Nokia’s new CEO needs to change the message

Original URL: https://www.theregister.com/2010/09/19/nokia_new_ceo/

Elop must not pander to the markets

Posted in Networks, 19th September 2010 08:00 GMT

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.

New handsets

The devices designed to lead that charge were unveiled by Vanjoki – though, disappointingly, no MeeGo products will be launched this week, even while Intel chatters away about the jointly-owned OS at its own IDF event across the pond. The quartet of phones will bear the burden of Nokia's turnaround plans during this year's holiday period, and their details, well rehearsed in advance, are solid enough.

The question is whether Elop and his team will be able to weave the spells around them to lure consumers and make them stand out from the crowd of Android, Apple and other competitors. Vanjoki introduced the new phones – the C6, C7, N8 and E7. The E7 is a high end for the enterprise focused "E" Series, so far the most popular with the hard-to-convince US carriers. It has a four inch touchscreen display and slideout Qwerty keyboard, and when closed, looks like its new stablemate, the N8.

The N8 was launched so long ago there was scarcely anything new to say, but its stand out features are the 12-megapixel camera and associated video/image capabilities, and the new Symbian platform, which Nokia now calls "the new Symbian", dropping the awkward Symbian^3 label. This comes with various improvements, notably an upgrade to the already popular WebKit Series 60 browser, but the full user experience will be detailed later in the event (and some elements will have to wait for Symbian^4 next year).

The C6 and C7 are the no-brainers of the event, since they fall into Nokia's almost undisputed heartland of the mass market smartphone, for prepaid, budget and emerging markets. The C6 is a small phone with a new user interface, while the C7 has a larger screen and a thinner body. "The C7 is the sleekest, smoothest device in the world. No doubt about that," Vanjoki said.

Support from a US operator would have been valuable to bolster credibility in Nokia's most sceptical market, but instead it fell back on its old love/hate partners, Vodafone and Orange. In a guest keynote, Vodafone CEO Vittorio Colao said: "Everybody north to south, rich to poor must be thought of as a data customer”, highlighting the broad reach that explains why Nokia retains smartphone market share (even as its margins slide) and remains in a different category from Apple and RIM, though increasingly chased by Samsung.

Geographical polarization

Time and again we come back to it – Nokia is a truly global player and should trade on that rather than getting over obsessed with the US. As the US carriers start to fall out of love with Google and Apple, Nokia may (ironically given its track record with US operators) win more favor, as a company that is positioned as the friend of the carriers and their business models, not the harbinger of a new open world - though it always has MeeGo as its fallback option when that open world materializes.

Another reason for Nokia to focus on its emerging economies – the open web/cloud model is a decade away and the power of the device makers and operators will persist as long as users lack the ubiquitous, reliable connections to support the new way of working).

But unless the US cellcos come running, there are far easier battles to win. The executives stressed the increasing polarization of Nokia's power base – in north America, despite many recent efforts, it still has under four per cent market share. In some newer markets like India, it has over 70 per cent share and massive brand recognition.

Colin Giles, senior VP and head of global sales, faced up to the US failure and vowed to re-enter that market – a promise Kallasvuo has made at least two years running. And like those previous promises, there was little to back them up, since none of the quartet of new smartphones unveiled at the conference are bound for north America, as yet at least.

"We're not happy with our current situation in the US, and we're looking for ways to enhance our position in the US market," Giles said on an analyst conference. "But we can't do everything at once. We need to focus on what we do well. And that will open up a cou ple of operators to us."

He said there were no plans to make CDMA handsets, but Nokia aims to get into CDMA carriers like Verizon Wireless and MetroPCS as they launch LTE handsets. The firm also believes its new MeeGo OS will raise its US profile by targeting new device formats and the hi-tech community and also because it has Intel's support.

It was notable that Elop's first public appearance before the Nokia crowd centered on emerging economies. He turned up for the closing speeches, and mounted a clear appeal to the Nokia developer community to keep the faith. In his surprise appearance, he announced the winner of a $1m investment as part of Nokia's Venture Challenge Award for use of technology in the developing world (the winner was Virtual City of Kenya). With many echoes of his current boss, Microsoft's Steve Ballmer, he said Nokia could create great devices but needed developers to bring its ecosystem alive.

"I love developers because you bring the ecosystem to life," he said, in a style that will make some of Nokia‟s less extrovert Finnish executives wince. "I'm impressed and humbled that you take our platforms and do things we would never had thought of."

Mary McDowell, EVP of the mass market Mobile Phones division, used her keynote to focus on the low end Series 40 software plat form and play up the emerging markets message. “Nokia is incredibly proud to bring the internet and mobile devices to people in every corner of the world. If the internet is the great equalizer, then mobile is the great enabler,” she said.

She pointed to the Ovi Life Tools apps – which cover areas like agriculture, e-learning, plus email for those with no PCs and no other internet and Nokia Money. These were “two critical services designed to improve the lives of people in rural parts of developing countries”, she said, claiming 4.7 million active users of Life Tools across China, India and Indonesia.

Among the feature phones geared to cost-sensitive markets, often with slow networks, the C3 Qwerty device has been particularly successful, with “long lines” in India and Vietnam, while the X3 Touch and Type recently went on sale in China. Unveiled at the show was the C3 Touch and Type, which includes 3G and WiFi connectivity.

As low end markets demand smartphone type capabilities, and get 3G, Nokia is enriching the Series 40 platform, improving the user experience and adding its own version of Ovi Store, focused on localized apps and those that do not require full smartphones.

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