Last week’s announcement of the latest setback’s at Nokia is saddening, to say the least.
I had a good innings at Nokia. As I wrote in my internal farewell note, I joined the company when the stock price was around 2.7 Euros, which was the same when I left. It had been a roller coaster ride – the stock went into the 60′s during this period.
The announcements made me look back on what went wrong and think about what the future holds.
I do not profess to be an expert, but here are some of my personal opinions.
First, however painful the recent cuts are, I join the majority view that it was necessary. Where I possibly differ is that I believe the bulk of this could have been done a year back.
Second, much as I see the negative comments around the CEO, Stephen Elop (Tomi Ahonen’s blog is one of the most vocal), I respect him – as a person. Having met him and seen him engaging with the workforce, I have no doubts about his sincerity nor his desire to do the best for the company. I do, though, now question whether he was ever up to the task he was selected for. That is something the Board should answer to, not Stephen.
And lastly, as far as the future goes, I have bought some Nokia stock. Pretty much turn it any way, it looks like it is value for its money now. Especially, as I personally believe it is a matter of time before it will be bought. (Note : this is pure personal opinion and not an advice in any way)
So, what went wrong ? Partly, it is the nature of the beast. When you get to No. 1 as rapidly as Nokia did, it is tough to hold on to the position. A small company challenging the giants has a very different style, culture and management from one that is trying to defend or grow from a No. 1 position. And when the growth is rapid, it becomes near impossible to institute the changes required at the same pace. Nokia knew where its problems were when the disastrous N97 was brought to market – that was when Stephen (or someone external) should have been brought in. By 2010, when the change came in, it was a bit too much, too late.
One of the most painful observations I hear was that Nokia was too late with Smartphones and Apps. Nokia literally created the Smartphone segment with its communicator ! And 3rd party developers were invited to develop Apps at the same time – almost 15 years back ! If anything, Nokia was too early with these. But the fact that I get that comment from even the relative tech savvy crowd I frequent says volumes about the botching up on the lead.
And that points to the other aspect of what went wrong. Nokia pretty much anticipated the trends and even took the lead in responding to them (too early, sometimes). The communicator, Club Nokia (delivering ringtones and other personalisation services),Music, Maps, etc. - were all considered strategic moves that could have kept Nokia ahead of the competition. What broke down was the reason why working for Nokia was such a great experience – empowerment. Small units (and even individuals) were responsible for and empowered to act to deliver on their objectives. Unfortunately, when you need a strategy change, you need everyone to pull to the common strategic objective for long term results. Nokia, however, was doing so well on short term objectives (sales, margins) and the empowered teams prioritised those over the strategic ones. So, while the company knew where it wanted to go, the work of those teams that delivered the great growth was sometimes at cross purposes. Essentially everyone was not rowing in the same direction and the leadership could not make that happen.
But, then Nokia decided to stir things up bringing in a new CEO. Well, obviously, the game is not over yet, but with it coming up to 2 years of the new CEO, it does not look good. So, here’s my take on a few of the key decisions.
1. Nokia was a large company. However hard Stephen worked, one person could not change everything. But he has been trying. Most of the next level were left in place, making change difficult to really happen. Yes, that has been corrected now. But now is it too late. Two years back, Stephen could have got external talent to have come in. Now, he has had to depend on promoting within. The changes were left too late.
2. The Windows phone decision will be debated for ever. Yes, it was infinitely better than choosing Android. But, having decided on Microsoft, the biggest mistake then was to have limited it to Smartphones. Tablets were not included (Microsoft launched Windows 8 later, which explains why they did not want that included). Simple logic would have shown that Smartphone market would be tough to gain leadership back in. Even the most optimistic of analysts look at Windowsphone market share to be in second place in 2016. And that is still an estimated 20% of the market. Given there are other manufacturers who are already active and new ones will join if traction for WP takes up, it does not leave Nokia with much room to create a smashing success story. So, while Smartphones would have been good to keep cash coming in and keep a presence, the bet should have been on the future. With Windows just announcing their own tablet, the oversight of not having Tablets in the original agreement (when Nokia was in a position of strength to negotiate) was a big mistake.
3. The Symbian decision is another that has drawn flak. I’ll break ranks with the majority opinion that it should not have been done in Feb 2011. The mistake in that announcement was not that the end of Symbian was announced. It was that a plan to sell another 150 Million devices was announced. Someone obviously did not understand the business dynamics and thought the sales could be kept up. It would have been easier to bite the bullet, declare the demise and shut down ASAP instead of having dragged it on for this long. Many of the cuts that will happen now could have been done a year back if the assumptions were done right. As it stood, all it did was was divert the focus and resources of the company from a new child to a patient already declared dead.
4. The Meego decision. This is something I’ll always find it difficult to understand. Yes, it was not doing well. But, the new CEO was specifically selected for his expertise in managing a software company. And the first major decision he made turned the company into a hardware company – that does not seem to be right use of the expertise. Everyone knew software development was screwed up in Nokia. Someone with experience in software focussed company should be fixing it, not ditching it. Having said that, it was surprising Nokia still went ahead with the N9 launch (again trying to pump life after writing a death certificate) and continued to invest in Meltemi (which was supposed to have taken parts of Meego). The latter, at least, is expected to be corrected in the latest announcement.
So, is all hope lost ? I don’t think so. Nokia is still a great company and it has turned around before. But, as with all its previous turnarounds, it will need even more painful decisions.
Given where it is, I guess focus is what is needed. Nokia has made a big bet on WindowsPhone and on N. America. Go for it. If the company can make a significant breakthrough in N. America early enough, there is definitely hope. Given that cost pressures remain high, I hope the latest restructuring will clearly bring that focus. Once Nokia demonstrates it can make an impact, maybe Windows 8 based Tablets (and other devices) could be something Microsoft will consider doing with Nokia. Though I am not a Microsoft fan, I think they have something going with Windows 8. It is a great opportunity to bridge between their still dominant Windows base and the new consumers. It may well be a Go for broke ! approach, but well, isn’t that where Nokia is headed anyway ?