Nokia’s new CEO needs to change the message
Elop must not pander to the markets
Nokia held its annual Nokia World event in London this week, with the usual series of handset launches, developer love-ins and promises to address its weaknesses in high end smartphones and north America. But all this was overshadowed by the ousting, just the week before, of CEO Olli-Pekka Kallasvuo, quickly followed by his closest lieutenant, Anssi Vanjoki.
The change of faces – even incoming CEO, Stephen Elop of Microsoft, put in an appearance before he formally takes the helm – was so dramatic as to obscure the fact that Nokia's messages hadn't changed very much. In many ways, this was a re-run of major Nokia events of the past two years, reiterating key strategies to build on the huge lead in emerging markets, to succeed at last in the iPhone-style smartphone and the US, and to transform from a hardware maker to a mobile web services giant. And all the while, maintaining market share and protecting margins by leveraging Nokia's scale, reach and famous supply chain.
The need for a new approach
This is all very well, but if Nokia still believes these strategies are sufficient to maintain and enhance its market dominance in future, why is it getting rid of Kallasvuo, the architect of most of them? Along with the faces, perhaps the messages should change too? For a start, Nokia should stop trying to pretend it wants to be Apple, and talk up its own strengths and plans.
Perhaps Elop's remit is to plot a new course, but his hasty appointment looks like a sop to highly western centric markets, so he seems unlikely to be brave enough to steer Nokia dramatically towards a strategy that takes advantage of its power, rather than leaving it playing catch-up – in other words, a strategy to dominate the growth markets of the future. And if that means staying in a bit-part role in the US, fine – Motorola, at the height of its success, usually did quite nicely with a bit-part role in Europe, after all.
In other words, new CEO or not, some different debates needed to be conducted at Nokia World. There should at least be discussion of whether Nokia should stop fretting about north America and give it up as a bad job, focusing on markets where Apple hardly figures but where the Finnish giant can enjoy huge share and growth? And if the answer is that US presence is vital – to market and investor perception if nothing else – then Nokia needs to stop thinking it can win that war by trading handset spec sheets, in its time honoured fashion, with Apple and Google. It has consistently beaten Apple, and most Android products, hands down in terms of features.
But that is not why two companies with no track record in mobile have dented Nokia's image so badly – it is because the Finn's marketing and image making is so poor. In terms of creating markets and channels, it is excellent - but the more "magical" side of marketing, at which Apple still excels despite Antenna-Gate, continues to elude. So perhaps choosing a CEO from a company with no track record in mobile is not such a bad idea – except that, rather than tapping Apple or Google, Nokia has gone for Microsoft.
Elop will need to cast off his Microsoft past and change the terms of debate even before he takes on the ongoing challenges at Nokia – the ones that really decide the company's fate, like ruling the supply chain with an iron fist; shortening the design cycle for mass market devices while keeping costs down; wooing operators the world over, and steering the painful progress towards web services.
Nokia chases the wrong dreams
Even if he addresses all these areas effectively, this will count for little among the mobile chatterers and the stock markets, unless he also weaves a new spell around Nokia. The firm's backers dream of a killer handset with a PR message to match, iPhone-style. Most companies never produce one of these (though Samsung, against the odds, is making a great attempt), so Nokia may have to do something different.
Nokia is often accused of arrogance, but its current problems sometimes lie in listening to the markets too hard, especially US players, who have little perception or understanding of the firm. When Nokia is told it is a smartphone failure, it accepts that, rather than pointing out that it has maintained its smartphone market share despite the torrent of new competitors – but it has very different go-to market strategies and target user bases to those of Apple.
When it is told it needs a new CEO, it runs off to get one, even though the chief comes from Microsoft. But he is north American and the very fact of hiring a non-Finnish new face boosted Nokia's share price.
When US analysts extrapolate their ideas about Nokia to its whole global base, the mighty Finn hardly contradicts. One of the most insightful comments from a Nokia World blogger came from the always intelligent GigaOM, who summarized the gulf of understanding that weighs Nokia down.
He wrote: “It‟s almost a challenge for me to believe the many positives I heard, simply because Nokia and Ovi aren't strong brands in the US. Looking from the perspective of developers that market their wares in 190 countries, however, provides a totally different picture. Happy developers should foster happier Nokia customers due to richer, compelling apps that are easy to buy.”
This contains more insights for the new Nokia management than half the management consultancies they may hire. In other words, leverage the scale, the massive user base, the enthusiasm for the brand – outside north America – and some of the magic will follow.
New faces, same speeches
Unfortunately, the man most likely to achieve that, Vanjoki, is departing. Sometimes called Nokia's Steve Jobs, Vanjoki understood - unlike Kallasvuo and his other main sidekick, Niklas Savander - that it is vital for a company to address and create perceptions as well as facts. There are few signs that Elop has the charisma or weightiness to do this, though we may be proved wrong. Certainly, there was little attempt to do so at Nokia World. The man on the stage may have been different from last year, but the opening of Nokia World took a similar tone.
Like Kallasvuo in 2009, his stand-in Niklas Savander hurled upbeat slogans (“Nokia is back!”), new devices and a storm of sheer statistics to remind the audience that the Finnish giant remains the industry leader in mobile devices. Had this been an Apple event, he would have been greeted with cultish applause. Since it was Nokia, most analysts decided Savander was being “defensive” in promising a 100-carrier launch at week one for the new N8, and boasting that Nokia sells over a quarter of a million smartphones every day.
Elop was welcomed in Savander's keynote, but he was not present at the opening day, so it was left to his deputies – including Vanjoki, who is on six months' notice – to try to address perception as well as reality, and convince the world that not only is Nokia back, but it never entirely went away. As we have said, this will take more than statistics, although as in Kallasvuo's past speeches, there were plenty of them, designed to impress 1.3 billion Nokia phone users in the world; pre-orders for N8 exceeding those for any previous device from Nokia; 364 million Series 40 handsets sold last year; and so on.
But Nokia needs a new message, and Savander did not deliver it (perhaps because he was likely using Kallasvuo's script). "We haven't been as competitive as we want to be in smartphones. That's about to change," he said. "Today, we shift into high gear in Nokia's fight back in smartphone leadership."
This was almost verbatim what his outgoing CEO said at last year's Nokia World. The markets didn't really listen then, and they won't now, until Nokia's new products and its new web services start to ignite the developers and the users again.
Next page: New handsets
Vanjoki is no great loss
Some of us at Nokia, although a bit shocked, are not sorry to see Vanjoki go.
This was the man who said Nokia would never make a clamshell phone - just months before Motorola released the RAZR and swept the board with it. Nokia's clamshell effort was pathetic.
This was the man who presided over the ovi debacle, which is still playing out like a really slow-slow-motion car crash - just ask the poor people who try to use ovi.
He may have been a visionary, but he should have gone to Specsavers.
Anonymous for obvious reasons.
Don't Blame the Messenger
This article is very interesting, but I disagree with several of its premises.
Nokia’s current problems do not “lie in listening to the market too hard”, in fact I would suggest they may lie in not listening hard enough. Because they didn’t listen very well, Nokia misallocated billions of R&D spend over the past few years (spend which by the way dwarfed that of Apple and Google in their mobile divisions) and allowed iPhone, and now Android, operating systems to emerge to capture not only the fancy of technologists, mobile operators, and investors, but of actual consumers of mobile phones.
Moreover, Nokia didn’t “run off to get” a new CEO after being told to do so by the investment community. Nokia in fact has heard suggestions from investors that they should become a little less Finnish for quite some time now. The signal that likely tipped the scales against Mr. Kallasvuo was from former customers. Customers who replaced their Nokia handsets with those of other vendors, particularly at the high end. Consequently, Nokia’s market share, particularly in “smart” devices, plummeted drastically, and in short order.
Also, point of fact, the appointment of Elop did not “boost Nokia’s share price”. The stock indeed tried to rally sharply on the announcement, but closed the day up less than a percent; and by the end of last week was down 1.5% since the appointment was made. Mr. Market isn’t interested in superficial pandering, he is interested in results.
I agree that the debate about whether or not Nokia requires a significant US presence is arguable from either side. However, I would suggest that Motorola’s lack of penetration in Europe is not a blueprint for potential long-term global success at Nokia. Believe you me, Nokia doesn’t want to end up like Motorola. In just three years since Motorola stopped selling the original RAZR – when Motorola’s was the number two handset vendor globally – they have practically fallen off the map. Motorola should be no one’s poster child.
Nokia’s head has been in the sand during this period too, and they ceded share in “smartphones” in dramatic fashion. The concern today, of course, as that the “low-end” phones of today (where Nokia still has significant share) will become “smart” devices tomorrow, and thus Nokia will suffer a fate similar to Motorola’s.
Contrary to the title of this article, Elop must listen to the market very carefully, and learn from it. Otherwise the potential consumers of Nokia’s phones or investors in their shares will stay way.
He must swiftly and correctly determine which platforms will attract developers (and thus, the US presence might be a little more important than suggested in this article). Apple and Android are clearly attracting attention from the development community, and thus iPhone and Android apps are better than those on Nokia phones. That’s simple mathematics. Meanwhile, Microsoft isn’t going to sit idly by either, and the early line on Microsoft’s latest offering is that it is even easier to develop for than iPhone (and maybe Android too). So, there is competition for Nokia from Android, iPhone, Windows Phone 7, and don’t forget Blackberry. Does anyone really think that developers will write code for five different mobile operating systems? If not, where will that leave Nokia? Perhaps Nokia’s customers and investors have already figured that one out.
Ovi out of sync
I think that one reason Nokia is losing market share on smartphones is that if your read their support forums, and from my own experience, the Ovi sync software is causing many users major problems which Nokia are simply not responding to anwhere near adequately or quickly enough. I would love to see the return rates and cancelled contracts - companies with thousands of users have allegedly stated via the forums that they are finished with Nokia because of loss of productivity due to these issues. So whilst everyone focuses on the phones, which I have to say are superb and better than apple, the real deal killer is the crap supporting software.