Nokia CEO: "our platform is burning"

By on February 9, 2011, 10:40 AM
Nokia CEO Stephen Elop sent out an intense memo to his troops today, as first reported by Engadget. He reiterated multiple times that the company is standing on a burning platform and that, as a result, a radical change in behavior must occur.

Elop's memo underlined how Nokia has been floundering while Apple and Google have been eating away at its market share. It's becoming more and more clear that because Espoo chose Elop, who is neither Finnish nor one with a Nokia background, the company is about to experience a serious shakeup. On Friday, at the company's Capital Markets Day event, we'll finally see what he has in store for Nokia.

Furthermore, Elop specifically mentions that MeeGo is not what the company thought it would be. On top of that, "Nokia has ended development of its first smartphone using its new MeeGo operating system before it was ever launched, two industry sources close to the company said," according to Reuters. While Meego smartphones seem to be going out the door, a Nokia Meego tablet seems to still be in the works.

Nokia adopting a third-party platform like Android or Windows Phone 7 is becoming more and more likely. This has been rumored before but we still can't say that it has been confirmed. Elop worked for Microsoft from January 2008 to September 2010, so many are leaning towards the company choosing Windows Phone 7 rather than Android.

You can read the whole memo below:

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.





User Comments: 23

Got something to say? Post a comment
Guest said:

The only thing I want to say is that we should all have a CEO that dares to say "We were wrong but let's try it again all together"

hassaan said:

Nokia ruled the world for quite some time... years ago. I can't count how many different handsets I had from them and I loved each and every one. Fast forward to today and I can't remember the last time I thought of them. Their focus and commitment to Symbian, imho, was their biggest mistake...

Staff
Per Hansson Per Hansson, TS Server Guru, said:

Wow, at first I thought TLDR but changed my mind...

This CEO atleast fully gets where Nokia is headed, I hope he can turn the ship around!

I'm still on a Nokia N82 and yet have not decided what I eventually want to upgrade to?

Guest said:

some bad news for Nokia.

Guest said:

after read this letter, the question is: Who wants a nokia?

Guest said:

Lighter than water. He could not have it said.

Jibberish18 said:

I read the entire email yesterday and I must say I really respect this guy. Has the balls to tell everyone in his company how it REALLY is. I mean they ALL must have known how it was but apparently no one had the balls to speak up or no one cared. Not sure which.

Archean Archean, TechSpot Paladin, said:

He seems to have grasped the problem, lets hope he can cure the ills with some smart decisions.

Now Per, whatever you may eventually buy, just stay away from Galaxy S !!!

Frankly I feel as if I made the wrong choice when I bought Galaxy S instead of Apple's brick (at least it seems more reliable despite being a hideous looking thing).

princeton princeton said:

Good job. You finally realized what the cell phone consumers have been stating since 2009.

ODEN said:

nokia had great hardware but worst software

I thing they should use android

dms96960 said:

Jibberish18 said:

I read the entire email yesterday and I must say I really respect this guy. Has the balls to tell everyone in his company how it REALLY is. I mean they ALL must have known how it was but apparently no one had the balls to speak up or no one cared. Not sure which.

+!

I'd hire this exec any day.

Guest said:

If Nokia goes WP7 or android , bye bye Nokia.

Symbian is the most secure and battery friend.

Android and WP7 software have lots of holes and are battery hungry, they are for kids to play.

Nokia for professioal workers.

Guest said:

No matter how good of hardware Nokia produces. And I think they produce some of the best mobile phones out there, but I will not by a single phone unless it is using Android.

JudaZ said:

Stil lsay its a hoax ...

none of the numbers add up, and the statments in the "memo" is untrue

America beeing the leading mobile market??

Everyone knows that its not. Its Japan, then rest of Asia, then Western Europe, then America and Middle east, then Eastern europe.

If this memo is true, Stephen has no clue about the company that he is suppose to be running, and totally missed that Apple is not a threat, Samsung is The biggest threat, and not because of Android alone.

Nokia is still ahead of the competition, and is not trying to catch up to anything.

Its everyone else catching up to Nokia, and that is a problem, but no one have reached that target yet, and sertanly not passed either

If this is really what Stephen Elop thinks, the boards needs to get rid of this unenducated psycopath fast.

aj_the_kidd said:

Thats all great but until they come up with a firm plan and action upon them, these words are nice and comforting but mean little until something actually happens

Guest said:

This was a brave statement by a CEO. Admitting that there is a problem. I owned Nokia 3650, 6680, N82, E72 and now an apple iphone 4.

Here in South East Asia, Nokia have been at the top during the last decade. Now, Samsung, LG and Apple are invading their markets here like a mushrooms in a rainy day. Before, If you have a Symbian Nokia Cellphone, you are seen as "cellphone god". I remember Nokia smartphone costs around $500 here, still many low income people would buy it just to have a nokia. If you want a cellphone with TV, radio, touchscreen, etc, many are sold here called China clones for around $50 and less.

Now, people here have grown wiser. Only Nokia loyalist would buy it just for the name. Why buy a $500 nokia smartphone when Samsung, LG and Apple have better overall device experience to offer at a same price. Symbian wasnt the best when your using it as an organizer. Syncing is a headache. Blackberry was the best but isnt popular here. Now, everyone wants an iphone here. Apple;s app store is the best i think better than android market. Ask people here, Samsung Galaxy and Apple Iphones are the best phones they want to have.

Im glad the CEO seen iphones as hi-end. yeah they costs more but truly the experience is what youre paying for.

As for android, Im still waiting for a tegra 2 android until i buy it. I LOLed when he said that android are mid-end and mainstream.

nevertheless, I will not buy a hi-end nokia phone again. Im sorry Nokia. RIP Nokia.

Guest said:

You will see when the professional workers do not have jobs.

leondobr said:

Hardware companies that ride a wave get upended when the next one comes along unexpectedly and they don't catch the new one. This has happened so many times in the computer industry. Anyone remember Digital Equipment, or Wang, or Prime? All minicomputer makers that became bloated and complacent and were crushed by PCs.

Nokia is going to have to change its corporate culture, its bloated staffing levels, and redefine the business it's in, or else it will become yet another has been. Only IBM, Apple, and maybe HP have been able to pull off this trick with notable success. And the jury's still out on HP.

hitech0101 said:

2 years later maybe nokia would have made a comeback and some other ceo might be writing a similar letter they can bounce back if they really want to.

Tanstar said:

Solid memo and I like the way he doesn't hold back.

Archean Archean, TechSpot Paladin, said:

Only IBM, Apple, and maybe HP have been able to pull off this trick with notable success. And the jury's still out on HP.

I would say jury is also out on Apple, as its 'closed' ecosystem has its advantages, but can it survive for foreseeable future considering how quickly Android has been eating into its mobile business?

Jibberish18 said:

JudaZ said:

America beeing the leading mobile market??

Everyone knows that its not. Its Japan, then rest of Asia, then Western Europe, then America and Middle east, then Eastern europe.

If you're talking about SmartPhones, you're wrong.

Jibberish18 said:

BTW I love how people come in and vehemently defend Symbian.

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