“The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.”

This is just one of many brutally honest statements from Nokia’s CEO, Stephen Elop written in what is now a famous memo allegedly sent by him to his staff (see full memo below).  In this memo he gives his unadulterated assessment of how and why Nokia have lost their footing in the global mobile device market to Apple and others. If you haven’t seen this already, it’s a must read!

Click to view in full size - 333 people's opinions of Stephen Elop's comments

Click to view in full size - 333 people's opinions of Stephen Elop's comments

I wanted to share this with our readers to talk about it from a leadership communication perspective, as it’s like nothing I’ve seen before. The memo Elop sent to his staff (originally published by engadget.com) is really quite disturbing in a way. But overall I think it’s positive. It’s my belief that you need to disturb people and make them feel uncomfortable about the way they do things now if you want to create radical change in behavior, which Nokia clearly need to as their survival seems to depends on it. Since this memo was sent, Nokia and Microsoft have announced a broad strategic partnership.  Nokia will release its Windows Phone 7 smartphone by the end of 2011.  This seems to be Nokia’s lifeline, and after reading Elop’s memo below, perhaps it is the only ‘platform’ possible from which to go about salvaging their lost market share.  Elop was employed by Microsoft as their President as recently as 6 months ago.

Enough from me. Here’s Stephen Elop’s memo to his staff below. What do you think?


 Hello there,

There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire. In mere moments, he was surrounded by flames. Through the smoke and heat, he barely made his way out of the chaos to the platform’s edge. When he looked down over the edge, all he could see were the dark, cold, foreboding Atlantic waters.

As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or, he could plunge 30 meters in to the freezing waters. The man was standing upon a “burning platform,” and he needed to make a choice.

He decided to jump. It was unexpected. In ordinary circumstances, the man would never consider plunging into icy waters. But these were not ordinary times – his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a “burning platform” caused a radical change in his behaviour.

We too, are standing on a “burning platform,” and we must decide how we are going to change our behaviour.

Over the past few months, I’ve shared with you what I’ve heard from our shareholders, operators, developers, suppliers and from you. Today, I’m going to share what I’ve learned and what I have come to believe.

I have learned that we are standing on a burning platform.

And, we have more than one explosion – we have multiple points of scorching heat that are fuelling a blazing fire around us.

For example, there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.

In 2008, Apple’s market share in the $300+ price range was 25 percent; by 2010 it escalated to 61 percent. They are enjoying a tremendous growth trajectory with a 78 percent earnings growth year over year in Q4 2010. Apple demonstrated that if designed well, consumers would buy a high-priced phone with a great experience and developers would build applications. They changed the game, and today, Apple owns the high-end range.

And then, there is Android. In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers. Android came in at the high-end, they are now winning the mid-range, and quickly they are going downstream to phones under €100. Google has become a gravitational force, drawing much of the industry’s innovation to its core.

Let’s not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally – taking share from us in emerging markets.

While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.

The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.

We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.

At the midrange, we have Symbian. It has proven to be non-competitive in leading markets like North America. Additionally, Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements, leading to slowness in product development and also creating a disadvantage when we seek to take advantage of new hardware platforms. As a result, if we continue like before, we will get further and further behind, while our competitors advance further and further ahead.

At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us.

And the truly perplexing aspect is that we’re not even fighting with the right weapons. We are still too often trying to approach each price range on a device-to-device basis.

The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.

This is one of the decisions we need to make. In the meantime, we’ve lost market share, we’ve lost mind share and we’ve lost time.

On Tuesday, Standard & Poor’s informed that they will put our A long term and A-1 short term ratings on negative credit watch. This is a similar rating action to the one that Moody’s took last week. Basically it means that during the next few weeks they will make an analysis of Nokia, and decide on a possible credit rating downgrade. Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness.

Consumer preference for Nokia declined worldwide. In the UK, our brand preference has slipped to 20 percent, which is 8 percent lower than last year. That means only 1 out of 5 people in the UK prefer Nokia to other brands. It’s also down in the other markets, which are traditionally our strongholds: Russia, Germany, Indonesia, UAE, and on and on and on.

How did we get to this point? Why did we fall behind when the world around us evolved?

This is what I have been trying to understand. I believe at least some of it has been due to our attitude inside Nokia. We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.

Nokia, our platform is burning.

We are working on a path forward — a path to rebuild our market leadership. When we share the new strategy on February 11, it will be a huge effort to transform our company. But, I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future.

The burning platform, upon which the man found himself, caused the man to shift his behaviour, and take a bold and brave step into an uncertain future. He was able to tell his story. Now, we have a great opportunity to do the same.

Stephen.


Please comment below, tell us your thoughts.     


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12 Responses to “Leaked: SCATHING self assessment from Nokia CEO Stephen Elop sent as a memo to his staff”

  1. Garry Wylie says:

    I believe that the Nokia CEO is correct about attitude being their #1 problem.

    Over a year ago my wife’s E71 died. She took it to a Nokia service centre and was told that it had water damage and was therefor not covered by warranty.

    She went back to Vodafone and they provided her with a new Blackberry. She also collected the “dead” E71 from Nokia.

    I had previously lost my E71 and was using an old 3110 so I put my Sim in the “dead” phone and it worked and is still working perfectly.

    Regards

    Garry Wylie

  2. Josh says:

    It’s about product experience. When given the choice between a N97 Mini and an Android based Xperia, my friend went for the Nokia. Having had an Android based phone for some time I was shocked at the amateur user interface. It was difficult to register key presses and it felt like the whole thing was from 2002! I couldn’t believe Nokia, whom had obviously made wise decisions in the past having provided me with 3 great successive phones growing up, hadn’t realised the importance of experience and gone with Android instead of developing their own half assed operating system. If I were them, I would go with Android quick smart, and work on great hardware, experience and service. They have already lost the lead… no point trying to reinvent the wheel now.

  3. Chris says:

    The phrase “Connecting People” is part of Nokia’s trademark. Fair enough. But I’ve read that Nokia’s lawyers are suing companies that even use the phrase in a sentence. What? Perhaps Nokia should invest more time making their phones competitive instead of trying to trademark the English language.

  4. Albert says:

    Timely reminder.Don’t be complacent of past success!!!!

  5. Phill Howlette says:

    So what was the boss doing while the platform was smouldering just before the blaze?
    It never ceases to amaze me that the top dogs always want to blame anyone and everyone else.
    Get over it and get on with improving your business.

  6. Steve Ludlow says:

    It’s worth noting that Elop started with Nokia only 6 months ago when he came across from Microsoft I believe, so he has probably spent the last 6 months trying to understand why they are so far behind and this memo is his summation.

  7. Djalma says:

    That was a much needed scold to the whole company and a wake-up call. This seems indisputable. However there’s another angle to it which seems to be affecting Nokia just as much. Their short sightedness regarding options and time. Josh (comment #2) has put it simply. Great sm phones with Android would give Nokia time if they wanted to devise their own ‘ecosystem’ while keeping or even increasing their market share. Elop who’s just joined the company has fallen prey to what seems to be group thinking while addressing the problem. As a recent market leader they refuse to consider joining someone else’s ecosystem. Setting up such a system from scratch takes much longer and will continue to hurt them even partnering with MS (or any other for that matter). Motorola realized that immediately, quickly recovering after adopting an existing platform.

    Elop’s words show he, himself, would have been a great change agent.

  8. marc zazeela says:

    There was a time when Nokia was one of the market leaders in mobile telephones. They were a darling of Wall Street. Seems that they caught some of what ailed the American auto industry, in the 1970′s. They became fat, happy, and complacent. Feeling invincible can lead to arrogance. Arrogant enough to think that they had their share of the market locked up.

    The one thing missing from this letter is Elop taking accountability. He is the proverbial ship’s captain and bears overall responsibility for the direction it takes. He talks about the arrogance and complacency. That usually starts at the top.

  9. Anandan says:

    To me, Nokia innovations are device based. They failed to realize how the phones could change present web enabaled services & networking. I honestly wanted to know how many researchers there in nokia in WEB innovation areas….

  10. Alper says:

    It is obvious that either Nokia does not care about User Research or they have to change their Research providers. Cellphone industry have matured to a point that User Experience, Usability and User Centered Design is more important than it was 10 years ago.

  11. Anders says:

    One significant miss in his analysis – where are we – the users – challenge, involve, ask, listen, implement wants and dreams? – nope – they are the significant part of the ecosystem – they are even delivering the cash-flow… :-)

    What ecosystem would be a game changer these days?

    The equation

    Two complacency systems with a huge customer base joining?

    Maybe if they start asking….

  12. Terry says:

    Nokia lost the plot when they did not spot that a phone is more than a communication device, but a fashion accessory as well. This started way back when clam phones first came out – they never really had one. Now they are focussing on the operating system .. who cares what it runs! Look at the Blackberry .. this is the same as the Nokia Communicator 12 years ago .. but it is fashion!!! Fashion, turn to the left, fashion!!!!!!!!!!!!!!!!

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