phone sales fell in early 2011 at a Nokia record speed. So the Ratner Effect side of the Elop Effect was clearly a self-inflicted wound. It was like an Olympic biathalon skiier (the ones who ski and shoot) deliberately taking his rifle, and shooting himself in the foot while competing.

Stephen Elop also voluntarily and unnecessarily caused the Osborne Effect in February 2011 by announcing the Microsoft Windows partnership at a time when he had no phones to sell or even to show. This was a timing disaster. Nothing would have prevented Elop from waiting until September to make the announcement, the usual timing Nokia has for a new phone to be launched, about two months before. Then the stores would have been able to sell old stock at some discounts, and used the news of the new phones as big buzz to increase interest in Nokia. The Osborne Effect hit the carrier community more than the retail stores. The carrier handset bosses who make strategic decisions about which handsets to support (and in many Industrialized World countries where handset subsidies are still common - also which of the handsets to subsidise and by how much). When the carriers/operators and their strategic leadership learned in February 2011, that the Symbian line is dead, and that Nokia has suddenly shifted away from MeeGo (even as Nokia had China Mobile as a carrier-partner supporting MeeGo and Nokia had prepared a new MeeGo based smartphone for Verizon - called SeaRay, what Elop later would cannibalize to create the first Lumia phone, the Lumia 800, etc) - they of course instructed the handset buying execs to discontinue supporting Symbian.

That makes 100% sense, if the Nokia CEO announces a change in his strategy, that Symbian is suddenly killed and its replacement, the much-promised MeeGo is also killed, then yes, the carriers will abandon Symbian immediately. It does NOT mean that the carriers will be taking Windows Phone instead, that would remain to be seen. For example Android was already growing strongly at this time and most of the Windows partners had shifted completely or partially from Windows to Android already at this time. The carrier reaction to the Osborne Effect was predictable and obivous, for example Horace Dediu ie Asymco was up on his blog instantly announcing that the Windows decision would collapse Nokia sales.

Note, that the Osborne Effect side of the Elop Effect hit essentially only the smartphone side of Nokia. So it collapsed Symbian sales by Nokia, not really impacting the dumbphone/featurephones sales (which were hit by the Ratner effect). And also Elop's Osborne Effect caused the ending of NTT DoCoMo's loyal support of Symbian in Japan, instantly also collapsing the Japanese Symbian sales overnight. NTT DoCoMo shifted to Android and is now in the process of bringing MeeGo's successor, Tizen based smartphones to Japan in 2013. Elop has since bitterly complained, time and again that the carriers are not supporting his strategy. Before the Elop Effect, Nokia had the largest carrier relations of any handset manufacturer and the carrier relations were the pride of the company, a clear competitive advantage second to none (now that is obviously with Samsung who stole all those contracts and deals and is forging new success replacing Nokia at every turn, such as with Tizen replacing MeeGo)

But yes, there was no need whatsoever for Nokia to make the Microsoft announcement in February, when the first phones weren't due until November. This was a self-induced wound. Its like the skiier in the biathalon now taking his rifle, deciding that the pain in one leg is not enough, and shoots himself in the other leg as well, to really damage his chances of winning this race.

THINGS GOT WORSE WITH SKYPE

The Nokia fall was already bad, then came Skype. This is not about which phone has or does not have Skype. We've had Skype on mobile phones since the middle of hte last decade. Today most smarpthones can have Skype installed and we can bypass the carriers completely if we use WiFi for example. This is not about having Skype on a phone (the early Nokia Lumia phones did not have Skype even). No. This is about who owns and bankrolls Skype. In other words, who keeps Skype alive, to threaten the carriers. Skype is the biggest existential threat to the mobile operators/carriers. Yes, Whatsapp or Blackberry Messenger or iMessage or Facebook are threats too, as what are commonly called OTT providers. Skype is the biggest. Skype has passed 1 Billion registered users (not all using it obviously) and through the Microsoft purchase of Skype in June 2011, Skype is now being expanded to cover all 1.2 Billion desktop/laptop/tablet/smartphone users of Windows and possibly even Xbox and beyond. For context, the world's largest mobile carrier/operator only has about 800 million users. Skype is a gargantuan threat to the carrier community.

Skype is not only messaging or only voice, it is voice, messaging and videocalls. Skype is particularly used in the most lucrative part of mobile operator business, cannibalizing international voice minutes and roaming revenues. Voice calls form 60% of mobile operator/carrier revenues and 50% of profits. SMS text messaging forms 20% of operator/carrier revenues and 45% of profits. So in total, Skype threatens about 80% of revenues and 95% of profits of the carrier community! If voice and messaging traffic disappears to Skype, or the revenues of it fall drastically, meaning the profits in it collapse totally, the operator/carrier business goes bankrupt. No two ways around it. Skype is an existential threat to carriers. For Microsoft to suggest to carriers, let me put Skype on your smarpthones via Windows Phone, is like labeling a bottle of poison as 'tastest great' and asking carriers to drink it all. That is not about to happen.

Stephen Elop testified to the Nokia shareholders meeting on April 2012, that its not that Skype exists which is killing Nokia sales. It is because Microsoft bought Skype - that the very ownership of Skype is what causes the carriers to reject any Windows based smartphones by any manufacturer. Before the Skype purchase, Microsoft had SonyEricsson, Samsung, LG, HTC, Huawei, ZTE and Dell supplying Windows based smartphones. After the Skype purchase, SonyEricsson, Dell and LG quit Windows completely - while HTC reduced its Windows portfolio shifting more to Android - Samsung announced the Tizen OS project - Huawei and ZTE decided not to roll out Windows Phone 8 based smartphones ie the next generation. All who have commented, either officially or indirectly, have said that the carrier demand for Windows ended with Skype. Nobody in the carrier community wants Microsoft anymore. The only reason they say nice things sometimes, and let Microsoft and Nokia occasionally launch a phone model or two is because Microsoft and Nokia are throwing quite literally billions of dollars into the marketing spend. The moment the money stops, the carriers say, sorry, it wasn't that popular after all. This is exactly the pattern we saw in Britain, in Germany, in America, and we will soon see in China too.

Not my words! So testified Nokia CEO Stephen Elop to the Nokia shareholders meeting in April, that the carriers dislike it that Microsoft owns Skype, adding 'of course' as it is so well known in the industry. And he added in a long reply that there are carriers who are refusing to sell any Windows based smartphones and that a year of negotiations with carriers involving Elop himself, and Microsoft, have not convinced any carriers to take the suicide pact of drinking the Skype poison and becoming Microsoft's bitch, sorry I should say slave.

OSBORNED MEEGO TOO

And then Elop himself was not satisfied in the damage done to Nokia smarpthone sales. He had his new smarpthones coming out running MeeGo, the wonderful new OS powering the N9, that has been winning praise the world over, many reviewers actually calling it better than the iPhone - no smartphone had ever gotten that kind of review, certainly none by Nokia before or since; nor of any Microsoft Windows platform either (by any honest tech review, I am ignoring the Microsoft-planted propaganda stories such as their inflated Amazon ratings by the ghost reviewers who were caught being paid to write positive reviews of Windows Phone smartphones). MeeGo had three handsets and a tablet ready to launch in 2011 and many more to come. Nokia actually produced only two, the N9 and N950, both highly beloved by those who have used them. The Nokia N9 won the design award of the year in 2012 by the D&AD awards, considered the Nobel Prizes or Oscar Awards of the design industry (beating Apple among others). This was a high-price flagship superphone that in every side-by-side review beat all contemporaries from the iPhone to the Samsung Galaxy to the Nokia Lumia. If you liked the original Lumia 800, recognize that phone model, originally as the SeaRay was the little sister to the N9, when both were designed to run on MeeGo. After Elop force-migrated the SeaRay to become his first Lumia Windows smartphone, it had lots of its abilities sacrificed, making it a bastard child nobody could love.

So back to the N9. If you manufacture such a highly desirable and excellent device, you roll it out everywhere and let its sales fly (even more, if your smartphone unit is seeing currently dramatically declining sales, your factories run idle and your are bleeding cash). Can you imagine Apple, if it releases a new device that suddenly wins all awards and is called the best in field, by every analysts at the time? Apple would roll it out everywhere and ramp up production. Elop refused to let the N9 be sold in major markets, would not release the N950 for sale anywhere, and to really make sure he nailed every nail into the coffin of the Nokia-owned and developed MeeGo world, he announced one day after the N9 was revealed, that Nokia will not support any further MeeGo devices! He Osborned his own product one day after it was born. Natural born killer, that is what Elop is. He is Dr Kervorkian-Elop, the Suicide Doctor of the mobile industry.

BALLMER THEN OSBORNED LUMIA 1.0

So Nokia had released four Lumia based smartphones by June of 2011 and had deals with AT&T and T-Mobile in the USA, and even the first deal in China with China Unicom. When Steve Ballmer did what he knows best, f*cking his partners. Ballmer announced that Microsoft will not provide a migration path for any first generation Windows Phone prodcuts (on WP 6 and WP 7 versions) into the new Windows 8 ecosystem, where a new Windows Phone 8 OS would be introduced instead. Ballmer looked at his struggling partner Nokia, and all others still left in the Windows ecosystem, and decided to screw them royally. No migration path. Even after the disasterous results of the 'no migration path' decision with WIndows Mobile two years before. That caused the 2012 sales of Lumia of the first generation, what I call Lumia 1.0 to collapse. Nokia Lumia sales had just started to catch some success, and actually doubled from Q1 to Q2. But the Osborne Effect is immediate and dramatic. Nokia's very next quarter that strong growth was traded for instant call. The Lumia sales fell by 28% from Q2 to Q3. This even as Nokia was offering Lumia at fire sale price cuts, literally in some cases sold in the one penny basket (with contract).

So while Nokia's collapse started with the Elop Effect, that damage might have ended during 2011, and with the new Windows Phone smartphones on Lumia and the hot MeeGo based N9 and N950, Nokia could have recovered at least some of the losses, or at the very least, stopped the decline, if Elop was a competent CEO. Instead, after the Elop Effect, we had the Microsoft Skype purchase, that caused carriers to institute a global boycott of all Windows phones by any manufacturers (and many Microsoft partners exited at this point). Then Elop caused yet another Osborning of the MeeGo system. And finally Ballmer Osborned what little success Nokia was trying to build with Lumia 1.0. Now we start, once again, from zero, with Lumia 2.0, running Windows Phone 8, not from a strong Nokia market position of 35% global market. Not even from the far weakened position when Lumia 1.0 was launched, when Nokia held 14% of the market. No, now the Lumia 2.0 is being introduced on an OS platform that still has a global carrier-boycott against Skype against it, with Nokia bringing in 3% market share to support that transition. How is this going to play out?

I am expecting Nokia will not survive and am expecting some rivals to come in, buy Nokia not for the smartphone competence or the factories or carrier relations or distribution or brand strength - but because Nokia has the world's largest patents portfolio in the mobile industry and that alone is worth more than the roughly 10 Billion dollars that is Nokia's market cap value today.

SAME PICTURE WITH SUMMARIES

I promised a variation to the simple picture in the above. Here is the same graphic, but adding the small boxes to describe the main reasons why these seven mobile handsets failed. You may use either graphic or both if you want to report on this story

This graphic may be freely shared

So yes, please do feel free to share this or any other stories, statistics, graphics and quotations in your stories about mobile and tech. And any journalists out there - look at this graphic. Look at Nokia. If this was Apple iPhone or Toyota or Boeing or Coca Cola, setting the world record collapse of its industry (and arguably a world record of any industry) - isn't that a HUGE story to tell? If you are a journalist or blogger, please do your story on this, and report on it. This is the biggest story in tech and some journalist who writes the Nokia Elop story will be winning the Pulitzer. And this story will become a case study at Harvard and all MBA schools, so if you are inclined to write a book - the Elop Effect and Nokia's collapse is a true case study in stupidity and ineptitude. Please do consider researching and writing your story about it.

WORLD RECORD FALL

So thats the story in Balamory. We had seen six incredible collapses in the handset industry. LG lost almost a quarter of its market per year for three years running, but recovered and is now healthy again. RIM and Siemens lost a third of the market per year for three years. RIM was on the ropes but now looks like it will survive. Siemens in mobile phones did not. Motorola and Palm lost four out of ten customers they had, per year, for three years in a row and went bust. And Windows Mobile set the world record for market failure losing literally half its customers per year, on average, for two years in a row, until the system was shut down and totally replaced.

Now we have Nokia under Elop. He looked at Ratner and Osborne, saw how they destroyed their respective companies, and decided he can do better. He combined the two, introduced us to the Elop Effect, that started Nokia's fall. Then partly through Elop's own idiotic decisions and partly due to Microsoft's actions, the problems at Nokia smartphones got only worse. Nokia's market presence has been falling 62% per year and rumors are increasing that Nokia will go bankrupt, or be sold, or both. Elop has acted in desperation moves from selling some of his smartphone factories (where the future of the industry is, that tells you how little Elop believes his strategy can succeed) to selling whole units, to selling some patents to selling Nokia's HQ building in Finland. This has been - and by a huge margin - the biggest fall in the history of the handset industry. Elop has taken growth and shot his company in the foot - twice - and even more since. He has snatched defeat from the jaws of victory. He had the win in his grasp but he voluntarily let it slip away. No, he actually flung it away. Elop has precided over the biggest market share collapse in the handset industry and is definitely the worst CEO of anyone in the mobile industry, ever. I will return with more analysis to this series, to illustrate, Elop is not just the worst CEO in telecoms, he is the worst CEO in any industry, of all time. But yes, keep your eyes on Nokia, we are witnessing a world record being made - a world record in failure. Elop is synonymous with total comprehensive failure.

Elop should do the right thing and resign. But as he is clearly not honorable enough to do that, he should be fired by Nokia Board immediately. You cannot hold onto a CEO who has just made Nokia a laughing stock and produced a world record failure for Nokia's illustrious history. 

PS ELOP OPENED DOOR TO ANDROID TODAY

And perfectly on que, today Elop admits what many analysts have been saying that must be considered as Nokia's Plan B - when Gizmodo asked Elop (on their Spanish site) is Android possible in Nokia's future, the shock response, "anything is posssible". What happened to Microsoft forever? What happened to Elop and Ballmer being BFF's Best Friends Forever? Was it last April when Elop broke the friendship by admitting that carriers hate Skype and won't support Windows Phone handsets by anyone? After that point it seems the two have gone to war. Microsoft announced its tablets and talks now openly of its own smartphones. Ballmer announced Nokia's Lumia phones can't be upgraded to Windows Phone 8. Microsoft suddenly wants to have huge retail space in a massive global series of stores to sell Microsoft products similar to Apple stores. Nokia tries to claim it is still in a special relationship with Microsoft, but Ballmer now shows HTC smartphones and others, no longer Lumias. Earlier we heard Nokia was hiring Android staff, supposedly just to do some mapping app port, but who knows how much Android staff they actually hired worldwide with that pretense. Elop has been getting the Android question for 23 months, literally, 23 months now, ever since he first announced Microsoft. He's always up to now said there is no plan B, Nokia will only go Microsoft. Now, today, Elop suddenly drops the bombshell that yeah, Android is open possibility in the future.

What if Nokia decided last summer that Windows WAS dead, what Elop heard from all carriers and the other handset makers departing the Microsoft ecosystem or giving it only lip service? If Elop and Nokia's Board decided last summer ie 2012, that Windows is dead, and they now need a new Plan B, and Elop had just finished destroying Symbian, MeeGo and Meltemi, and if last summer they decided to quietly shirt to Android, then when might we see the first Nokia Android smartphones? About Christmas 2013. The development cycle in this industry is 18 months from clean table to first handset sold... So having done his share of Osborning, maybe Elop does know that Android phones are coming to Nokia, and now wants to start the buzz and speculation, so that he could then announce them around September or October of this year, to sell for Christmas.. At this moment pure speculation but lets start to monitor the rumor space. 

Lessons from this blog? Its almost exactly parallel to LG. The massively costly misadventure to Microsoft, replaced by the rescue Plan B via Android back to profitability. And the irony? Elop himself sunk Nokia's own Linux based smartphone OS platform, MeeGo and he also sunk the low-cost handset OS running Linux, Meltemi, now to replace Nokia's OS with Linux-based Android, where Nokia is not in any way in control... And irony upon irony, MeeGo legacy living on via Tizen on Samsung and Huawei, as well as via Sailfish used by handset-maker start-up Jolla of Finland.

This was part 3 in the series of Nokia strategy mistakes illustrated by one picture each
The series started with the long blog re-visiting Nokia's SEC filing that identified risks in the Windows strategy (And how bizarrely almost every risk is turning out to actually have happened)
Then in Part 1 of the single-issue blogs, I showed how Nokia unit sales turned from record growth to sudden collapse timed exactly at Elop Effect February 2011
Then in Part 2 I compared Nokia market performance to the two other big smarpthone makers of the past three years, Apple and Samsung.


More stories coming in this series, each one with one picture to showcase one management failure by the world's worst CEO, Stephen Elop of Nokia.

Second picture in the Nokia Destruction Saga - Greatest individual Management Mistake Ever Made - Nokia vs Competition in one picture

I launched yesterday a series of short articles about the Nokia collapse where each blog article looks only at one specific aspect of it, and is illustrated by one picture. Both of these are rare for me, usually my blogs are longggggg and comprehensive (and very repetitive) and text-only, like this about the 20 risks Nokia listed in its Form 20-F which now have all turned out to be true and are haunting Nokia. So today in the Nokiasaga, we look at Nokia's two main competitors in smartphones over the past few years, Apple's iPhone and Samsung's smartphones on several platforms but most famously led by the Galaxy series on Android. So lets start with a riddle:

MANAGEMENT RIDDLE - WHICH OF THESE THREE IS ON THE BRINK OF DEATH?




This graph may be freely shared

So yes, in the picture we have Apple, Nokia and Samsung but not necessarily in that order. Which of the three companies is in deep trouble, so hopeless, its CEO destroys the platform and invites employees to jump off the 'burning pltform'?

Blue company has seen growth in smarpthone sales - so strong growth in fact, that it set a company-record in smartphone unit sales in 2010. It also finds its smarphone unit profitable, in fact it sets a new company record for most profits by that unit, ever, in 2010. Blue company considers itself a mobile company and states that smartphones are critical to its success in the mobile industry.

Lets compare to Green company, which totally differently from Blue company, in 2010, sets a company-record in smartphone unit sales in 2010, and its already-profitable smartphone unit sets a company record for most profits in that unit, ever, in that year. But Green company thinks that smartphones are vital to its future in the mobile industry, which it considers is its primary business.

Well, what of Red company, which totally differing from the first two, actually in 2010, sets a company-record in smartphone unit sales and the profitable smartphone unit also sets a company record for biggest smartphone profits in 2010. Red company however, sees mobile as its future and says that smartphones form the critical part of its success in the mobile industry.

This riddle would not trouble any first-year MBA student for any time at all. The three companies are performing in exactly the same way, reporting exactly the same internal performance benchmarks of excellence. There is no difference between the three. If you have a growing, profitable business, and its profits are growing - you have a successful unit, congratulations. Unless there is any other info to the contrary (illegal dealings like some banks did, or perhaps cancer-causing business like cigarette-sales etc or your technology is polluting or something like that) - these are three HEALTHY businesses of excellent condition. Only a pure madman would terminate any of those three.

Especially if 'smartphones' are the stated future of YOUR company main business. It doesn't matter at all whether you are company Blue or company Green or company Red, if you set company record growth and set company record profits in this smartphone business which is the future of your company industry, then you are SUCCEEDING. DO NOT STOP THIS SUCCESS.

Any first year MBA student gets this. Elop did not. Nokia had a highly profitable and growing smartphone business when Elop joined Nokia in the middle of 2010. That smartphone business grew so well, it set a new Nokia record for growth in 2010, and its profits were growing so well, the smartphone  unit not only set a Nokia record for profits for the unit - the profitability itself grew towards the end of the year. It was only getting better.

Only a certifyable idiot would call this growing business success a Burning Platforms problem at Nokia. Which is before we figure out which of the three actually is Nokia? Who do you think? Apple must be company Blue, right, in 2010, iPhone 4 and so forth, the huge runaway global success that was so the darling of all the techie press with Steve Jobs on every magazine cover holding an iPhone. So which is Nokia, company Green or company Red. How was Samsung doing in 2010? When did the Galaxy launch?

Actually Apple is not company Blue. Nokia sold 28.6 million smartphones in Q4 of 2010, thats the blue line. Nokia is company Blue. For the full year 2010, Nokia sold 103.6 million smartphones according to the latest Quarterly data as reported by Nokia. Apple is company Green, the middle line, and as we know, Apple sold 47.5 million iPhones in 2010. So company Red is Samsung which sold 24.0 million smartphones in 2010. Nokia in smartphones was literally more than twice as big as Apple and more than four times as big as Samsung in 2010.

TWICE AS BIG AS NEAREST RIVAL

This is incredibly rare. I have to emphasize this point. Toyota has most of the recent years been the world's biggest car maker. GM ie General Motors of the USA has been in most of the other recent years. When was Toyota last so dominant in its industry, that it was twice as big as GM - or any other rival? Try 'never'. Yes, Toyota the car giant, has NEVER been twice as big as its rivals. How about GM? When was GM last twice as big as its rivals? NEVER HAPPENED. Volkswagen? Never. Fiat? Never. Nissan? Never. Renault? Never. 

What of the PC industry? HP is currenly the world's biggest PC maker by one analyst house and Lenovo is the biggest by another expert's opinion. When was HP last twice as big as its nearest rival? Never. What of Lenovo? Never happened. Dell, surely Dell at one point? Nope. How about Apple? It was once the world's biggest PC maker in the era of the Apple 2, but even then it was not twice as big as its nearest rival. IBM? Never in the PC era. Toshiba? Compaq? Acer? Siemens? Asus? Never never never never and never.

Can you understand how rare - and massively dominating - such a position is, when you have the luxury of being TWICE as big as your nearest rival. Nokia was MORE than twice as big as its nearest rivals. So yes, Nokia is company Blue and not only is it setting Nokia records for new sales per year, and Nokia records for profits in the smartphone unit, Nokia is so utterly towering over its rivals, that almost any major tech company CEO would jump to take that market position in a second. If you TOWER over your rivals, and you are setting records in growth and profits, you are the hero and this is the goose that lays the golden eggs. You do not shoot this goose, in the face, like Dick Cheney.

GREW FASTER THAN RIVALS

Now the most astonishing part. Here is actual sales for year 2009 and 2010 and the absolute growth for Nokia smartphones, Apple iPhones and Samsung smartphones. Look at the amount of growth in 2009-2010

COMPANY . . . SMARTPHONES 2009 . . . SMARTPHONES 2010 . . . GROWTH 2009-2010
Nokia . . . . . . . 67.8 million . . . . . . . . . . . 103.6 million . . . . . . . . . . . 35.8 million
Apple . . . . . . . 25.1 million . . . . . . . . . . . . 47.5 million . . . . . . . . . . . 22.4 million
Samsung . . . . . 7.0 million . . . . . . . . . . . . 24.0 million . . . . . . . . . . . 17.0 million
Source: Company data
This table may be freely shared

The gap between Nokia and its rivals was not closing in 2010, it was GROWING. Nokia grew more than its rivals. Nokia smartphones unit was growing more than Apple iPhone or Samsung's smartphone unit. Remember, these are absolute numbers, don't be fooled by the propaganda and spin-doctors, whether at Apple, Microsoft or Nokia who may talk about 'growth rate' as a percentage. The growth 'rate' measure is mathematically skewed always to show the smallest rival to seem to have the biggest rate, when in absolute terms it might not be so. For real competition, real growth, you have to always compare by absolute numbers.

Let me show by simple example. If you grew your 'number' by 20, and I grew that same 'number' by 10, you grew more. This could be smartphone sales. It could be our bank accounts. It could be Olympic polevault jumping heights or whatever. You grew twice the amount I did. Now lets show how 'growth rate' can distort the reality. If you were the biggest at 200 measures (in smartphone sales or bank account balances or whatever) your addition of 20 was only 10% growth rate. But if I only started from 20, a far smaller starting point, and added only half what you did, ie 10, my growth rate is still 50% - a number 5 times bigger than your growth 'rate'. The growth 'rate' number is misleading when comparing rivals of different size, but the absolute growth number is always correct.

Apple grew in 2010 by 22.4 million smartphones. Samsung grew in 2010 by 17.0 million smartphones. Nokia however, grew by a massive 35.8 million smartphones, ie by far the biggest growth. The gap between Nokia and Apple was not shrinking in 2010, it was growing. NOKIA WAS NOT LOSING TO THE iPHONE - NOKIA WAS WINNING. (I know it sounds so totally 'counter-intuitive' and surely every news article you read at the time suggested Nokia was doing a death-dance, but I don't deal with fantasies and imaginariums here. If you want to believe in the Tooth Fairy and the Easter Bunny and any myths that Apple was growing faster than Nokia in 2010, enjoy your delusions up there on whatever planet you live on. Here at the CDB Blog we deal only with the hard facts, not entertaining myths). The reality is - those are actual reported numbers by Nokia and Apple direct from their quarterly results. Like Bill Clinton said, its just math. If you live on Planet Earth, your reality will tell you, Nokia grew 35.8 million in 2010, in smartphones, more than Apple which only grew 22.4 million. And as Nokia already was more than twice as big as Apple, and Nokia already was profitable, and Nokia's profits were growing, this the very definition of winning. Nokia was winning the smartphone wars against Apple's iPhone in 2010. The math is undeniable.

Same is true of Nokia vs Samsung. Nokia was more than twice as big as Apple and more than four times as big as Samsung in smartphones - an the gap was only growing larger, in Nokia's favor. This, while Nokia's smartphone unit was profitable, and producing ever bigger profits.

If you suggest Nokia is somehow on a dying platform, ie 'burning platform' on fire, and it must be terminated as the loser - it is like today, if Apple looked at the massive dominance of the iPad over the Kindle and Galaxy Tab and other tablets, suddenly said, hey, we are losing, lets abandon the iOS platform for the iPad, lets switch to the smallest tablet platform we can find - ironically yes, Windows 8. If Tim Cook suggested that today, he'd be burned on the stake and Steve Jobs would turn in his grave. For Nokia to look at the smartphone wars in 2010, find itself more than twice as big as its nearest rival, growing faster than the competition, in a highly profitable business, setting new Nokia records for profits (with plenty of hot new smartphones coming down the pike too, for early 2011 launch) - only a complete lunatic, a Microsoftian Misguided Muppet could write a memo suggesting the Nokia smartphone platform was 'burning' and Nokia had to jump off it.

ELOP EFFECT

Yet, that is bizarrely, unbelievably, what Nokia's new delusional CEO, Stephen Elop did (and how on earth could he have tricked Nokia's Board to believe this fairy tale, who knows?), in what will go down as the costliest and maddest, most destructive management decision of all time. The Elop Effect. Elop wrote his Burning Platforms memo, which caused what is commonly called the Ratner Effect, and then compounded that with the sudden announcement of the Microsoft partnership while having no phones to sell - but collapsing instantly current Nokia Symbian based smartphone sales due to what is called the Osborne Effect. Nobody has ever tried these two self-destructive management mistakes together - until now. The Osborne Effect bankrupted the Osborne computer company while the Ratner Effect nearly did the same for the Ratner jewelry company (which only survived by firing its CEO and rebranding). Elop Effect combines those two suicidal management actions into this, the worlds' most destructive management mistake ever, called the Elop Effect. Here is what happened to Nokia's record-setting domination and growth, instantly after the Elop Effect. Compare how the rivals did under the same period:




This picture may be freely shared

Yes, this is the full picture of the earlier one we saw, the riddle. Now I have identified Nokia as the blue line, Apple as the green line and Samsung as the red line. You can also see where the Elop Effect happened and what happened to Nokia smartphone sales instantly after that.

Nokia's smartphone unit was instantly plunged into loss-making. Nokia issued a profit warning only weeks after this new strategy was announced and Nokia's smartphone unit has produced an ever-increasing loss ever since that day. In the latest quarter for which we have data, Q3 of 2012, Nokia's smartphone unit was generating a loss of 48% per smartphone it managed to sell. The sales have collapsed so comprehensively, Nokia went from 29% market share to under 3% now for Q4, ie very literally, Nokia has scared away nine out of every ten customers it had just two years ago. This is a world record in market destruction of a market leader, in any globally contested industry in human history. No car company has fallen this much this fast, not Toyota with its brakes problems, not Ford when launching the Edsel, not General Motors when it went through its bankruptcy. BP didn't see this rapid collapse of its business with the oil spill, and neither did Exxon with the Exxon Valdez oil tanker disaster. New Coke when launched, a textbook marketing disaster, did not cause this much total market loss for Coca Cola, and then - Coke wisely re-introduced its 'old platform' ie Coca Cola Classic, to regain its market. 

We are witnessing the making of the world record in market failure by a global brand leader. Stephen Elop took the most rare 'sure thing' of utterly dominating his industry, holding victory in his hands, and cast it away. He literally snatched defeat from the jaws of victory. Nokia's brand is damaged, Nokia's dumbphones business is damaged, Nokia's credit rating has had a series of downgrades and is now rated junk by all ratings agencies. Nokia's share price which had been growing 11% since Elop started at Nokia and passed 8.20 Euros in value, is now down to about 3 Euros and Nokia is frequently the target of takeover speculation or bankruptcy.

This decision to judge Nokia's market dominating and massively growing, profitable smartphone business as a 'failure' and 'burning platform' which Elop decided to destroy, has to go down as the worst management mistake of all time, and yes, worse than New Coke. As this was Elop's idea, his decision, his communication and his strategy and his execution - this is obviously Stephen Elop's personal management mistake. Thus Elop is the most incompetent CEO that has ever held corporate office. Having set the world record for management failure, Elop is thus, the world's worst CEO of not just technology or of last year but yes, when you set the world record for market self-destruction you are the worst CEO of all time. Stephen Elop, do the right thing and resign, now!

I will return with more analysis of Nokia's plight with more pictures soon. 

Picture Tells it Better - first in series of Nokia Strategy Analysis diagrams, how Nokia smartphone sales collapsed

So yes. Yesterday I wrote the long blog where I only focused on Nokia's own risk assessment, in the SEC filing Form 20-F for the NY Stock Exchange from March 2011. And I found 20 major risks that had come true, and why Nokia's Windows Strategy is utterly failed and doomed. But its a very long tedious blog. Now I will embark on a series of single-topic blogs about the Nokia strategy failure, illustrating each failure by one graph and related stats and/or analysis.

Lets start with the obvious. How did Nokia's strong smartphone unit sales growth turn suddenly, instantly, into a suicidal collapse? This is how it happened:




This graph may be freely shared

Note how Nokia had steady growth from each year-half to year-half. Here is the data by year:

NOKIA ANNUAL SMARTPHONE SALES BEFORE AND AFTER ELOP EFFECT
Year 2009 . . . . 68 million smartphones
Year 2010 . . . 103 million smartphones
Year 2011 . . . . 77 million smartphones
Year 2012 . . . . 35 million smartphones
(Year 2013 . . . . 25 million smartphones, TomiAhonen Estimate)
Source: Nokia Quarterly Data up to Q3 2012, after that TomiAhonen Consulting Estimate
This table may be freely shared

Nokia smartphone sales grew 53% from 2009 to 2010, until they turned instantly into catastrophic decline. From its peak sales in Q4 of 2010 when Nokia sold 29 million smartphones, exactly 12 months later that was down to 14 million per quarter - a fall of half, and now for Q4 of 2012 we expect sales at the level of about 7 million (my forecast is 6.8 million) which is again a collapse of half in just 12 months. Never in the history of mobile phone handsets, has any leading brand fallen this fast, not Siemens, not Palm, not Motorola. This is a world record collapse of a market leader. Bear in mind, while this happened, the global smarpthone market grew by 50% in 2011 and 40% in 2012. Nokia was the only major smartphone maker to actually see decline in unit sales while the industry grew so strongly over the past two years.

The Nokia strategy in 2010 had the industry-leading growth in absolute numbers, Nokia smartphones grew in unit sales more than Apple's iPhone or Samsung's smartphones or RIM's Blackberry. Nokia was also profitable doing this, and Nokia profits were increasing.

Every published mobile industry expert organization who made a Nokia-related forecast during 2010 was convinced that Nokia would continue as the world's largest smartphone maker into year 2011 and 2012 - that ws the consensus view, not one dissent! And every one of those industry experts, when considering Nokia using Symbian and MeeGo based smartphones, projected strong GROWTH in Nokia smartphones through 2011 and 2012. Every one of those experts was convinced that still today at the end of 2012/start of 2013, Nokia would be safely the world's largest smartphone maker. (that is the blue dotted line in the diagram)

That was before the Elop Effect happened in February 2011, and CEO Stephen Elop's ill-advised Microsoft strategy that caused instant Ratner Effect and instant Osborne Effect, which collapsed Nokia smartphone sales and plunged Nokia's smarpthone unit into ever bigger loss-making from which Nokia has not recovered. In fact, by Q3 of 2012, Nokia was reporting a massive 48% loss per smartphone sold, while the smartphone sales were vanishing.

When Elop announced his new strategy, he did not promise the previous growth rate of Symbian/MeeGo. But Elop did promise his new Windows strategy would achieve a 1-to-1 transition from Symbian to Windows Phone (that is the horizontal orange line in the diagram). His strategy had a two-year time span. That is now coming to a close on 11 February, 2013. So for Elop to 'achieve' his stated strategy, he should be able to deliver about 103 million smarpthone sales per year, now in 2013, all those migrated from Symbian to Windows Phone. In 2012, Nokia only managed to sell 35 million smartphones. That is likely to still fall further in 2013, to about 25 million for the full year, and about 2.5% market share. Nokia held 29% market share when this mad Microsoftian Misadventure was announced two years ago. This is comprehensive strategy failure.

Obviously, if you as CEO introduce a strategy that results in a world-record collapse in your market, then your strategy has failed and you have presided over a world-record in management failure. That means, obviously, that you as CEO are a total failure. Arguably, a world-record fool as CEO (but we'll get to that, one picture cannot yet prove Elop is the worst CEO of all time, although this first picture gives him a strong start in that race). And yes, Nokia's Board is complicit in this too - for them to tolerate the Microsoft Muppet and the Mad Microsoft Misadventure, the Board is also incompetent (or worse, in collusion with the delusional CEO) and must be fired.

I will return with more pictures and analysis of Nokia's smarpthone strategy fiasco in the coming days and weeks. 

UPDATE - second picture in this series is about Nokia and competition, and how Apple's iPhone and Samsung branded smartphones did in the race against Nokia smartphones under Elop. See here Greatest Individual Management Mistake Ever Made - Nokia vs Competition in One Picture. 

How Do You Know If Your Strategy Has Failed - The Nokia Form 20-F Submitted to the NY Stock Exchange - Elop, your two-year experiment has failed and so have you

If you really want to cry about how badly Nokia has been mismanaged, go and re-read the Form 20-F that Nokia filed shortly after Nokia's new CEO Stephen Elop announced his surprise strategy and turned the strongly growing, profitable, market-dominating handset maker into the diminishing, loss-making, loser it is now. Oh? You didn't read the Form 20-F which Nokia Corporation filed with the USA Securities and Exchanges Commission on 11 March, 2011? I did. At the time I remarked how many of the possible problems that Nokia warned might come true, I was in fact already convinced would also come true, and now we see from the evidence, that they also have indeed come true.

So? If we want the truly honest measure of Stephen Elop's CEO tenure, his radical strategy, and measure is it working or not - this is Nokia Corporation's own statement to the USA Securities Exchange Commission and the New York Stock Exchange, about its radical new strategy, and what all might go wrong. This is not my suggestions of why or how we should measure Nokia's success or failure, this is Nokia's own statement, issued during Q1 of 2011, after the new strategy was unveiled on 11 February 2011. Please also note, this is a very long article, that is not my fault, I only selected a FEW of the main risks as identified by Nokia in the Form 20-F. If Nokia had decided not to pursue such a risky strategy two years ago, I wouldn't need to write such a long article. This whole article is only around Form 20-F and the risks that Nokia itself identified as threatening the Windows strategy. Yes, there are plenty of OTHER mistakes that Elop has also done since then, but we will limit this blog only to Form 20-F. These are the problems that Nokia itself identified. So get yourself a cup of coffee before you embark on this long blog but if you are interested in can Nokia (or Elop) survive, read this blog and how Nokia itself identified its risks with Microsoft.

FORM 20-F STATES CLEARLY  WINDOWS STRATEGY IS FULL OF RISKS

In the filing, Nokia Corporation told us how long the transition to the new strategy would take "We expect the transition to Windows Phone as our primary smartphone platform to take about two years." The exact two-year milestone will be on 11 February, 2013, in about 40 days from today. I expect many business, telecoms and strategy writers to re-examine the Nokia failure in its Microsoft strategy at that point. Lets now use Nokia's own standard for how to measure success or failure of its strategy, as Nokia told us in the Form 20-F.

Nokia warned that if the Nokia strategy with Microsoft were to fail, most likely Nokia would then become a low-margin box-mover basic handset maker (hey, thats what I said on Twitter within minutes of this strategy first revealed). This is what Nokia wrote:

Our proposed partnership with Microsoft and change in our smartphone platform strategy are subject to certain risks and uncertainties, which could, either individually or together, significantly impair our ability to compete effectively in the smartphone market. If that were to occur, our business would become more dependent on sales in the mobile phones market, which is an increasingly commoditized and intensely competitive market, with substantially lower growth potential, prices and profitability compared to the smartphone market.

So please understand - Nokia explicitly said if this Microsoft strategy were to fail in the two years period, that would leave Nokia as only a dumbphones-maker of very low-margin business. That this strategy in effect threatened Nokia's future as a smartphone maker. If the Microsoft strategy were to fail, Nokia would become a 'box mover' like Dell is in the PC market. Very low-margin, cheap dumbphone maker.

Lets get back to Form 20-F. After that, Nokia listed its perceived risks. And there were many. Just general risks related to the Microsoft strategy produced 21 itemized risks, before Nokia went onto specify hundreds more risks as they related to the Symbian platform, the competitive 'ecosystem', differentiation, speed of innovation, employee morale, etc etc etc. I am not going to take every single item from the risks assessment, it would else produce the longest blog I've ever written, and even on the holiday break, I am not about to do that amount of writing. I will take some of the most obvious risks, as specified by Nokia, and see how they panned out. Remember readers, this is not somehow 'Tomi Ahonen's petty list of complaints'.. this is Nokia's official testimony, in its official filing to the SEC and NYSE about what may cause the Nokia Windows strategy to fail. This is Nokia's own published set of 'failure standards'. Nokia told us how to measure failure (or success) with its strategy. This is directly from the Form 20-F in the explicit section 3D Risk Factors, where Nokia wrote in bold:

Our proposed partnership with Microsoft may not succeed in creating a competitive smartphone platform for high quality differentiated winning smartphones or in creating new sources of revenue for us. (bold in original)

WINDOWS WAS RISKY PLATFORM OF TINY SCALE

Nokia then gave a lot of text and explanation about the changes in the smartphone market, and then listed explicit problems with this lead in: "Our proposed partnership with Microsoft and change in our smartphone platform strategy are subject to certain risks and uncertainties .. those risks and uncertainties include the following:

• The Windows Phone platform is a very recent, largely unproven addition to the market focused solely on high end smartphones with currently very low adoption and consumer awareness relative to the Android and Apple platforms, and the proposed Microsoft partnership may not succeed in developing it into a sufficiently broad competitive smartphone platform.

So now we know. When this strategy was announced, the Windows Phone platform had a 2% market share and as of the latest quarterly data reported, all Microsoft based smartphones, running both Windows Phone and its older Windows Mobile version, had a combined market share of 4%. Today, latest data from Q3 reveal that Windows on all platforms combined had a market share of under 2%. Latest market data from selected major markets suggests Windows Phone sales have suffered even more, and total Windows Phone market share for Q4 may be rounded off to 1%. The Windows Phone operating system was already sold and in production when Nokia selected this platform. Since then it has shrunk in size. Nokia started selling Lumia based smartphones running Windows Phone more than a year ago, so Nokia has now had more than a year of contributing to the Windows Phone success. When this strategy was announced, Nokia had 29% market share on its own operating systems. They are now down to 2%. So Nokia has sacrificed 27 points of market share of its own smartphone customers and that has not moved the Windows Phone share up even one point of market share. This after more than a year of Lumia sales. Absolutely, concretely, beyond a shadow of a doubt, the Windows Phone startegy for Nokia has failed. 

Then on the price. Windows Phone was and still is focused only on the 'high end' of smartphones. When this strategy was announced, Nokia average sales prices of its smartphones was 152 Euros (190 US dollars). Informa has just reported that for year 2011, the average price of smartphones globally was 188 US dollars. Earlier, Deloitte had calculated that 300 million ie 41% of all smartphones sold in 2012 will cost under 100 US dollars. Nokia's Symbian was well suited to provide smartphones into the low-cost segment. But Nokia's Lumia series, the Windows Phone based smartphones had an average sales price of 160 Euros (200 US dollars) and the first set of the newest 'second generation' Lumia smartphones that run Windows Phone 8 have an average price of 570 Euros (717 US dollars). Nokia knew when announcing this strategy that the prices of Microsoft based smartphones would be a risk. We have now seen, that as the market has moved down in price, Elop's strategy has pushed Nokia into the implausible business case level. The Windows Phone Lumia series is priced far too high to sell in the volumes Nokia needs. Which is why for each release, almost instantly, within weeks of launch, the Nokia prices for Lumia handsets have collapsed. So happened a year ago now, with Lumia 800. So happened with the Lumia 900 last spring. So happened already now for the brand new Lumia 920!! The prices have been slashed because nobody wants these Lumia phones and Nokia has to move undesirable phones so they slash prices.

WINDOWS LIMITED NOKIA ABILITY TO DIFFERENTIATE

• Our ability to innovate and customize on the Windows Phone platform may not materialize as expected to enable us to produce smartphones that are differentiated from those of our competitors.

Yes. So far we've seen 9 Lumia models, which are all near clones of each other, and arguably, all are clones of the original iPhone, via the iconic design of the Nokia N9 that runs on MeeGo. There are no premium camera models like has been famous for ever sinc the award-winning N93 with real optical zoom, or the award-winning N8 that had a 12 megapixel camera, real Xenon flash, etc, that ran on Symbian; or now, the award-winning 808 Pureview, which has the monster 41 megapixel camera, real Xenon flash etc, that also runs on Symbian. Even the top Lumia 920 does not even match the N8 for camera sensor size, with Nokia's top flagship severely regressing to 8 megapixels, the level where most rivals are, and leading rivals have long since moved to bigger camera sensors. Nokia has a strategic partner in Carl Zeiss and yet under Elop's Microsoft strategy, Nokia's Lumia series has been unable to capitalize on Nokia traditional strengths, and abilities that Nokia customers expect. A 2012 survey of Nokia smartphone buyers by Nokia, published at Nokia's website, revealed that when coming to replace their phones in 2012, the number 1 request Nokia loyal existing customers had was the camera. And what do we now see? Samsung has taken the top cameraphone specs crown with the brand new Galaxy Camera. Why, if Nokia knows this from internal consumer surveys, would Nokia voluntarily abandon this competitive advantage - to Samsung no less?

Similarly QWERTY inputs. Nokia invented the full QWERTY input method for smartphones long before there was a Blackberry. The last data Nokia revealed before Elop came to run the company, was that for the year 2009, 27% of Nokia smartphone buyers selected the E-Series which was essentially all QWERTY handsets (there also were other Nokia smartphones with QWERTY keyboards). So Nokia has millions upon millions of satisfied loyal customers who want a smartphone that is differentiated from the iPhone and some of those love the real physical QWERTY keyboard. Nokia even sold a separate Bluetooth-based foldable QWERTY keyboard for those who wanted to have a larger keyboard for their smartphones. Bizarrely, the Lumia series does not even support the foldable Bluetooth keyboard and not one of the nine Lumia models released so far has a QWERTY variant. Elop has admitted that there have been 'debates' inside Nokia whether to release QWERTY variants. As we know every major Nokia flagship recently on Symbian and MeeGo have had QWERTY variants like the E7 to the N8 and the N950 to the N9, but there is none for Lumia, we can see which side of the 'debate' Elop has been on. He is a moron. Nokia's own customers beg for QWERTY variants, yet the Microsoft Muppet won't give us any on Windows Phone. And worse - if he won't do one on the Lumia series, then what moment of madness was that 'decision' not to sell the N950 with MeeGo, after the N9 was winning all the awards and had massive sales success a year ago? Why not then release at least the N950 on MeeGo if Elop didn't want to do a Windows based QWERTY Nokia superphone? Idiot!

Nokia was able to differentiate very broadly with its Symbian OS, and the Maemo and MeeGo advanced smartphone operating systems. But with Windows, Nokia has not been able to differentiate. Not against other platforms, not even against other smartphone makers on Windows Phone platform. Nokia's Microsoft strategy has comprehensively failed in a critical ability for Nokia to build scale and volume and win market share, because the Lumia series and Windows Phone do not allow Nokia to differentiate. Nokia's ability to differentiate was promised to increase with Windows. It has been severely curtailed instead. Early Windows Phone models did not even support NFC, a feature Nokia had started to roll out on its top end Symbian and MeeGo devices. Who only increases their differentiation, across Android, bada and Windows platforms? Samsung thats who? Differentiation and a broad product portfolio gives you reach and scale. Nokia knew that before Elop came to town. But Elop has refused to allow that now. Elop only wants to make i-Phon-a-Clones. Before Elop, Nokia never had Apple iPhone-envy. Elop contaminated Nokia and now it seems the Lumia series is all but cheaper-looking plasticky iPhones.

WINDOWS IS SIMPLY NOT COMPETITIVE IN GLOBAL MARKET

• The Microsoft partnership may not achieve in a timely manner the necessary scale, product breadth, geographical reach and localization to be sufficiently competitive in the smartphone market.

Scale? Nokia sold 103 million smartphones in 2010. That refleced a growth level of 53% from 2009. Every single analyst who during 2010 published a forecast for Nokia performance into 2011 and/or 2012, said with total confidence that Nokia's then-current Symbian (and MeeGo) based strategy would yield solid growth into 2011 and 2012, and every single published handset industry analyst was convinced Nokia would remain the world's largest smartphone manufacturer in 2011 and 2012. Every single analyst was convinced. The scale Nokia was expected to hit would be about 130 to 140 million smartphones for 2011 and 170 to 200 million for 2012. That is the scale that we are looking at, that Nokia was prepared to support, with the world's largest factory capacity to produce smartphones, spread across 7 factories around the world, including the world's largest handset factory facility, in China. Nokia had the massive sourcing ability to buy components at bulk discounts. Those all depended on Nokia's ability to continue to grow. 

Instead of Nokia growing from 103 million in 2010 to about 135 million in 2011 and  about 185 million now in 2012, what happened, right after Elop announced his Microsoft strategy, Nokia smartphone sales collapsed to 77 million in 2011 and 35 million in 2012 and something like 20-25 million in 2013. Nokia has absolutely failed to "achieve in a timely manner the necessary scale to be sufficiently competitive in the smartphone market.:." In the latest Q3 results, Nokia's smartphone unit generated a 48% loss per every smartphone it managed to sell! 48% loss per handset. When Elop announced this strategy, Nokia's smartphone unit was healthy and reported growing profits from 9.3% profitability before he took over, to 12.5% in the first full quarter he was in charge. Elop's strategy has exchanged 12.5% profit for 48% loss. This is total comprehensive failure, and it stems from the fact that his mad strategy cannot sustain the level of volume that Nokia needs just to remain viable.

USA FAIL AT EXPENSE OF CHINA SUCCESS

• The Microsoft partnership may erode our brand identity in markets where we are strong and may not enhance our brand identity in markets where we are weak. For example, our association with the Microsoft brand may impair our current strong market position in China and may not accelerate our access to a broader market in the United States.

Duh! China is the world's largest smartphone market, accounting today for almost a third of all smartphone sold. Nokia had over 70% market share in 2010 in China's smartphone market according to Canalys and 6.8% market share in the USA smartphone market in 2010 according to Kantar. After the Microsoft strategy was announced in 2011, Nokia's China market share has fallen to 6% according to Canalys Q2 data for China, and was that achieved with any corresponding growth in the US smartphone market? Kantar reports that Nokia's Symbian and all Windows Phone (which includes HTC, Samsung and other WP manufacturers) total market share in the US market is now 2.9%. The Chinese market was sacrificed achieving a LOSS to the USA market in return! Yes, the numbers do not lie. Before Elop's Mad Microsoftian Misadventure, yes using 'obsolete' Symbian, Nokia had nearly 7% of the USA smartphone market and over 70% of the far bigger Chinese smartphone market. Since then the US market has grown a little but the Chinese market has grown massively. And in both markets Nokia has collapsed. This is a totally, comprehensively failed strategy. A December survey of Chinese online sales found that Nokia's Symbian based N8 and 808 Pureview were among the top 5 besteselling Nokia smartphones and the N9, which runs on MeeGo was the second bestselling Nokia smartphone in China. Why is the idiot CEO forcing the utterly undesirable failing Windows based smartphones to the market where Nokia's Symbian is well entrenched and MeeGo is beloved?

NOKIA ABANDONED ITS ADVERTISING UNIT

• We may not succeed in leveraging the Microsoft advertising assets to build and achieve the required scale for a Nokia based online advertising platform on our smartphones that generates new sources of advertising based revenue.

Among his desperation moves, Elop sold the Nokia advertising unit, while global mobile advertising is doubling year after year after year, and Nokia had one of the most used mobile advertising platforms of the planet.

WINDOWS DEMOLISHED ANY PROFITS IN SMARTPHONES

• We may not succeed in creating a profitable business model when we transition from our royaltyfree smartphone platform to the royaltybased Windows Phone platform due to, among other things, our inability to offset our higher cost of sales resulting from our royalty payments to Microsoft with new revenue sources and a reduction of our operating expenses, particularly our research and development expenses.

Duh. Nokia generated 12.5% profit per smartphone sold when Elop was only executing the Symbian/Maemo/MeeGo based strategy he was given. After he foolishily abandoned that, today Nokia's smartphone unit reports 48% loss generated per every smartphone sold. Yes, its clear, the new strategy was not able to create a profitable business model. The new strategy has comprehensively failed. Spectacularly failed. I cannot think of any industry ever, where a global market leader went from 12% profits to 48% losses in a period of less than two years (while the industry itself continues to be highly profitable, so excluding world economic downturns, wars, natural disasters etc)

Note - this is EXACTLY the same problem with Windows that has previously been observed by LG, Motorola, SonyEricsson and HTC - that out of all smartphone operating systems and 'ecosystems' the Microsoft one is the only one that is always the unprofitable one, and anyone who attempts to use Windows as the primary operating system will only be plunged deeper into losses (as observed by LG, Motorola and HTC, all who after attempting Windows as the main OS, soon thereafter shifted their majority (and then all) smartphones to Android instead. Windows is known to be the loss-making platform. Everybody knows this. Only a Microsoftian Madman would insist, after two years of damage and devastation - and ever increasing losses in the smartphone unit - come on, Nokia was generating increasing profits at 12.5% exaclty two years ago using Symbian, now when roughly half of all smartphones run Windows at Q3, Nokia produced 48% loss per every smartphone sold.

PATENTS

• We will need to continue to innovate and find additional ways to create patentable inventions and other intellectual property, particularly as we would no longer be developing the core platform technology for our smartphones under the proposed Microsoft partnership. As a result, we may not be able to generate sufficient patentable inventions or other intellectual property to maintain, for example, the same size and/or quality patent portfolio as we have historically.

If Patents are so valuable, why is idiot-CEO Elop selling key patents to trolls (and is it not a criminal offense for a Nokia CEO to gift Nokia patent rights to Microsoft when selling some of those rights to the patent trolls. Elop must be investigated for this and any illegal patent-transfer contracts must be revoked)

OPERATORS, DISTRIBUTORS

• The proposed Microsoft partnership may cause dissatisfaction and adversely affect the terms on which we do business with our other partners, mobile operators, distributors and suppliers, or foreclose the ability to do business with new partners, mobile operators, distributors and suppliers.

Touche! Nokia expresses in bold in Form 20-F how vital this is for Nokia survival. Nokia writes:

Our ability to maintain and leverage our traditional strengths in the mobile product market may be impaired if we are unable to retain the loyalty of our mobile operator and distributor customers and consumers as a result of the implementation of our new strategy or other factors. (bold in original)

Nokia further explains how much this is a true competitive advantage and key to Nokia long-term market dominance:

We have a number of competitive strengths that have historically contributed significantly to our sales and profitability. These include our substantial scale, our differentiating brand, our worldclass manufacturing and logistics system, the industry’s largest distribution network and our strong relationships with our mobile operator and distributor customers. Going forward, these strengths are critical core competencies that we will bring to the proposed partnership with Microsoft and the implementation of our Windows Phone smartphone strategy. Our ability to maintain and leverage these strengths also continues to be important to our competitiveness in the mobile phones market. (bolded emphasis added by me) 

As discussed above, however, the proposed Microsoft partnership and the adoption of Windows Phone as our primary smartphone platform are subject to certain risks and uncertainties. Several of those risks and uncertainties relate to whether our mobile operator and distributor customers and consumers will be satisfied with our new strategy and proposed partnership with Microsoft. If those risks were to materialize and mobile operator and distributor customers and consumers as a consequence reduce their support and purchases of our mobile products, this would reduce our market share and net sales and in turn may erode our scale, brand, manufacturing and logistics, distribution and customer relations. The erosion of those strengths would impair our competitiveness in the mobile products market and our ability to execute successfully our new strategy and to realize fully the expected benefits of the proposed Microsoft partnership. (bolded emphasis added by me)

(Wow. This is like text lifted from my blog! I have been writing here until I was blue in the face, how vital it was for Nokia to maintain strong carrier relationships and maintain positive dealer relationships, and I have chronicled here how much Elop's actions have damaged those relationships.)

On May 31, even before the first full quarter of Elop's new strategy was in place, Nokia stunned its investors with a profit warning. Elop admitted being surprised by how much Nokia had been damaged by his statements and Nokia said in its press release on 31 May about the profit warning that the main reasons why Nokia was suddenly unprofitable were:
- the competitive dynamics and market trends across multiple price categories, particularly in China and Europe;
- a product mix shift towards devices with lower average selling prices and lower gross margins

So, as of May 2011, the CEO had seen that his strategy is having severe backlash in China and Europe. At the Q2 results, Elop wrote "In Q2, our immediate action to manage unexpected sales and inventory patterns enabled us to create healthier sales channel dynamics." He also added "Most notably we took action in China and Europe. We have shifted our sales focus and marketing resources more towards retail interactions with consumers. We made changes in certain critical sales management."

CAN ELOP FIX PROBLEMS AT NOKIA?

In the Form 20-F Nokia tells us that the carrier/operator and distributor support is vital for the strategy to succeed. So explicitly, that if operator/carrier and distributor support is lost, the strategy will fail. Then immediately at the first profit warnings only weeks after filing Form 20-F, and then a few weeks later, at the first quarterly results under the new strategy, Elop starts to complain about lack of sales support. But he promised he will fix it immediately. Stephen Elop, CEO of Nokia has identified an existential threat to Nokia's strategy. He has publically committed to fixing the problem with operator/carrier and distributor sales support. He has had 18 months to fix that since. How has Elop succeeded?

Just before he announced his strategy, in Q4 of 2010, Nokia sold 33.5 million handsets in Europe and 21.9 million in China. When Elop reported that his biggest problem driving growing-profits Nokia to sudden loss-making, was China and Europe, for Q2 of 2011, Nokia European sales fell by 45% down to 18.4 million units and China (the world's largest handset market) Nokia sales fell 49% to 11.3 million units. So, Elop announced that he understands the issue and will fix it. Elop was attributed in The Wall Street Journal saying "Nokia needs to streamline its distribution channel and ensure profitability in the region, where local operators such as China Telecom and China Mobile are playing an increasingly active role in determining the range of handsets available."

When the Q2 results were released in July 2011, Elop said "The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 of 2011." So in other words, his strategy stumbled right from the start. The problems ('challenges') were 'greater than expected' already in Q2. So yes, lets now go see how well Elop has fixed these problems 15 months later. As of Q3 results 2012, Nokia sales in Europe have not recovered, not even to the same level. They are now down another 9% to 16.8 million. And what of China, the world's biggest market? The Nokia brand has utterly collapsed, falling another 49% and now Nokia only sells 5.8 million devices in the market that is growing at breakneck speed.

Note - The new Nokia Windows strategy pushed Nokia away from low-cost friendly Symbian smartphones to very high-cost Windows Phones. This bizarre strategy was unveiled when the world market was already going faster to lower-cost smartphones, and right after Elop announced his strategy, his company fell victim to the truth. "Lower average sales prices". Has Elop been able to recover from that since? In Q2 of 2011, Nokia's ASP was 56 Euros. By the end of 2011 (Q4) it was 53 Euros. Now, the latest data we have, in Q3 of 2012 the Nokia ASP is 43 Euros. When Elop announced his strategy, his mix of smartphones (high ASP) out of all handsets was 25%. Now, today, by Q3 data, as the world nears 50/50 split of smartphone migration, Nokia's migration rate from dumbphones to smartphones has regressed towards the lower-cost featurephones, and is only at 7.5% !!! Before Elop took over, Nokia had every single quarter had safely better migration rate from dumbphones to smartphones than the industry average. Every single quarter (and doing that profitably). Now as he pushes Nokia away from smartphones, to dumbphones, Elop is very literally snatching defeat from the jaws of victory.

Most - MOST bizarrely, Nokia had been developing its low-cost smartphone platform, called Meltemi, which was weeks from announcing its first low-cost Nokia smartphones for the Emerging World markets like India, Brazil, Indonesia, China etc - and Elop suddenly cancelled the whole project! This is like if Sony - the master of portable music with the Walkman brand, had observed Apple take big market share with the iPod, and then developed its own MP3 player, and when it was weeks from launch - to truly address the way the market is evolving, the Sony CEO suddenly kills the project. Weeks from launch! Instead Elop is offering even more costly new Lumia smarphones now for Christmas 2012, compared to those from last Christmas. He is like a madman who looks at the world, sees its night time, and decides its daytime and refuses to turn on the headlights of his car. Elop is acting 100% against the best interests of his company, and 100% against the trends of the industry! Elop had 15 months to fix the existential threat to Nokia and has not even stabilized the problem, it just keeps getting worse. Nokia's CEO, Stephen Elop is not trusted by the carrier community/mobile operators & distributors. He has proven to be incapable of rescuing Nokia nor of restoring Nokia's strong carrier relations and distributors.

STAFF MOTIVATION

• The implementation of the proposed Microsoft partnership may cause disruption and dissatisfaction among employees reducing their motivation, energy, focus and productivity, causing inefficiencies and other problems across the organization and leading to the loss of key personnel and the related costs in dealing with such matters.

Yes. Tons have left.

REPLACED BY INCOMPETENT BUT MORE EXPENSIVE MICROSOFTIANS

• We may not have or be able to recruit, retain and motivate appropriately skilled employees to implement successfully the Windows Phone smartphone platform and to work effectively and efficiently with Microsoft and the related ecosystem.

And worse, by allowing relatively low-paid long-term Finnish employees to depart, and attempting to replace them - especially to take jobs at Headquarters in cold Finland - by bringing in experienced West Coast talent with Ex-Microsoft background etc, he is massively adding to the top-level compensation all while replacing competent knowledgable experts with unknowledgable outsiders who clearly do not understand Nokia nor its customers nor its markets.

TABLET MADNESS

• We do not currently have tablets in our mobile product portfolio, which may result in our inability to compete effectively in that market segment in the future or forgoing that potential growth opportunity in the mobile market.

Ah, the tablets madness. Yes, MICROSOFT may want a tablet, it would be suicidally stupid for a pure handset maker like Nokia to launch a tablet PC. The tablet market is very hard to get into, has a totally different resale channel, pricing model, distribution chain and Nokia has zero brand there. For any PC maker like Apple or Samsung, a tablet makes sense. For any pure phone maker like RIM or Motorola - or yes, Nokia, a tablet would be utterly mad - as we can see from how the Blackberry and Motorola tablets have struggled and plunged both companies into losses (killing Motorola in the process and almost bankrupting RIM too).

RATINGS DOWNGRADES NOW JUNK LEVEL

• The assessment of our proposed partnership with Microsoft and new strategy could cause lowered credit ratings of our short and longterm debt or their outlook from the credit rating agencies.

Ah, yes. Moody's, Fitch and Standard & Poors (S&P). Yes. They might lower their credit ratings. At the time this strategy was unveiled, Nokia had emerged from the global financial crisis with a healthy profit-generating business where most of its rivals were producing losses, and the credit ratings agencies liked Elop and his early first five months of management by raising Nokia's credit ratings to one notch below perfect. One notch below perfect. And yes, Nokia warned that this new strategy might cause that sterling credit rating to be damaged. And you know what happened? The credit ratings agencies did in fact - each of them downgraded Nokia - incidentially, citing Nokia distribution and sales as the primary reason at every downgrade. Then they downgraded - each of them - Nokia again, citing what as the reason? Again the sales and distribution problems. And they downgraded Nokia again and again and again, sometimes as severely as two notches at a time, until all three ratings agencies now rate Nokia as junk. Ah. Yes. If you were near perfect by the ratings agencies, and in a period of just over a year, you are downgraded so many times you are now junk - that is total failure of your strategy and yes Elop has precided over the biggest strategic management catastrophy of all time. If this was an earthquake in Japan causing a Tsunami and nuclear evacuation, that would be understandable. If this was an oil spill in the Gulf of Mexico, this kind of a series of ever worse downgrades would be (or could be) understandable. But what happened at Nokia was a totally unnecessary self-inflicted wound to Nokia, by the arrogant, ignorant CEO who refused to deal with reality and continues to live in some parallel universe of delusion in his mind. This series of Nokia downgrades was caused by the Elop Effect, and CEO Elop's inability to stop the sales erosion and carrier boycott. Which brings me to..

CARRIER BOYCOTT

Remember what Nokia testified to the SEC and NYSE in its Form 20-F ? Nokia wrote the following

We have a number of competitive strengths that have historically contributed significantly to our sales and profitability. These include... the industry’s largest distribution network and our strong relationships with our mobile operator and distributor customers. ...Several of (the) risks and uncertainties (of the proposed Microsoft partnership) relate to whether our mobile operator and distributor customers and consumers will be satisfied with our new strategy and proposed partnership with Microsoft. ...The erosion of those strengths would impair our competitiveness in the mobile products market and our ability to execute successfully our new strategy. (emphasis added by me)

At the Q2 results of 2011, how did Nokia report the carrier support of the new strategy? "During the second quarter 2011, distributors and operators purchased fewer of our devices across our portfolio as they reduced their inventories of Nokia devices." (emphais bolding added by me) And specifically smartphones? Nokia announced "the sequential decrease in our Smart Devices volumes was driven by distributors and operators purchasing fewer of our smartphones during the second quarter 2011 as they reduced their inventories of those devices." (emphasis bolding added by me)

So how did Elop manage to fix this? Did he get the carriers onboard to love the Windows strategy? Elop told the Nokia annual shareholders meeting in April of 2012 (as reported by Finland's largest newspaper Helsingin Sanomat, in response to a direct question of does Nokia have a distribution problem, that: "If the operator doesn't want us, it doesn't want us. We will appeal to them with other arguments." (Note, quote is from Helsingin Sanomat, directly quoting Stephen Elop at the Annual Shareholders Meeting). Elop openly admits Nokia has now a severe problem with its operators/carriers and distribution. A year earlier, in Form 20-F, Nokia proudly said it has "strong relationships with mobile operators and distributors" which were the industry-best and a clear competitive advantage Nokia held over all its smartphone maker rivals. 

Now, a year after Elop's strategy, he admits to the Nokia shareholders meeting, that yes, there is such a severe problem with many operators, that some don't even want Nokia, period. That he, Elop, has to now try to appeal to those operators by winning them back. And yes. The Nokia smartphone sales at that time (Q1 data) was 11.9 million units. Now, six months after Elop tries to 'argue' with the operators to win them back, how is he doing? The latest quarter has Nokia smartphone sales (Q3 data) down 47% from that level !!!! Nokia sold 6.3 million smartphones after Elop tried to 'argue' with the operators. He lost half of what little customer base Nokia had left - AFTER he admitted carriers/operators hate his strategy and many are refusing to sell Nokia. He lost almost half his market in the past six months. How incompetent is that?

By the way, the Helsingin Sanomat quotation was MY translation of the actual published Finnish translation from original English as spoken by Elop. The Helsingin Sanomat quote is in fact, a slightly shortened version of what Elop actually said. His full statement has been released in full video and actual transcript. I have not taken the significant point about carriers hating Nokia out of context, but yes, a more accurate full transcript of 12 sentences has been released by Nokia. I won't bother us with the full text here. The point is, that Elop admitted to the Nokia shareholders that many carriers refuse to sell Nokia smartphones now after the Microsoft strategy was released, and Elop admitted that the Microsoft partnership was explicitly the cause of that sales boycott. And more than that, this fact was published (in Finnish) by Finland's largest newspaper reporting from the Nokia shareholders' meeting, and that story was also reported widely by the global press in other languages.

Separately, Finnish biggest TV broadcaster YLE reported that Elop was asked directly about Nokia market share in relation to resale problems (what I have been calling the Nokia sales boycott for now for nearly two years already). Elop's answer, according to YLE was that Elop hoped "that sales staff in retail outlets would offer Lumia handsets to customers asking for a mobile phone." Elop admits to Nokia shareholders on the explicit question, yes there is a retail problem - akin to a sales boycott - where retailers HAVE Nokia smartphones in the store, but are refusing to sell them. Refusing to show Nokia customers those phones when Nokia customers ask for them. This problem has been independently verified by press studies into various handset markets relating to Nokia smartphones overall, and the Lumia series specifically, from Finland to France, from New York to California, from UK to Hong Kong by countless press stories. But the fact was settled by Elop in April 2012, when he openly admitted that in stores where Nokia smartphones were in stock, the sales staff were refusing to show customers Nokia smartphones, even when asked by name!

That was in April 2012, when the latest Quarterly data (Q1) had Nokia still holding 8.1% market share in smartphones. Had Elop been able to fix that problem? He released tons of new Lumia smartphones and lowered prices and massively boosted marketing expenses and added new operators to his distribution since then. But the retail boycott is continuing, or why else is Nokia's market share only six months later (Q3) at 3.7%?

MARKET EROSION IS IRREVERSABLE

• Our mobile operator and distributor customers and consumers may no longer see our Symbian smartphones as attractive investments during the transition to Windows Phone. This would result in a loss of market share, which could be substantial, during the transition and which we may not be able to regain when quantities of Nokia Windows Phone smartphones are commercially available.

Yes, how clear. Nokia smartphones using Symbian had 35% market share in 2010 just before this strategy was announced. The 'mobile operator and distributor customers' did not indeed support the 'Osborned' operating system. By the time Lumia smartphones were launched one year ago for Q4 in 2011, the Nokia smartphone market share had plummetted to 14%. To call the loss of six out of every ten customers you had in just nine months as "loss of market share which could be substantial" is a severe understatement.

Has Elop's wonderful Windows strategy now managed to regain any of the lost 19% of market share? Hardly. Since Q4 of 2011 when Windows Phone based Lumia smartphones were launched by Nokia, the market share has continued in total freefall and was now 3.7% by Q3 of 2012.

THE MIGRATION DID NOT SUCCEED

• We may not succeed in transitioning over time our installed base of Symbian owners to our Windows Phone smartphones.

Yes. That is now obvious. After Lumia launched in Q4 of 2011, Nokia has not recovered ANY of its past 35% market share. The attempts have failed totally to try to "succeed in transitioning over time our installed base of Symbian owners to our Windows Phone smartphones."

After Lumia was launched in Q4 of 2011, this is how poorly Nokia has "succeeded" in transitioning the installed base of Symbian owners per quarter:

In the four Quarters that have reported so far, Nokia has attempted a total of 13.2 million Symbian users per quarter to be migrated to Windows Phone (ie a total annual customer base transition attempt of 52.6 million loyal Nokia smartphone users). Of those in how many cases did Nokia "succeed in transitioning over time" the installed base? The level at Q3 of 2012 was 2.7 million per quarter (10.8 million on an annual basis). Nokia has lost four out of every five conversion attempts SINCE Lumia has launched! (If we count from when the strategy was announced, and the full Elop Effect, in reality it is 9 out of every 10 customers Nokia had.) If Elop was able to sustain roughly a one-to-one transitioning level of Symbian to Windows Phone - what Elop promised with his new Windows based strategy - then he could at least claim modest 'success' to this strategy. (incidentially, I personally would NOT consider abandoning a 'guarateed growth' path on Symbian/MeeGo for only 1-on-1 no-growth stable transition to Windows, when the industry doubles every 18 months, but thats perhaps me, I prefer growth and profitable business in mobile, not stagnant business. But lets not talk about Tomi's higher standards, lets keep this only to Form 20-F and what Nokia warned two years ago)

So, as Nokia bleeds 4 customers to rivals for every attempt to shift a Symbian customer to Windows Phone, the Microsoft-based Lumia strategy is pure suicide for Nokia and must be terminated immediately. Those customers must be given alternative Nokia smartphones that run on MeeGo and Symbian that conform to Nokia customer expectations (like great cameras, some QWERTY form factor alternatives, great connectivity from unrestricted Bluetooth to microSD card slots and FM radios, etc)

WINDOWS WILL NOT BE BELOVED

• The Windows Phone platform may not achieve or retain broad or timely market acceptance or be preferred by ecosystem participants, mobile operators and consumers

Duh. Microsoft had a 12% global market share for Windows smartphones once, briefly in 2007.  It was briefly the world's second most popular smartphone ecosystem behind the far bigger Symbian and just ahead of the rapidly growing Blackberry and iPhone operating systems at the time. You can definitely call 12% ie one in eight smartphones sold as being a "preferred ecosystem" for some "mobile operators and consumers". For 2010,. just before Nokia partnership was announced, the combined market share for the older Windows Mobile and newer Windows Phone smartphones for Microsoft had fallen far from that level. It was 5%. To try to push Microsoft as "preferred ecosystem" at that time was utterly misleading. Microsoft had 5% market share with the ecosystem that was bought only by one in 20 consumers and was ranked 5th behind the massively bigger Symbian, Android, iOS and Blackberry.

But certainly, it was 'plausible' in February of 2011, when the two CEOs, Stephen Elop of Nokia and Steve Ballmer of Microsoft strutted on the stage together, that Nokia and Microsoft could turn their two worlds into one big ecosystem. That was plausible at the time, not likely, but plausible. Now we have the facts. Windows Phone was seen so poisonous and undesirable, that many Windows Mobile equipment maker partners bailed out even before Windows Phone launched, like the Top-10 smartphone manufacturers SonyEricsson, Motorola and LG. After Windows Phone launched, Dell quit the partnership, Samsung announced a new operating system to be directly a competitor of Windows Phone (called Tizen, with smartphones to launch in 2013). Now after Windows Phone 8 launched, HTC has reduced its offering and ZTE and Huawei have decided not to bother to launch any smartphones on this new operating system. Every one of these smartphone makers had shifted their attention to another or other smartphone platforms, usually Android (although Dell has since also quit the smartphone business altogether).

What do they know at Samsung, HTC, SonyEricsson ie Sony, Motorola, LG, Dell, ZTE and Huawei, that only the Microsoft Muppet CEO Stephen Elop cannot see? Its that Windows Phone is utterly undesirable. From 12% in 2007 to 5% in 2010 to 2% in 2011 to yes, 1.9% in Q3 of 2012, and - if the usually very good predictor Kantar early market sales numbers prove to be accurate - an expected about 1.5% for Q4 of 2012. The Windows Phone platform has not achieved "broad or timely market acceptance by mobile operators and consumers". Windows Phone has comprehensively failed to gain any traction at all! Understand, after Nokia was added to the Windows ecosystem, the world's biggest smartphone maker and the world's biggest dumbphone maker Nokia, since then Windows market share has shrunk! Not grown, shrunk! Windows was the 5th biggest ecosystem at the time, it is now the 6th. (Oh, and watch this space, after Tizen launches on a couple of handsets and manufacturers, it may push Windows to 7th ecosystem, haha, during late 2013.. At least Tizen - like MeeGo before it - has strong carrier support, whereas Nokia CEO tells Nokia shareholders that carriers hate Windows Phone)

ABANDONING FIRST-MOVER GAINS

• Other competitive major smartphone ecosystems have advantages which may be difficult for us to overcome, such as first-mover advantage, momentum, engagement by developers, mobile operators and consumers and brand preference, and their advantages may become even greater during our transition to the Windows Phone platform.

Oh man, this hurts so bad. Yes, "first mover advantage" - how about Mobile Money? Did you read in the Harvard Business Review where Google Chairman Eric Schmidt wrote last year that Google's number two priority now is mobile money? Where is the Google Money? It is still coming, as part of Google Wallet and various NFC etc related experiences. And what of Nokia? Nokia has launched Nokia Money years ago. Nokia had 12% of the mobile money market share in India - the world's second largest mobile market behind only China - and where regular banking is underserved and mobile money is growing at breakneck speeds. Nokia was ahead of Google on Google's number two priority, in the second biggest mobile market. Who is that smart that they get ahead of Google in tech? Who gains a first-mover advantage over Google? (and what idiot CEO abandons the lead where Google says in public this is their number 2 priority? Why isn't Elop celebrating Nokia's lead over Google and showcasing Nokia Money as the prototype Google should follow?)

Nokia Money was 100% compatible with Symbian, with MeeGo and even with S40 based featurephones of Nokia that sell in large numbers in India. But Nokia Money was not compatible with Windows Phone. So what did Elop do? He decided to act against Nokia's best interests, just to please Microsoft! This is against his fiduciary duty as CEO, and Elop must be investigated for this kind of acts against Nokia's best interests! Nokia did not expand his Nokia Money-oriented Emerging World market handsets running Symbian, MeeGo and S40 for India that could have secured Nokia tremendous competitive advantages and loyalty hooks into this decade. Rather? He shut down the unit! He did not even sell it! 12% market share in India's rapidly growing mobile money market. And Elop shut it down. Yes, Nokia is fully capable of first-mover advantages if built on Symbian or MeeGo or even S40, but not using Windows Phone.

What of the N9? The MeeGo based smartphone was released in 2011 and immediately got massive positive responses everywhere. In 2012 it was rewarded by the D&AG Awards (the "Oscars" of industrial design) as the best designed device of 2011, not just besting the Lumia smartphones, but besting the iPad 2 ! Who beats Apple at design? Nokia did, thats who. And did Mr Microsoft Muppet allow the huge publicity in Britain at the D&AG Awards be used to help promote and sell the N9 in all of Nokia's major markets? No. Elop rather refuses to let the N9 be sold in the biggest European markets including - yes, the UK (where the D&AD Awards are handed out).

Brand preference? Wanna really cry? The German newsmagazine Der Stern loved the N9 so much, it told its readers to travel to Austria or Switzerland to go get one, because Nokia was not selling the N9 in Germany (Europe's biggest smartphone market where Nokia had 49.5% market share in 2010 according to Kantar). Note, this is not a techie magazine but a weekly newsmagazine like Time, doing a smartphone review! And they reviewed a smartphone not even sold in Germany! And they loved it so much, they did actually recommend their readers to go to another country to get one. Nobody achieves that level of brand love (this side of Apple's iPhone). And did Elop rush to Germany to be pictured on the cover of the very next issue of Der Stern holding the N9 in many colors and promising the German readers that yes, of course the N9 will be immediately launched in Germany and its sister phone, the N950 will also be soon? No. Elop forbids selling the N9 in Germany! No wonder Nokia's market share is down to 5.6% (Symbian and Windows Phone combined) in Germany now in November 2012, according to Kantar's latest numbers.

Nokia is fully capable of building highly desired, beloved, award-winning handsets - and on Symbian and on MeeGo they are not artificially restricted by all the weird limitations that Microsoft has built into the compromise that is the Windows Phone 8 operating system. Symbian was open source, had at its peak over 20 equipment manufacturers as partners as well as operator/carrier partners. Nokia's MeeGo OS was also an open source system with many handset vendors and carrier partners. Windows Phone is a closed system, where Microsoft holds a dictatorial control over its world and its equipment maker partners are deserting the platform and not one carrier has signed onto it. But its not like they don't want to. The MeeGo platform that Elop abandoned? Samsung took over, renamed it Tizen and has today - get this - Telefonica (Spain's biggest operator/carrier) as a carrier partner, as well as NTT DoCoMo (Japan's biggest operator/carrier), SK Telecom (South Korea's biggest), and others such as Sprint of the USA. Its not that the carriers do not welcome and wish for a 'third ecosystem'. But very clearly they have comprehensively rejected Microsoft and Windows Phone.

DAMAGED NOKIA BRAND

• Our brand preference may erode due to various factors, such as inadequate marketing, quality issues, lack of affordable locally relevant services, applications and content or lack of success in smartphones.

And yes, that too has happened. Nokia's brand had been in the top 10 most valuable brands every year since the list was released. After the Elop Effect, the Nokia brand fell out of the Top 10 for the first time ever. How much of that damage has resulted in the Nokia handset average sales price falling (which was growing when Elop took over), or the Nokia costs of marketing going through the roof just to move handsets (Nokia profits were growing when Elop took over, the handset units profits vanished and have produced ever bigger losses ever since) and how much has it hurt Nokia market share - was 35% in smartphones in 2010 when Elop took over, and was 3.7% in Q3 of 2012, the latest Quarter for which we have data.

SOURCING PARTS

Talking about sourcing parts, components and subassemblies: Additionally, with the increased bargaining power of other large manufacturers in the mobile device and electronics industry, we may not be able to achieve as favorable terms as in the past resulting in increased costs that we may not be able to pass on to our customers.

Yes. In total handset production, Nokia was 50% bigger than Samsung in year 2010. Today Samsung is 25% bigger than Nokia. In Smartphones, where most of the innovation is happening, the issue is even more pronounced. Smartphones have far more features and abilities, and more technical sophistication within those matters. Thus in smartphones Nokia faces a far more broad range of critical components and subassemblies. In 2010, Nokia was not just the largest smartphone manufacturer in the world, Nokia was twice as big as Apple and four times bigger than Samsung. Today (latest Q3 data) Nokia has tumbled to 10th largest smartphone manufacturer meaning Samsung, Apple, Huawei, Sony, ZTE, HTC, Lenovo, RIM and LG are all now bigger than Nokia and have more scale-based advantages in sourcing parts and negotiating bulk discounts. In Q3 just in smartphones, today Apple is 4 times bigger than Nokia, Samsung more than 8 times bigger.

CLOSING FACTORIES

In the Form 20-F, Nokia reveals that it ran 10 factories that made handsets. Seven of those (Finland, China, Romania, Hungary, South Korea, Mexico and Brazil) were able to produce smartphones. In 2010, Nokia's total smartphone production was 103.6 million units or 35% of the global smartphone production capacity. To understand the scale, Apple sold 47.5 million smartphones that year and none of those iPhones were made at Apple factories, they were physically manufactured at various Foxconn factories in China. No rival smartphone manufacturer exceeded Nokia's 2010 smartphone production capacity in the year 2011, even as the industry grew 63% that year! Only in year 2012, has Nokia's massive smartphone capacity of year 2010 been exceeded by Foxconn and by Samsung.

The Form 20-F reveals that on contract manufacturing (such as Compal of Taiwan, which made the first Lumia handsets), Nokia warned "In future, we may increase the use of contract manufacturers to produce in the normal course the entire product, which is subject to certain risks." Nokia wrote a long list of possible problems that this might introduce, concluding: "Such failures or interruptions could result in our products not meeting our and our customers’ and consumers’ quality, safety, security and other requirements, or being delivered late or in insufficient or excess volumes compared to our own estimates or customer requirements, which could have a material adverse effect on our sales, results of operations, reputation and the value of the Nokia brand." (emphasis in bold added by me)

Remember, Nokia had when this strategy was announced, by far the world's largest mobile phone handset manufacturing capacity, with a globally placed set of factories, of the utmost modern design, capable of handling in perceived proportion the mix of low-cost high-volume featurephone handsets, and the higher cost smartphones. Nokia had 10 handset factories spread across the planet, near the customers. There was no lack of ability to build smartphones in Nokia's own factories, yet Stephen Elop went to the bizarre option of using an outside company, Compal, to build the first Nokia Lumia handsets. That was, as can be seen from the above, with predictable results. The early Lumia handsets were built with considerable amount of bugs, production flaws and problems that caused a lot of PR damage to Nokia, necessitating recalls, replacements, total new software re-installs, purchase discounts and refunds. The outsourced production was a disaster and damaged the launch and early perception of the whole Lumia brand as well as Nokia overall. There was the further problem of having committed to certain volume levels of production that Nokia could not then adjust, something it could have easily done with its own factories.

The worst aspect is, that Nokia's own smartphone production ability, when the Lumia series was launched, was already running at more than 60% idle! So Nokia carried the costs of its own factories idling, while Taiwanese Compal was charging outsourced production premiums, while delivering underperforming quality problem ridden products. To even suggest this kind of stupidity, is a sign of a totally incompetent CEO. Elop has no concept of how to run his own company. He had his OWN smartphone factories at 60% idle, yet he purchases outside production for the first Lumia series. He is a moron. He has to be fired.

As the Nokia smartphone market has continued to shrink, today out of total Nokia smartphone production capability Nokia used to have, more than 90% has been idling. As to featurephone/dumbphone capacity, Nokia has receeded about 25% from its peak capacity two years ago, so one quarter of its high-volume dumbphone factory capacity has also been idling. Nokia has thus shut down or sold several of its factories as this incredible amount of overcapacity was so large, Nokia's own management admits by these actions, Nokia will not be returning to its old levels of production! Nokia has totally failed in the strategy and abandoned a key competitive advantage out of scale and the resulting production capacity advantage which traditionally is a very long-term competitive advantage that is very difficult for smaller rivals to match or exceed. Nokia gave it away and admitted comprehensive failure of this aspect, by selling or shutting down several handset factories already.

Note that of the seven factories Nokia had that were capable of producing smartphones, two have been shut down completely or sold (Finland and Romania). So Mr Elop's strategy has definitely resulted in Nokia's total maximum capacity being so severely damaged, Nokia's maximum smartphone production capacity is down 29% from what Nokia had in 2010. Thus, if you ever thought Nokia would 'return' to just the levels of smartphone sales it did in year 2010, of 103.6 million smartphones, think again. That Nokia sold or shut down 29% of its smartphone production capacity - even after the debacle of disasterous experimentation with outsourced production - means Nokia's own management knows it cannot return to over 100 million per year smartphone sales levels or beyond, in the foreseeable future. 

Remember, a phone handset factory project is a costly investment in the several hundreds of millions of dollars that takes years just to get the factory up and running. These decisions are not taken lightly. So, Stephen Elop initially promised his strategy would, as Form 20-F said "This strategy recognizes the opportunity to retain and transition the installed base of approximately 200 million Symbian owners to Nokia Windows Phone smartphones over time." And the time-period for this transfer was, as Nokia wrote: "We expect the transition to Windows Phone as our primary smartphone platform to take about two years." (emphasis in bold is by me).

But well before the two-year window is even closed, Elop has already admitted he will come nowhere near his goal to 'retain and transition' the existing Nokia Symbian customer base to Windows Phone on Lumia. He has so far lost 9 out of every 10 Symbian customers he even attempted to migrate. And he has sealed the fate of Nokia's ability to compete as the world's biggest smartphone maker, by selling 29% of his factory capacity in smartphones (but not sold any of the capacity in high volume low-cost dumbphones).

How much capacity does Nokia have? We do not know how close to peak capacity the factories in 2010 ran, but roughly speaking as Nokia's own smartphone sales grew 52% from 2009 to 2010, they must have been highly utilized already. If we take 29% out of the capacity in 2010, it means Nokia management, under Elop, looking realistically at the market demand for Lumia, now suggest by factory closings, the peak Nokia capacity is somewhere near 74 million smartphones. This starting year, 2013, the world will buy about 1 Billion smartphones and if Nokia were to fully sell its maximum capacity in smartphones - that would only give Nokia 7% market share this year!

Elop's strategy suggested he is capable of transitioning the total Nokia customer base from Symbian to Windows Phone. Nokia owned more than a third of the global smartphone market when he said that, and Nokia's smartphone sales grew more than Apple, more than Samsung and more than RIM that year, doing it profitably (with increasing profits to the end of the year). One third of the world's smartphones would be 333 million smartphones in 2013. Samsung will be doing roughly that level. Nokia could easily have done as much, if Elop had not meddled with Nokia's dominating smartphone strategy at the time. Instead, in year 2012, Nokia sold only about 35 million smartphones. Elop has destroyed nine out of every ten loyal customers relationships Nokia has had, and Elop has now admitted defeat by his actions by limiting Nokia's ability even to compete with the biggest smartphone makers anymore.

NOKIA SET ITS OWN STANDARDS - AND BY THOSE IT HAS FAILED

I end with the same quotes I had in the above. This blog is not Tomi Ahonen's listing of what all is wrong with Nokia's strategy (there is much more that is rotten, beyond these 20 items). This Is Nokia's own list of risks it testified to when filing to the SEC and NYSE. Nokia very VERY clearly indicated what was the biggest risk to the risky Microsoft strategy. Nokia wrote in the Form 20-F

Our ability to maintain and leverage our traditional strengths in the mobile product market may be impaired if we are unable to retain the loyalty of our mobile operator and distributor customers and consumers as a result of the implementation of our new strategy or other factors. (bold in original)

Nokia further explained how much this is a true competitive advantage and key to Nokia long-term market dominance:

We have a number of competitive strengths that have historically contributed significantly to our sales and profitability. These include our substantial scale, our differentiating brand, our worldclass manufacturing and logistics system, the industry’s largest distribution network and our strong relationships with our mobile operator and distributor customers. Going forward, these strengths are critical core competencies that we will bring to the proposed partnership with Microsoft and the implementation of our Windows Phone smartphone strategy. Our ability to maintain and leverage these strengths also continues to be important to our competitiveness in the mobile phones market. (bolded emphasis added by me)

As discussed above, however, the proposed Microsoft partnership and the adoption of Windows Phone as our primary smartphone platform are subject to certain risks and uncertainties. Several of those risks and uncertainties relate to whether our mobile operator and distributor customers and consumers will be satisfied with our new strategy and proposed partnership with Microsoft. If those risks were to materialize and mobile operator and distributor customers and consumers as a consequence reduce their support and purchases of our mobile products, this would reduce our market share and net sales and in turn may erode our scale, brand, manufacturing and logistics, distribution and customer relations. The erosion of those strengths would impair our competitiveness in the mobile products market and our ability to execute successfully our new strategy and to realize fully the expected benefits of the proposed Microsoft partnership. (bolded emphasis added by me)

Understand what this means. Nokia testified in the SEC official filing of Form 20-F that Nokia historically had the world's largest distribution network, which was one of Nokia's biggest competitive advantages. Nokia also testified it had strong carrier relationships with mobile operators and distributors. These too were critical competitive advantages that Nokia held when Elop took office.

Today nobody suggests Nokia has the strongest distribution - Elop himself has been abandoning Nokia distributors and pissing them off, who have gone, in most cases from Russia to Africa - to Samsung, who now have clearly the biggest distribution network in mobile.

Worse, Nokia's very survival depends on the support of the operators/carriers. Nokia testifies so in Form 20-F "Whether our operators and distributor customers (are) satisfied with our... partnership with Microsoft" and how critical is that? Nokia testified in the filing of Form 20-F that "the erosion of these strengths woudl impair our ... ability to execute successfully our new strategy and reaslize fully the expected benefits of the proposed Microsoft partnership." If the operators/carriers and distributors refuse to support fully the Microsoft Windows strategy, the strategy is not viable. It cannot succeed without the operators supporting it!

Not my words. Words of Nokia filing for the SEC in Form 20-F. Nokia saying the Microsoft strategy would "be impaired if (Nokia) is unable to retail the loyalty of the mobile operators and distributors."

Elop reported to the Nokia Shareholders Annual Meeting in April that "Indeed, Microsoft did buy the Skype company as part of the ecosystem that comes with Windows Phone and Windows."  What do these operators/carriers think of Skype? "The feedback from operators is they don’t like Skype, of course." Why? Elop explains because "it could take away from revenues." and the kicker on are the carriers onboard with Nokia and its Microsoft strategy? Elop told Nokia shareholders "And, so what Microsoft has done – and we’ve been part of these conversations as well with operators – is as you correctly say, if operator doesn’t want Skype installed on a Windows Phone from Nokia or any other company, then the operator can make that decision."

Elop told Nokia shareholders this April - six months after Lumia had launched and more than a year after the Microsoft strategy had been revealed - that operators/carriers did not like it, "of course", many were refusing to take ANY handsets that use the Windows Phone operating system - like say NTT DoCoMo, the biggest carrier of Japan - and the reasn they don't like the Microsoft partnership with Nokia is "Skype, of course". So well known is the operator/carrier hatered of Skype, that Elop added 'of course' to his statement to Nokia shareholders. Everybody knows this. Not my words - Elop's words. Of course the carriers hate Skype.

Skype was not in-built into Windows Phone 7. Windows Phone 7 sold at its peak, just over 4 million units per quarter this year. Windows Phone 8 does have Skype fully integrated not only to the Nokia Lumia handsets, but integrated to the 1.2 Billion desktop PCs that Microsoft is now upgrading to Windows 8. If the operators "don't like Skype, of course" almost a year ago, now, that Skype is fully integrated - they positively hate it now with Windows Phone 8 and Skype fully integrated.

This is not Elop's mistake. Elop did not buy Skype for Microsoft. This is Ballmer's call. He wanted Skype to help keep Microsoft relevant in an internet age for personal computers. It may help Microsoft on the desktop, but it positively killed Nokia's chances on Lumia and Windows Phone. Microsoft purchased Skype in June of 2011. Microsoft had 2.4% global smartphone market share at that time across its Windows systems. Since then Motorola, LG, SonyEricsson and Dell have quit the Windows ecosystem (and several said or hinted that the operator/carrier demand had dried up). Samsung has reduced its Windows based portfolio and launched its own OS, Tizen - which has half a dozen carriers/operators SUPPORTING the new OS. And HTC has reduced its offering on Windows Phone.

After sacrificing all those millions of Nokia Symbian customers to try to retain some market, how is Windows Phone today? The Q3 numbers had Microsoft's market share at 1.9% and the early view to Q4 (using usually reliable Kantar numbers as a guide) suggest Windows Phone to have about 1.4% market share in Q4. 

Elop told Nokia shareholders "The feedback from operators is they don’t like Skype, of course."

That is the operator/carrier response to Nokia's Microsoft partnership. They simply hate it. When Ballmer commented on how Windows Phone was doing as Nokia was ramping up in 2011, Ballmer said in September 2011 Windows Phone sales were "below expectation." That is not a success of a so-called 'third ecosystem'. And then, any disagreement by Elop over at Nokia? In May 2012 - yes, after AT&T had launched Lumia even in the USA, Elop's words on how Windows was doing with Nokia Lumia? Elop said the sales were "below expectations". What was Elop's latest statement about Windows Phone 8 market performance? That some early tech reviewers like the new phones and that Elop told CNet on December 10 that he was "certainly pleased" with how the new Lumia were selling - that is not a roaring success either, but then notice this - Elop admits on The Next Web that yes, Nokia had not run a large production of the new Lumia, so this 'pleased' level of sales is out of very small initial production run (far less than how Nokia ramped up Lumia the first time). And meanwhile, many independent analysts who do channel checks, have all said that Nokia sales are sluggish or below early expectations in Q4. As I said, the Kantar numbers that I analyzed, suggested worldwide Windows Phone sales are down (but Symbian sales for Nokia are up? Wouldn't that be ironic).

SKYPE KILLED THIS STRATEGY

Only minutes after the Microsoft partership was announced by Elop on 11 February, 2011, I was writing on Twitter that this was good for Microsoft but deadly for Nokia. I warned that Nokia's market share would collapse and Nokia's smartphone business would become not viable and Nokia would become Microsoft's slave and become a low-cost box-mover like Dell in PCs. But, I did say and write, on Twitter and on my blog at that time, that this partnership might work out for both parties. It was not likely, but it was plausible.

When Microsoft bought Skype, I was immediately on Twitter and on my blog explaining that the Skype purchase had effectively killed the Windows strategy for Nokia. I was the first person to say so in writing or in public. In March of 2011, Nokia told in its SEC fillings, in Form 20-F that the whole Microsoft strategy would depend on whether the mobile operators would "be satisfied with our partnership with Microsoft". One year after that, in early April, Elop had to confess to Nokia shareholder that there was no love for the Microsoft partnership. That even as Elop himself had been sitting in meetings that Microsoft had with carriers, the carriers hated Skype so much, many were not taking Windows Phone at all, and all carriers hated it. Or in Elop's words "The feedback from operators is they don’t like Skype, of course."

Of course

The feedback from the carriers is that they don't like Skype. Of course.

The mobile operators/carriers are refusing to support Nokia in its Microsoft Windows Phone strategy. Elop has heard it for now two years. He keeps complaining that there is no carrier support or that it is weak. Whatever promises he gives us - like that T-Mobile would bring big USA success, or AT&T would bring huge US success, etc, prove to be total fabrications. Before Elop announced the Microsoft partnership, Nokia sold 11.1 million mobile phones in the USA. This year 2012 (with Q4 an optimistic estimate by me) after the full Lumia launch in the USA, Nokia's total USA market sales is .. 2.1 million handsets!

The feedback from the carriers is that they don't like Skype. Of course.

THIS IS THE PERFECT PICTURE OF STRATEGY FAILURE

In 2010 Nokia had 35% market share in smartphones and Microsoft had 4%. The soon-to-be-announced partnership had a combined market share of 39%. Then this happened:

MARKET SHARES OF NOKIA AND MICROSOFT IN SMARTPHONES
Year 2010 . . Nokia 35% . . Microsoft 4% . . Partnerhsip 39%

Q1 2011 . . . Nokia 24%  . . Microsoft 3% . . Partnerhsip 27% *
Q2 2011 . . . Nokia 15%  . . Microsoft 3% . . Partnerhsip 18% **
Q3 2011 . . . Nokia 14%  . . Microsoft 2% . . Partnerhsip 16%
Q4 2011 . . . Nokia 12%  . . Microsoft 2% . . Partnerhsip 14% ***

Q1 2012 . . . Nokia 8%  . . Microsoft 3% . . Partnerhsip 11%
Q2 2012 . . . Nokia 7%  . . Microsoft 3% . . Partnerhsip 10%
Q3 2012 . . . Nokia 4%  . . Microsoft 2% . . Partnerhsip 6%
Q4 2012 . . . Nokia 3%  . . Microsoft 1% . . Partnerhsip 4% **** (est)
Notes: * Nokia+Microsoft partnership announced
 ** Microsoft buys Skype
 *** Nokia launches Lumia on Windows Phone
 **** Microsoft released Windows Phone 8 including on two Nokia Lumia phones
Note 2 the data for Q4 is estimate by TomiAhonen Forecasting, based on preliminary analysis and data by Kantar on November smartphone sales in selected markets
All the above data may be freely shared

Nokia sold 103.6 million smartphones in 2010. Nokia GREW smartphone sales in 2010 by 53% from the year before. Nokia added 35.8 million new smartphone customers during 2010, compared to 22.4 million new smartphone customers added by Apple, 17.0 million added by Samsung and 13.4 million added by RIM. The numbers do not lie. This means that in 2010, globally, Nokia was growing faster than its nearest rivals - the gap between Nokia and the pack chasing it, was growing wider, not narrower. Who grows faster than Apple's iPhone? Who grows faster than Samsung, come on! And Nokia was doing this profitably, with increasing profits. 

Nokia was towering over its rivals, more than twice as big as its nearest rival in 2010 !!! That is more global domination than Toyota has EVER had in cars (or General Motors when it has been biggest, either - ever!). And Nokia's gap to the pack was growing, not shrinking when Elop took over. He had stepped into a winning platform play, Symbian was the bestselling smartphone OS in Latin America (which has more mobile phone users than North America) and the bestselling smartphone OS in Europe (which is bigger than Latin America); and the bestselling smartphone OS of Africa (which has more mobile users than North and Latin America combined); and the bestselling smartphones OS of Asia (bigger than North America, Latin America, Europe, Australia and Africa - combined).

Nokia was the bestselling smartphone and Symbian the bestselling OS in 2010. Nokia's Symbian was also by far the most widely used smartphone OS by installed base, the most used smartphone OS on five of the six inhabited continents (and even Nokia had the most used smartphone of the uninhabited Antarctica, where Nokia's Linux-based Meamo was the favorite of scientists using smartphones and preferring the open source Linux software for the N900).

Not just most sold, and biggest installed base. Nokia had the second bestselling smartphone App Store, behind only Apple's - ahead of Blackberry, Android, Palm and Windows - and the gap to Apple at the time was closing, not growing. Nokia had by far the world's largest army of software developers. Nokia was about to release its new MeeGo operating system we saw winning all sorts of awards on the N9 smartphone which many called better than the iPhone - something the Lumia series is never said to be in any major tech reviews and comparisons.

This all, Elop threw away with a strategy so risky, Nokia itself admitted if the strategy did not work out, Nokia not only would lose its smartphone leadership, it might even damage its dumbphones/featurephones business. Yes, this was the most boneheaded management move of all time. And now the time is up for Mr Elop.

MR ELOP, YOUR TWO YEARS ARE UP

Nokia wrote in the Form 20-F "We expect the transition to Windows Phone as our primary smartphone platform to take about two years." The exact two-year milestone will be on 11 February, 2013, in about 40 days from today. I expect many business, telecoms and strategy writers to re-examine the Nokia failure in its Microsoft strategy at that point. Lets now use Nokia's own standard for how to measure success or failure of its strategy, as Nokia told us in the Form 20-F.

Nokia warned that if the Nokia strategy with Microsoft were to fail, most likely Nokia would then become a low-margin box-mover basic handset maker. This is what Nokia wrote:

Our proposed partnership with Microsoft and change in our smartphone platform strategy are subject to certain risks and uncertainties, which could, either individually or together, significantly impair our ability to compete effectively in the smartphone market. If that were to occur, our business would become more dependent on sales in the mobile phones market, which is an increasingly commoditized and intensely competitive market, with substantially lower growth potential, prices and profitability compared to the smartphone market.

Here are some of the risks that Nokia identified what might go wrong, that did, in fact go wrong:

Explicit Risk 1 Windows Was Weak - "Windows Phone  is an unproven addition to the market focused solely on high end smartphones with currently very low adoption, and the  partnership may not succeed in developing it into a sufficiently broad competitive smartphone platform. That "very low adoption" when the partnership was announced, was 2%. At the latest Quarter (Q3) that market share had fallen to 1.9%. It may fall to 1.4% by Q4. Yes, very obviously the Windows Phone platform has failed in developing into a "sufficiently broad" platform.

Explicit Risk 2 Cannot Differentiate - "Windows Phone platform may not enable us to produce smartphones that are differentiated." Nokia traditionally had the most diverse smartphone portfolio. Today the Lumia series is the least diverse series. Samsung has obviously stepped in to offer the broadest portfolio and taken a huge lead in smartphones.

Explicit Risk 3 Cannot Get Scale - The Microsoft partnership may not achieve in a timely manner the necessary scale, product breadth, geographical reach and localization to be sufficiently competitive in the smartphone market. Nokia sold 29 million smartphones per quarter when Elop took over. It now sells about 6 million per quarter.

Explicit Risk 4 Ruin China while Not Gaining in USA - The Microsoft partnership may erode our brand identity in markets where we are strong like China and may not enhance our brand identity in markets where we are weak like in the United States. Before Elop announced this mad strategy, Nokia was the overpowering number 1 in China the world's largest smartphone market, with over 70% market share. That is now down to about 5%. Did that sacrifice translate into a USA success? No. The Nokia smartphone market share in the USA was 6.8% using Symbian, it is now less than 2.9% in the USA using both Windows Phone and what remains of Symbian.

Explicit Risk 5 Nokia Mobile Advertising Fails - We may not succeed in leveraging the Microsoft advertising assets to build a Nokia based advertising platform on our smartphones. Yes. Elop "Mr Ecosystems" simply sold away the Nokia-owned mobile advertising unit when his strategy was burning too much cash.

Explicit Risk 6 Profitability Ruined - We may not succeed in creating a profitable business model when we transition from our royaltyfree smartphone platform to the royaltybased Windows Phone platform. Nokia profits from smartphones every single quarter they have been manufactured up to Elop's new strategy. In year 2010, when the world was still emerging from the global economic crisis and most of Nokia's rival full-portfolio handset makers were reporting losses, Nokia's the smartphone unit generated 1.5 Billion Euros (2 Billion US Dollars) of profits. And remember, the profits were growing at the end of the year, showing the biggest jump in profitability Nokia smartphones had ever seen. Since Elop's strategy Nokia's smartphone unit generated a loss in 2011 of 400,000 Euros (about 520,000 US dollars) and now, using consensus opinions of Q4 results, Nokia will report roughly a loss of 1.1 Billion Euros (1.4 Billion US Dollars) in its diminishing smartphone unit in 2012. So Mr Elop has destroyed over two years, about 5.9 Billion dollars in profits for Nokia Corporation (why is this Microsoft Monkey allowed to remain as CEO? This is complete madness!)

Explicit Risk 7 Patents  - We may not be able to generate sufficient patentable inventions or other intellectual property to maintain, for example, the same size and/or quality patent portfolio as we have historically. And in efforts to raise cash to cover for the destructive Microsoft strategy, Nokia has been selling its patents in big bunches to various Patent Trolls, poisoning the well of future wealth

Explicit Risk 8 Operators & Distributors Abandon Nokia - The proposed Microsoft partnership may cause dissatisfaction or foreclose the ability to do business with mobile operators, distributors and suppliers. So "cause dissatisfaction" - Elop admitted to Nokia shareholders that mobile operators do not like the partnership, because of Skype, "of course." So clear is the explicit dissatisfaction in the carrier community that Elop added 'of course' when he was asked on point about that question. And worse, "to foreclose the ability to do business" with operators/carriers & distributors? Yes. That too was explicitly admitted by Elop at the annual shareholders' meeting, that yes, some operators who traditionally bought Nokia handsets now refuse any Microsoft Windows Phone based smartphones. The numbers could not be more explicit. Before this strategy, Nokia sold 29 million smartphones per quarter. Since then the industry has more than doubled. Now after the Nokia reseller boycott, Nokia only manages to sell 6 million smartphones per quarter.

Explicit Risk 9 Damage Employee Morale - The implementation of the Microsoft partnership may cause disruption and dissatisfaction among employees leading to the loss of key personnel. The exodus of Nokia staff has been dramatic and devastating including several of Nokia's longest-standing sales and marketing staff as well as Nokia's top technical staff starting with its CTO.

Explicit Risk 10 Damage Recruitment - We may not be able to recruit and motivate appropriately skilled employees to implement the Windows Phone smartphone platform and to work effectively and efficiently with Microsoft and the related ecosystem. The proof is in the pudding, again. The Lumia series launch (and relaunch) have been plagued with all sorts of implementation problems and failures from faulty hardware and software to almost instant massive price discounts to feuding with thought-leaders and bloggers and astroturfing and fake Amazon ratings, to faked 'Pureview' pictures etc etc etc.

Explicit Risk 11 Ongoing Tablet Diversion - We do not currently have tablets in our  portfolio. There is no doubt, that Microsoft - Microsoft not Nokia - would prefer to see tablets in the Windows Phone ecosystem. For any handset maker like Nokia, to turn a non-profitable smartphone unit and refocus any of its scarce resources to try to build a world-beating (iPad-beating) tablet would be foolish. Mobile phone handsets are distributed, marketed, priced and sold totally differently from tablet PCs. A traditional PC maker like Apple or Samsung that has the distribution and sales already for the traditional PC market, would be wise to launch tablet PCs. A pure handset maker like Motorola or RIM (or Nokia) would find it hopelessly loss-making to try to enter that market - witness RIM and Motorola. For Nokia's CEO to even entertain a tablet fantasy without putting a clear stop to any such projects and prospects, shows he is thinking like a Microsoftian, not a Nokian. He is not fit to run Nokia the handset manufacturing giant that is currently in distress. A tablet rumor should be killed comprehensively by the CEO as a luxury Nokia cannot now afford (And besides, the tablet OS should have been - would have been MeeGo, considering the Nokia N9 smartphone beat the iPad as the best design of 2011 at the D&AD Awards).

Explicit Risk 12 Damaged Credit Rating - The partnership with Microsoft and new strategy could cause lowered credit ratings from the credit rating agencies. Yes. Nokia was nearly perfect by all three credit ratings agencies on February 10, 2011, one day before this strategy was announced. Within 15 months of this strategy being announced, all three credit ratings agencies had downgraded Nokia so many times, Nokia was rated (and still is, obviously) junk by all three credit ratings agencies. It is one of the fastest destructions of a credit rating by any global market leader in any industry and all by itself serves as proof that Elop is one of the worst CEO's in the economic history of corporate governance.

Explicit Risk 13 Symbian Collapse - Our mobile operator and distributor customers may no longer see our Symbian smartphones as attractive during the transition to Windows Phone. This would result in a loss of market share, which could be substantial, during the transition and which we may not be able to regain when quantities of Nokia Windows Phone smartphones are commercially available. Totally prophetic. Nokia's Symbian market share was 29% when Elop took over. He promised a 1 to 1 transition from the Symbian base to the Windows Phone base. But the 'Osborne Effect' and the 'Ratner Effect' both caused by Stephen Elop communications during February 2011, caused a collapse of Symbian sales. During 2010, Symbian based Nokia smarpthones had grown more than the iPhone in absolute terms globally, grown more than Samsung, grown more than Blackberry. The gap between Nokia and its rivals had been growing, not shrinking before this strategy. Immediately after Elop announced his strategy, the Symbian sales growth stalled and reversed into an unprecedented fall. Nokia branded Symbian based smartphone sales fell from 29% market share when this strategy was announced to 14% in only three quarters, by the time the first Lumia branded Nokia smartphones running Windows Phone were launched. Elop himself caused the collapse in Symbian sales by calling his own products rubbish (in the infamous Burning Platforms memo, the costliest management communciation of all time) ie the 'Ratner Effect' and the simultaneous announcement of his current platform as obsolete with no replacement devices on the new platform ie the 'Osborne Effect'.

Explicit Risk 14 Transition Failure from Symbian to Windows Phone - We may not succeed in transitioning over time our installed base of Symbian owners to our Windows Phone smartphones. The math is undeniable. For every 10 attempts Nokia has made of its Symbian users to migrate to the Lumia series running Windows Phone, nine have failed! Only one in ten Symbian users from 2010 has so far been successfully migrated to Windows Phone while nine have gone to rivals, mostly Samsung and Apple. The transition failure is comprehensive, and this before we remember that the Yankee Group independent survey of new Lumia owners in 2011 found that 4 out of 10 new Lumia owners was so disgusted with their new smartphone, they ranked their satisfaction worst on the scale. Yes, worst smartphone they have ever seen, say 4 out of 10 Lumia owners. This is not a success. There is the infamous 101 faults list for past Nokia owners to try to migrate to Windows Phone (upgraded with even more Elop, now with 121 faults) and the very latest analysis at All About Symbian still finds major faults in so many Nokia 'staples' in features regular Nokia smartphone owners on Symbian (And Maemo and MeeGo) expect, that are still absent from Windows Phone, like the ability to see the time on the idle screen (bearing in mind, of the planet's population, a Nokia branded phone is the world's most used watch, ahead of Timex, Casio, Citizen etc). Like the lack of full file transfer on Bluetooth, like the lack of data transfers via NFC. Like the lack of microSD support (in all but one smartphone). Etc etc etc. The Lumia series resale price is nonexistent, meaning in most markets where phones are sold at full prices (no subsidy) the resale market is ruined as well, meaning the Lumia series is unsuited for Africa, India, Indonesia, etc etc etc.

Explicit Risk 15 Windows Will Not Be Beloved by Consumers • The Windows Phone platform may not achieve broad market acceptance by consumers. Very obvious. When this strategy was announced, Windows on smartphones was the world's fifth-bestselling smartphone OS (when adding Windows Mobile and Windows Phone based smartphones). That was to replace Symbian which at the time was the world's bestselling and the world's most used smartphone OS. Today Windows Mobile has been extinguished, and Windows Phone remains. Has it grown from 5th ranking to get better consumer acceptance? No. Windows Phone now ranks as 6th most used smartphone OS, behind Android, iPhone and Blackberry - and the new Samsung bada OS - and insult to injury, still trailing Symbian. The latest Kantar numbers suggest that for Q4 we will see Windows Phone market share decline while Symbian market share would increase! By every conceivable measure, it is obvious, that after the biggest marketing spend by any handset maker of all time, with Nokia initial global launches of Lumia, supported by billions more by Microsoft including giving away free Xbox 360 game consoles, and supported by the biggest-ever new phone launch marketing efforts by carriers like AT&T in the USA - Windows Phone has fallen from 5th most used smartphone to 6th most used. It is not beloved by consumers. Windows is despised by consumers.

Explicit Risk 16 First Mover Advantage Lost - Nokia first-mover advantage (may be lost) during our transition to the Windows Phone platform. Yes. Apple is rumored to bring NFC to the iPhone 6. Nokia had NFC on Symbian and MeeGo well before Windows Phone. The first Lumia series did not even support NFC. Google is calling 'mobile money' its number 2 strategic priority. Nokia had its Nokia Money launched commercially years before and was strong for example in India. That is now abandoned because Windows Phone does not support the technology. Nokia had the magnificent camera with 41 megapixel sensor in the Symbian based 808 Pureview but Windows Phone does not support that pioneering technology. Now Samsung has launched the Galaxy Camera smartphone with the biggest optical zoom and best camera on the market. Nokia is losing its first-mover advantages to Apple, to Google and to Samsung. All because of Windows Phone.

Explicit Risk 17 Nokia Brand Damaged - Our brand preference may erode due to the lack of success in smartphones. Nokia was ranked in the Top 10 most valuable brands by Interbrand every single year that survey was published, and ranked number 7 when Elop took over. Nokia immediately fell out of the Top 10 after the new strategy was announced.

Explicit Risk 18 Lose Scale Advantage in Sourcing Parts - "We may not be able to achieve as favorable terms as in the past resulting in increased costs that we may not be able to pass on to our customers." The sourcing issue is so damaged, even several of Nokia's long-standing suppliers have gone from healthy profits to loss-making.

Explicit Risk 19 Cause Damage by Outsourcing Production - "We may use contract manufacturers to produce the entire product, which could result in our products not meeting our customers’ and consumers’ quality requirements." The original Lumia 800 and Lumia 710 launch was so riddled with faults that Nokia resellers were reporting Nokia-record returns. Both first Lumia handsets were completely badge-engineered by Compal of Taiwan, using non-standard Nokia parts, and the new Microsoft operating system. So nothing in the first Lumia was true Nokia except perhaps the brand pasted onto the cover and the sexy physical design that was stolen from the MeeGo based award-winning N9. Its like if Porsche took the classic design of the 911, and then asked low-cost car maker Tata of India to manufacture a look-alike 911, with an engine not from Porsche but from low-cost car maker Proton of Malaysia and then just sticked on a Porsche sticker on the hood and tried to sell that as the new 911 - with classic 911 prices mind you - in Porsche stores to loyal Porsche customers. I think the conversion rate would probably be about 9 Porsche customers lost for every 1 retained, and most of those who actually bought this fake Porsche would be incredibly unsatisfied. Its prices would fall within weeks of the first launch (exactly as happened with the Lumia 800, exactly as happened again with the Lumia 900, and exactly as is now happening already with the Lumia 920!!!)

Explicit Risk 20 Destroy Manufacturing Capacity - The most difficult-to-achieve, most costly barrier to entry to scale in smartphones is manufacturing capacity. Nokia had built a huge lead in its manufacturing ability, with 10 handset factories around the planet of which seven could manufacture smartphones. Nokia had in 2010 the ability to produce one in three smartphones sold on the planet. Since the Microsoft strategy was announced, the global smartphone market has grown by 2.4 time. Elop promised that his strategy would take 2 years and he would replace the existing Symbian smartphone sales 1 to 1 by Windows Phone sales. But his strategy has failed so comprehensively, that Nokia has been shutting down factories and selling them. The total production ability of smartphones for Nokia is down 29% since Elop took over - and those were not inefficient old factories, those were highly modern, new factories of highly automated specialized ability. Now we hear that Huawei, the world's third largest smartphone maker has moved into Finland to start a new manufacturing plant there to take over from the skills that Nokia has abandoned. 

By closing its factories, Nokia so expressly admits this strategy has failed, that it has already shut down 29% of its smartphone production ability from Nokia's peak in 2010, while since then the global market has more than doubled in size. And Elop's actions point to how low Nokia thinks its maximum ceiling now is with Windows Phone - even if all smartphone factories run at full capacity, Nokia's global production could only manage about 7% of the smartphone market demand for this year 2013. That is, under 'perfect case'. You may find that many Nokia analysts are now saying the Windows Phone startegy is such a comprehensive failure, they expect Nokia smartphone market share this year to be nearer to something like 2% or 3%..

TWENTY REASONS WHY NOKIA STRATEGY HAS FAILED

When testifying to the US Securites and Exchange Commission via the required Form 20-F about this radical change to Nokia strategy, Nokia wrote that there were explicit risks, which "could, either individually or together" impair öur ability to execute successfully our new strategy."

So some of those 20 items I analyzed in the above might alone derail Nokia's Windows based strategy, or others might 'together' cause the strategy to fail. Now we know. Nokia experienced huge growth in smartphone sales in 2010. The sales turned into decline in 2011 immediately after this strategy was announced - and the decline has worsened quarter after quarter. Nokia towered over its rivals in 2010, twice as big as Apple, four times as big as Samsung. Now Nokia has shrunk to 10th in smartphones with an ever-shrinking share and might fall out of the Top 10 by Q4 results. Nokia's record-setting growing profits in the smartphone unit that generated more than 2 Billion dollars of profits per year have now been replaced by ever worsening losses, Nokia generated over half a Billion dollars of losses in its smarpthone unit in 2011 and more than 1.4 Billion dollars of losses now in 2012. The operators/carriers and distributors hate the Windows strategy - Elop himself admits it "of course" and points out that many carriers/operators refuse to sell Nokia Windows Phone handsets altogether. The Nokia brand is damaged, the Nokia ratings agencies hate this direction rating Nokia as junk. The Nokia share price which had grown 11% in the first five months of Elop's tenure to over 8.20 Euros has collapsed to 3 Euros and Nokia is regularly under take-over speculation, even as Elop fires tens of thounsands of staff and sells factories, units, patents, the Nokia Headquarters buiding etc.

The Windows Phone based strategy has failed. Its not me saying so. It is what Nokia warned when this strategy was unveiled. Nokia filed its Form 20-F which gives us the failure standards, how do we know if the strategy has failed. It was not me who wrote those risks into that testimony, it was Nokia. And now when we examine those points, we find that yes, Nokia's strategy has comprehensively failed. 

Elop must be fired for thrusting profit-making market-dominating Nokia into this self-destructive path. Elop must be fired for continuing on this ruinous path even as he saw clearly it cannot succeed (the most obvious evidence being when smartphone factories are sold or shut down). Elop must be fired for horrid execution of the plan - witness the total failure of Windows Phone even in the new Lumia launch now - where Elop 'learns' from his mistakes and after Lumia first time lost market share and saw collapsing sales, he now raises prices, reduces distribution, cuts operators (the idiotic "exclusive" operator-deals which even Apple wanted to get rid of as soon as it could, stating exclusive deals are not capable of supporting large scale sales) and limits the portfolio with ever less differentiation. The Lumia Windows Phone launch year of 2012 was a disaster. Now, with the new steps, Elop is guaranteeing that the Re-Launch of Lumia for 2013 will be worse still. Why is the Microsoft Muppet allowed to remain in control of Nokia? His strategy has failed on 20 counts. He must be fired now!

These were not ' Tomi's petty reasons' to blame Elop. These were 20 risks that Nokia testified in Form 20-F to the USA Securities And Exchanges Commission and New York Stock Exchange last March, that were risks that could destroy the Microsoft strategy announced in February of that year. This form clearly says, that Elop's strategy would take 2 years to complete. On February 11, 2013 we will have 24 months from the start of this strategy. The last Quarterly data for Nokia related to this strategy is coming now in January (fro Q4 of 2011). The Microsoft Windows strategy for Nokia has comprehensively failed, at least on those 20 points, several which alone will destroy the strategy - not my words, so said Nokia.

I will post this long blog now to start the year, for those who may want to reference this and dig for themselves. I will return to some of these topics with some updated diagrams and numbers to explore some of the failures in more detail in the coming days and weeks. 

UPDATE - I have now published the first short blog dealing with one Nokia problem illustrated with one picture - its the Collapse of Nokia Smartphone Sales and the Elop Effect.

Note, this blog was 100% on risks and problems Nokia identified 2 years ago. Stephen Elop has mismanaged Nokia but he has done far more damage to Nokia, both in smartphones and elsewhere than just these 20 risks that Nokia itself identified. I wrote last summer my 'definitive' piece on the biggest faults of Stephen Elop as CEO. If you want to read another monster-long Tomi Ahonen blog about management failure, and learn the lessons of how Elop through his mismanagement accomplished these risks to come true (and other damage to Nokia), read The Sun Tzu of Nokisoftian Microkia.

Lets do the disclosure part - I am an ex-Nokia employee. I was not fired by Elop haha, I left in 2001, back in the very good days when Nokia was still growing as the giant. In my last job I was at headquarters heading Nokia's global consulting unit which served the major international carrier/operator giants like China Mobile, Vodafone, T-Mobile, Orange, Telenor, etc so I saw not only what Nokia strategy was but I was personally and deeply involved in seeing how the carriers/operators formed their strategies. I have been used by Nokia over the years as their consultant including at various public events from Finland to Pakistan and from Egypt to Colombia. The first of my 12 books was listed as an 'official Nokia book' and sold through the Nokia website. A Nokia President has written the foreword to one of my books. So I am not holding any kind of grudge against Nokia. I have been both supportive of - and very critical of Nokia before Elop came to town. I have been both supportive and critical of Elop based not on any personal vendetta, but on what he has actually done. Clearly being the biggest management failure of all time not just in telecoms or tech, but in any industry, ever, Elop has managed to accomplish more lunacy than any other CEO in a comparable period of time. Hence, most of my writings about Elop over the past two years have been negative, but not all. I was for example very supportive of him and Nokia when the N9 was launched or the 808 Pureview etc. 

Note that I consult for the industry, my refernce customers include just about every giant of the industry and I have been equally critical of past giants stumbling in the handset industry such as Palm, Motorola and RIM. I am not here because I somehow hate Elop (or because he slept with my wife, haha, very funny theory someone once suggested) - I am here as an honest expert giving my honest view when a company is making dramatic mistakes. The release of the Burning Platforms memo WAS a huge mistake - I said so here immediately, and Elop himself has admitted it caused damage to Nokia. I was here to say that when Microsoft bought Skype that was good for Microsoft on the desktop but would damage Windows Phone smartphone sales - and again, Elop himself admits now that it is true, that operators hate Skype 'of course' and many refuse to even carry Windows Phone based smartphones. I called Elop for creating an Osborne Effect and a Ratner Effect - I was not alone in either of those observations, now most tech analysts agree that it is what he did. And so forth. I am calling it as I see it, if Elop stopped making colossal mistakes - like now "exclusive" carrier deals which further damage Lumia market success - not my view, that was the industry consensus view when Elop announced it - if Elop stopped making mistakes, I would stop criticizing him. This is not about hating Elop, this is about loving Nokia. I still am an optimist, I love Nokia, and I hope Nokia can somehow survive, shifting quickly to Android or - more likely - that it might be bought by a friendly new owner that the Nokia brand might still survive and mean something. After all, it was Nokia that invented the smartphone and utterly dominated this market until Elop came in to destroy Nokia's leadership position.

On shares. This blog makes no recommendations on any share prices, I do not personally own Nokia shares and I do not allow discussion of share prices and stock markets in the comments. 

Why am I obsessing about this story? Because this IS the biggest catastrophy in the mobile industry, and one that keeps evolving, going from bad to worse. This is a bigger disaster than Siemens exit in phones, Motorola's collapse from number 2 handsets, far greater failure than Palm falling from number 2 in smartphones. This is bigger than the damage Toyota saw from its brakes problems and recalls. This is bigger than problems British Airways witnessed with the catastrophy at Terminal 5 opening, or BP saw with the Oil Spill, or Exxon saw with the tanker fiasco of the Exxon Valdez, or Coca Cola experienced when attempting to launch New Coke (and note - Coca Cola wisely brought back Coca Cola Classic alongside its new 'platform'). This IS the biggest story in telecoms and tech. Elop has precided over the biggest management failure of all time, and the most rapid collapse of a global market leader - in any industry, ever. He is the biggest failure CEO ever. He is a loser of a boss. These stories must be chronicled and lessons learned so that the mistakes of Stephen Elop will never be repeated by anyone. His name must be synonymous with comprehensive - self-induced - market destruction. I write this story, because I am an analyst of this industry - and wrote 'the' book on how this industry makes its money. If we are witnessing a world record being made in incompetence in this industry - in how money is lost - then yes, I must write this story or I would not be honest to my craft. And I will continue reporting on Nokia's troubles as long as it continues on this mindless suicidal path, of course.

One plug - if you noticed, I have no ads on this blog, I have written more than two million words over six years on topics relating to mobile, telecoms, tech, media and the internet on this blog. We have had over 3 million visitors and have had over 30,000 comments posted here. Yet note, no ads. We have no registration, we don't harvest your emails, this blog is not for sale. I am here only to share with my loyal readership, many of those people posting comments have been on this blog for years. I am already the most published author of my industry, Forbes rated me the most influential expert in mobile, what more could I want? I have zero interest in anything else except sharing my best insights where I can - and often I have been wrong - and I am the first to announce here on this blog whenever I am wrong (how many 'mobile experts' bother to do that?). I've spoken at over 350 public conferences to a cumulative audience of over 100,000 in over 60 countries on all six inhabited continents. I have over 500 press references. What more could I want? I am not writing this to 'try to get visibility' haha, everyone in my industry knows me, most major CEOs in this industry have autographed copies of my books in their bookshelves. I do this only for my readers. I only share my thoughts with my readers out of a passion for sharing. But in my day job I am a consultant and author - I am the most published author in the mobile industry and my books are already referenced in over 120 books by my peers - a truly phenomenal achievement considering my first book is less than 11 years old. So for anyone who needs to understand the mobile handset industry and business, please see my TomiAhonen Phone Book 2012 for the latest industry data and stats. 

On The Twelfth Day of Christmas My Elop Gave To Me.. The Classic Christmas Carol Updated for Nokia

The Classic Christmas Carol 'On The Twelfth Day of Christmas' ie 'Partridge In a Pear Tree' now updated with lyrics more relevant to the Nokia debacle. Merry Christmas to all our readers on the CDB Blog


Twelve Days of Christmas / Partridge In a Pear Tree - Updated for Nokia & Elop:

On the first day of Christmas my Elop gave to me
A new Windows strategy

On the second day of Christmas my Elop gave to me
Two dead systems
And a dumb Windows strategy

On the third day of Christmas my Elop gave to me
Three profit warnings
Two dead systems
And a fool's Windows strategy

On the fourth day of Christmas my Elop gave to me
Four killed MeeGos
Three profit warnings
Two dead systems
And a failed Windows strategy

On the fifth day of Christmas my Elop gave to me
Five ratings downgrades
Four killed MeeGos
Three profit warnings
Two dead systems
And the worst Windows strategy

On the sixth day of Christmas my Elop gave to me
Six factories a-closing
Five ratings downgrades
Four killed MeeGos
Three profit warnings
Two dead systems
And a farsical calamity

On the seventh day of Christmas my Elop gave to me
Seven quarters of losses
Six factories a-closing
Five ratings downgrades
Four killed MeeGos
Three profit warnings
Two dead systems
And a delusional fantasy

On the eighth day of Christmas my Elop gave to me
Eight Lumias a-failing
Seven quarters of losses
Six factories a-closing
Five ratings downgrades
Four killed MeeGos
Three profit warnings
Two dead systems
And a devastating tragedy

On the ninth day of Christmas my Elop gave to me
Nine Symbians still selling
Eight Lumias a-failing
Seven quarters of losses
Six factories a-closing
Five ratings downgrades
Four killed MeeGos
Three profit warnings
Two dead systems
And a self-destructive remedy

On the tenth day of Christmas my Elop gave to me
Ten execs a-quitting
Nine Symbians still selling
Eight Lumias a-failing
Seven quarters of losses
Six factories a-closing
Five ratings downgrades
Four killed MeeGos
Three profit warnings
Two dead systems
And a self-inflicted lunacy

On the eleventh day of Christmas my Elop gave to me
Eleven sad excuses
Ten execs a-quitting
Nine Symbians still selling
Eight Lumias a-failing
Seven quarters of losses
Six factories a-closing
Five ratings downgrades
Four killed MeeGos
Three profit warnings
Two dead systems
And heartbreaking misery

On the twelfth day of Christmas my Elop gave to me
Twelve failed promises
Eleven sad excuses
Ten execs a-quitting
Nine Symbians still selling
Eight Lumias a-failing
Seven quarters of losses
Six factories a-closing
Five ratings downgrades
Four killed MeeGos
Three profit warnings
Two dead systems
And a colossal catastrophe

The above lyrics adapted by Tomi T Ahonen / HatRat. No Partridges nor Pear Trees were harmed in the writing of this joke. It is the opinion of this comedian that Stephen Elop is the worst CEO of any Fortune 500 sized company ever in economic history of mankind - and should be immediately fired (and denied any compensation; and sued, and investigated for conduct against his fiduciary duty, and barred from holding any corporate office of any publically held corporation - and tarred and feathered). This lyric may be freely shared.

Kantar November Numbers: Suggest Decline in Windows Phone and.. Increase in Symbian? Nokia is so doomed

A very accurate predictor of the current Quarter smartphone sales trends is a population-weighted average of the most recent Kantar numbers of the current quarter, compared to the previous quarter. We've now seen the pattern for many quarters and Kantar's numbers foretell very accurately what is the global reality on a very short term view, ie now in late December, with November sales data, we have a good view to Q4 (October-December) quarter sales.

Windows Phone 8 was supposed to excite the world and restore Microsoft and Windows to smartphones (yeah, when have we heard that before, and before, and before, and before). Nokia's brand new Lumia 920 and 820 were supposed to be the best Windows Phones ever made and somehow magical in restoring Nokia's past glories from America to China. With the parallel launch of Windows 8 for the PC environment, the Microsoft powered ecosystem was supposed to be on a big comeback. Well, I don't specialize in the PC world but rumors from that side suggest Windows 8 has been far worse in its early adoption than say Windows 7 was. This does not suggest a glamorous Christmas Quarter for Redmond on its main business. Well, at least we have the new Nokia Lumias and the HTCs and Samsungs and others doing the 'magnificent' new Windows Phone 8 smartphones, right? Enter Kantar. 

KANTAR SUGGESTS WINDOWS PHONE SALES ARE DOWN FROM Q3 !!

Kantar always gives us some of its markets it studies, not all. This time from the November 2012 stats they published, we have a good comparison to September Kantar data (both before Windows Phone 8 launched, and data that was reported in Q3). The regions that Kantar reported both in September and November are the European big 5 countries ie EU5 (Germany, France, UK, Italy and Spain), plus the USA, Australia and Brazil. When we take the population-weighted averages of those four regions, and calculate the Windows Phone market share then and now, we get this finding:

Kantar numbers population-weighted average for these 4 regions in Q4 suggested a global average market share for Windows Phone to be 5.3% (don't worry that the reality was only 2%, remember this is not a 'globally representative' sample of Kantar data, this sample strongly over-samples Windows OS's best markets, USA and Europe, and ignores the huge smartphone markets where Windows is negligable, such as China, India and Japan. The point we want, is to compare Kantar last quarter vs Kantar now.

What does Kantar measure for those same four regions now, for November? The weighted average of those same four regions says Windows Phone new sales market share has fallen to 3.8%. Yes, a drop of one third! So what was 1.9% global Windows Phone market share in Q3, these Kantar measurements suggest that after Windows Phone 8 was launched, the global market share for Windows Phone is now crashing to 1.3%. We rounded it to 2% last quarter (was almost 3% in the previous quarter) and Kantar numbers suggest we will round off the Windows Phone market share for Christmas at 1%. That is catastrophic.

Now, remember, the Christmas Quarter, Q4, October to November, does always feature a big jump in smartphone sales. I am modelling a 30% jump from Q3 data. So while the Windows Phone market share is down by a third (according to Kantar measurements) the actual sales are not down by much. If the global smartphone market grew 30% for Christmas, then the total global Windows Phone sales (both platforms, old Windows Phone 7.x and new Windows Phone 8) would be about 2.9 million units.

By The Way.. I did warn you, that the new Lumia 920 and Lumia 820 sales will underperform at Nokia compared to the first Windows Phone launches a year ago. I explained what factors were wrong, mostly in the executive management by Stephen Elop the CEO, who raised prices, not lowered them - raising prices means less sales. Who also limited his carrier relationships, limited distribution means less sales than broad distribution. Etc Etc Etc. I told you so...

ANY OTHER CONTRADICTORY DATA?

But wait, how about China! Yeah, Nokia's Lumia 920T that will launch for China Mobile on the Chinese proprietary 3G standard, TD-SCDMA, will not launch until January. So no help there. What of other Chinese smartphone sales on Windows? Informa has just reported that Windows Phone market share in China is 1%. When Analysys, Gartner and IDC have given China numbers for their latest reports, none mentioned Windows Phone at all, it is that small.

So don't expect miracles out of China. What other news? HTC is so disappointed in Windows Phone 8, it is withdrawing its lowest-price (best-selling) Windows Phone smartphone, the 8C from many markets including the US. And Samsung? Is focusing on its new Tizen devices for next year, don't expect Sammy to waste too much of their marketing efforts on the undesirable Windows platform right now.

Kantar numbers suggest Windows Phone, after Windows Phone 8 has launched, will still sell less than Windows Phone did in Q3? That is very bad news for Microsoft and for Nokia. But now lets look at the shocker.

SYMBIAN SALES GROWING SUGGESTS KANTAR

And this second bit of data must be devastating for Espoo and anyone near Nokia strategy. It is now 9 months from the last new Symbian based smartphones released by Nokia. The model range is obsolescent. The customers are being peddled new Windows Phone based smartphones instead. Yet those old pesky Symbian based Nokia smartphones have many of the features and abilities that Nokia owners want - like great cameras, like real physical QWERTY keyboards, etc. And what does Kantar data suggest? Those 4 Kantar-reported regions, weighted average suggested Symbian sales in Q3 of 7.7% in these four regions. And now? They suggest 7.5% market share for the same four regions. After we factor in the growth in sales for the Christmas quarter, the data suggests Nokia Symbian sales have jumped from 3.3 million to 4.3 million !!!

KANTAR NUMBERS SUGGEST 6.8 MILLION TOTAL NOKIA SMARTPHONE SALES

Like I said, the Kantar numbers are very accurate in short-term forecasting smartphone OS platform performance for the current quarter. And these findings suggest total Nokia smartphone sales of 6.8 million units for Q4 which they also suggest, would split 4.3 million on Symbian (and MeeGo), and 2.5 million on all Lumia, old and new, on Windows Phone. So compared to Q3, when Nokia only sold the 'undesirable' and suddenly 'obsolete' early Lumia smartphones, and now when the new Windows Phone 8 has launched, Nokia Windows based smartphone sales would be down by 13% while the industry grew 30% in the same period (real effective loss in unit sales of 43% in a 3 month period, after the new platform had launched). I call this a disaster.

And the customers? They refuse Windows Phone but they still accept Symbian (and MeeGo). So Symbian/MeeGo sales would be up - based on the Kantar numbers - from 3.4 million in the last quarter to 4.3 million now - an increase in absolute terms of 27% in Symbian sales from 3 months ago, but after we factor in the market growth, its slightly less than the 30% growth of the market, so Symbian would only lose 3% of its share in this past 3 months - with utterly obsolete and uncompetitive phones! (and zero management support of any kind). Incidentially, my recent spot-check of Chinese online sales of handsets found two Lumia devices as Nokia's bestselling smartphones in China. And two Symbian devices - the 808 Pureview and ... the N8 !!! (Why does moron-CEO Stephen Elop not give us a Lumia with 12mp camera, if the N8, at two YEARS of age, still is a top 5 bestselling smartphone in the biggest smartphone market on the planet? Hello?)

And do you really want to cry? Nokia' second best-selling smartphone in mid December online sales in China was.. the N9 running MeeGo. A smartphone that is 15 months old, but still outsells all Lumia smartphones except one and outsells all Symbian smartphones by Nokia. Why is idiot Elop not fully supporting the N9, selling this magnificient smartphone in every market, and launching its sister phone the N950 to the world? What is wrong with the brain of the CEO? And why is the Board still allowing the clueless Microsoft Muppet to run Nokia. He should have been fired long ago. The worst CEO of all time! (PS the continued very strong sales of the N9 and MeeGo suggest very promising starts for two new smartphone operating systems that launch next year - Sailfish the MeeGo next version that will power Jolla smartphones from Finland; and the Tizen alliance which will see first smartphones launched by Samsung and Lenovo in 2013. Tizen is what Samsung too of Nokia-discarded MeeGo and its partnership, and transformed now as a Samsung-led Tizen alliance. With such partners - PARTNERS - as NTT DoCoMo, Sprint, Telefonica, SK Telecom etc - some of the biggest mobile operators/carriers in the world)

If Nokia smartphone overall number is 6.8 million for Q4, that would be slightly up, 8% up, from Q3 and no doubt, the snake-oil-salesman ultimate spin-doctor-in-chief Stephen Elop of Nokia would proudly celebrate that his smartphone unit had growth. Don't be fooled, as the market grew 30%, it means effectively Nokia lost more than one fifth (in mathematical terms, the competitive decline is 22% of its market share last quarter) of its feeble remaining market position just over the past 3 months. Not 'grew by 8%' but rather, lost one fifth of what remained. Nokia's market share in smartphones - which was 29% just 24 months ago - would now fall from 3.7% in Q3 to 2.7% now in Q4. This, if Kantar's numbers are accurately indicating the total global market reality. Do remember, that Brazil is included in this data, so its not just the rich world markets we are looking at.

WINDOWS PHONE EVEN WORSE

And Windows? The Kantar numbers do suggest Windows Phone sales collapsing from Q3 to Q4. Market share falling from 1.9% to 1.3%. Total global Windows Phone sales falling from 3.3 million in Q3 to 2.9 million now in Q4. What collaborative data do we have? We hear that in most markets the Windows Phone based Nokia Lumia smartphones have been selling out. Selling out sounds good. Until we see what trick Nokia CEO has now been playing. The Next Web quotes Elop and runs a story on 20 December explaining that Nokia has deliberately run low initial rates of Lumia 920 and 820 unit production for Christmas, to help create buzz and demand and a feeling of success. Elop admits in his CNet interview on 21 December that "there's frustration due to limited supply. Our focus is on broadening distribution."

Deutche Bank analysts have severely downgraded their Lumia sales numbers saying their market checks reveal far lesser actual sales than initial hype suggested. And remember, if the mix of Windows vs Symbian phones is now reversing to more Symbian, it means Nokia average sales prices would plummet for Christmas, and likely loss-making in the smartphone unit again increase. Last Quarter the Windows Phone unit made a 49% loss per every Lumia smartphone sold. How much worse can it get? 

Then the other Windows Phone partners? I mentoined HTC reducing its Windows Phone 8 offering, including pulling the HTC 8C from many markets and not launching its large screen Windows Phone smartphone. HTC is focusing on where the profits and customers are - on Android obviously.

We'll see soon enough in January, but yes, I am now quite confident in my previous early gut-feeling forecast number that 6.8 million is roughly the level of Nokia total smartphone sales for Q4. The mix of Lumia on Windows Phone vs Symbian is very likely to switch to more Symbian!! So I expect Nokia to have about 63% of its smartphones now in Q4 running still on Symbian/MeeGo and only 37% running on all variants of Windows Phone. 

Meanwhile, globally, Windows Phone would have something in the order of 1.3% market share for Christmas and sell 2.9 million units. It would still remain smaller than Symbian now 22 months after Elop decided to sacrifice Symbian and MeeGo instead of Windows Phone. When Palm - once the world's second biggest smartphone platform - had fallen to about 1% market share (and very unprofitable), it had its mercy killing, being sold to HP and ended. How long will Ballmer keep the massive-losses-generating Windows Phone platform even alive? It will soon go the way of the Kin and the Zune and Microsoft will shift its focus only on the PC and tablet side of the Windows 8 operating system.

How long does Nokia have as a company? I said a year ago it was a dead-man-walking. I expect Nokia to be sold any day now.. In reality, lets see how the US fiscal cliff is sorted out, some sanity and stability is restored to Wall Street, and perhaps all those giant tech and consumer electronics giants sitting on billions of cash, will finally feel it safe enought to start the bidding war on the corpse that is Nokia, mostly obviously for its rich patents portfolio - did you notice again, Nokia picked RIM's pockets again on a patents fight, like it did with Apple about a year ago, etc. So realistically? Lets say a good time frame for when the Nokia take-over battle will happen could be around February-March'ish of 2013.

For those who took part in our Crowd-sourced forecast, remember, a little over a year ago, I asked my Twitter followers to suggest what market share Microsoft Windows Phone would have now at Q4 of 2012. The forecasts ranged from 0.4% to 43.2% with the average suggested at 10.1%. Haha, if Kantar numbers do foretell a reality near 1.3%, then currently the nearest guesses are with Gibson Tang, Maarten Lens-FitzGerald, Josie Fraser and Ben Fletcher. Good luck to all contestants. See the full contest and all entries here: Crowd-sourcing a forecast for Windows Phone.

Note: an early edition of this blog posting mistakenly identified the HTC handset as 8X when it is the 8C that is being pulled. The blog is now corrected.

One plug - For anyone who needs data and numbers on the handset industry, remember my TomiAhonen Phone Book with all the charts, numbers, data you would ever need to know, in a convenient pdf eBook formated for small screens so you can carry all the data right on your tablet or smartphone.

 

First Look into Final 2012 full year market shares for smartphones and OS wars, the Top 3 are settled on both

The full-year 2012 race for smartphones has its Top 3 settled for both handsets and operatin systems. We have the RIM results for Q4 - 6.9 million units which is down 7% from Q3 and gives Blackberry about 3% market share now in Q4 both in hardware and the operating system race. It also gives us the numbers we need to be able to verify the top 3 for the full year for 2012, both in smartphone handset market and the OS market.


PLEASE NOTE - the actual numbers are now in (February 13, 2013) so please read the full Q4 and end of year 2012 smartphone market share numbers here. 



The top 3 in handsets for 2012 are settled. The exact number & market share are of course waiting for Q4 results data out in January, but the relative rankings are settled. The year was won by Samsung and Android. Congratulations. Here is the definite Top 3 for both charts, and the number range to expect for total sales for the year and market share as my best guesstimate.

TOP 3 SMARTPHONE MANUFACTURERS 2012
1 Samsung . . . . 220M - 235M units about 32% market share
2 Apple . . . . . . . 140M - 150M units about 20% market share
3 Huawei . . . . . . . 55M - 60M units about 8% market share
Race for 4th is between Sony, ZTE, Nokia and RIM (about 5% each)
Others in Top 10 for the year are HTC, LG and Lenovo (about 4% each)
Motorola has fallen out of the top 10 in global smartphone makers for hte full year
Source: TomiAhonen Consulting Estimates December 21, 2012
This data may be freely shared

And in the operating systems we also have most of the Top 6 settled, with only the race for fourth place still open, between Samsung's bada and Nokia's Symbian. This is the Top 3 definite and the other races for the top 6 operating systems in smartphones for the full year 2012

TOP 3 SMARTPHONE OPERATING SYSTEMS FULL YEAR 2012
1 Android . . . . . . 465M - 485M about 66% market share
2 iOS . . . . . . . . . 140M - 150M about 20% market share
3 Blackberry . . . . . 33M and about 5% market share
4th will be race between Samsung's bada and Nokia's Symbian (about 3% either)
Windows Phone is definitely going to be ranked 6th operating system by sales in 2012 (about 2%)
Source: TomiAhonen Consulting Estimates December 21, 2012
This data may be freely shared

The top 3 are definite for the year. I will keep monitoring the rest of the info. I cannot fail to observe the irony of it being now nearly two years from the Elop Effect and when Stephen Elop of Nokia exchanged the world's most used smartphone OS, Symbian, to a tiny start-up with 2% market share, Windows Phone. Now, almost two years later, Symbian has tumbled losing 9 out of every 10 customers it had, and even for this year, Symbian still outsold all of Windows Phone, even after those highly-hyped Lumia smartphones released by Nokia all through this year. What does the highly-promised 'third ecosystem' Windows Phone do today, after all those Nokia sacrifices? It will end the year with about 2% market share!! Yes, with full Nokia's sales power behind it, massacre'ing 29% of Nokia's Symbian market share, Elop has not moved the Windows Phone market share needle even by one percent!!! Windows Phone had 2% market share in Q4 of 2010, exactly two years ago, before this partnership was announced and now we know for a fact, Windows Phone will end with 2% for this full year market share after Nokia is fully oboard. Pathetic! Yeah. Dumbest management move of all time, no doubt. Why is Elop allowed to run the company? He is the most incompetent CEO of all time.

And PS - if you are still drinking that Windows cool-aid by Steve Ballmer, why is HTC reducing the availability of its low-cost Windows Phone handset the 8S including ending its US sales - while the world market in smartphones is shifting to lower-cost smartphones? And why is HTC also not releasing its promised large-screen Windows Phone 8 based smartphone? If Windows Phone was the success Ballmer (and Elop) are hyping, then HTC should be happily onboard. Look at the reality of the market, not the hype from the delusional CEOs... I warned you that Microsoft has poisoned all carrier relationships after it bought Skype. Since then the Windows partnership has lost Sony, LG, Dell (Motorola had already left) and now Samsung is shifting its focus in 2013 to Tizen. HTC is diminshing its involvement and Nokia is the dead man walking, about to drop out of the Top 10 biggest smartphone makers. Is this a 'healthy' third ecosystem or is this the last gasps of a smartphone platform that should be allowed to die in peace. Just for full year 2010, Windows smartphones on both Windows Mobile and Windows Phone had 5% market share and many of its partners were struggling even then.. Isn't it about time for Microsoft to admit, Windows on smartphones is another Zune, another Kin, another dead path..

For the installed base, we know the full Top 6. That race is so clear, the rankings are totally settled

TOP 4 SMARTPHONE OPERATING SYSTEMS BY INSTALLED BASE AT END OF 2012
1 Android . . . . . . .  about 710 million smartphones in use and 53% of global installed base
2 iOS . . . . . . . . . . about 260 million smartphones in use and 19% of global installed base
3 Symbian  . . . . . . about 190 million smartphones in use and 14% of global installed base
4 Blackberry . . . . . 104 million smartphones in use and 8% of global installed base
5 bada  . . . . . . . . . about 30 million smartphones in use and above 2% of global installed base
6 Windows Phone . about 20 million smartphones in use and under 2% of global installed base
Total smartphones in use at end of 2012 about 1.3 Billion across all platforms globally
Source: TomiAhonen Consulting Estimates December 21, 2012
RIM/Blackberry data final, other 5 (Android, iOS, Symbian, bada, Windows Phone) subject to final Q4 data
This data may be freely shared

And for Q4, RIM and HTC numbers suggest that HTC has fallen to about 8th and RIM to about 9th, both with about 3% market share. Last quarter we saw Motorola fall out of the Top 10 and this Q4 we may see Nokia follow, it is chased by Coolpad of China ie Yulong. I will keep us posted as the numbers come in. For those playing at home, I am modelling about 248 million smartphones sold in Q4 and 720M for the full year. There is some number out already suggesting the full year 2012 smartphone sales were 780M so we may be having a big Christmas season for smartphones, but lets not get ahead of ourselves. We'll know in late January and early February for sure.

And all who need more info about the handset market, remember my TomiAhonen Phone Book 2012 with all the stats and facts you could ever hope for in one ebook.