Forget the spin, we're doomed: Nokia boss does a Ratner
Thursday 10 February 2011
As rallying cries go it was less "we will fight on the beaches" and more "we must plunge into the icy sea".
Nokia's new chief executive has issued a brutally frank memo comparing his struggling company to a man on a "burning platform" who must make a potentially fatal leap into freezing water to survive.
Admitting that Nokia was in a state of crisis could prove to be a "Ratner moment" for Stephen Elop, the former Microsoft executive who took over the Finnish handset manufacturer in September. But his blunt admission that Nokia needed radical change was also praised as a smart PR "fightback" strategy. The company's share price rose yesterday amid speculation that Nokia will unveil a new smartphone initiative on Friday.
In the memo, which was leaked to technology website Engadget, Mr Elop admitted Nokia had been comprehensively outmanoeuvred by Google's Android operating system and Apple's iPhone. The company's profits are eroding at a rate of 20 per cent each quarter.
The Canadian compared Nokia's plight to an oil worker faced with a choice between remaining on a burning platform or jumping into the icy water below. "We too, are standing on a 'burning platform', and we must decide how we are going to change our behaviour," Mr Elop wrote. "The first iPhone shipping [was] in 2007, and we still don't have a product that is close to that experience. Android came on the scene just over two years ago, and this week they took our leadership position in smartphone volumes. Unbelievable."
Although Mr Elop's memo shook his employees, it was well received by analysts and technology bloggers. Twitter respondents praised the chief executive for being "very clear and honest". "Shows how the mighty have fallen," wrote one.
Mark Borkowski, a leading public-relations consultant, said: "There's a danger when a motivational message intended internally seeps out in to the public domain. Mr Elop now has raised expectations that he has to live up to. He's let the genie out of the bottle."
However, damning your own business is a high-risk corporate strategy. When Guy Hands bought EMI, the financier accused staff of wasting money on "fruit and flowers" and told artists to work harder. EMI lost the services of Radiohead and The Rolling Stones shortly afterwards.
Mr Elop largely avoided the derision heaped on Gerald Ratner when he said in 1991 that his jewellery stores sold "total crap". After attacking the past, Mr Elop is expected to unveil his strategy to turn Nokia around in London on Friday. There is speculation he will unveil plans for a Nokia tablet device, or his intention to clear out a tranche of the company's senior management and announce new smartphones that use the Android or Microsoft's Windows Phone 7 operating systems. Nokia's management are prepared for the worst.
Mr Elop wrote: "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."
Nokia's share of the global smartphone market fell from 47 per cent in 2009 to 38 per cent by the end of 2010, according to the research firm IDC.
Stephen Elop's memo in full
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 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 seconds to react. He could stand on the platform, and 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. And, we have more than one explosion – we have multiple points of scorching heat that are fuelling a blazing fire around us.
Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem. And then, there is [Google] Android. In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers.
While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, we lost time. We thought we were making the right decisions... 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.
Consumer preference for Nokia declined worldwide. In the UK, our brand preference has slipped to 20 per cent, 8 per cent lower than last year. That means only 1 out of 5 people in the UK prefer Nokia. 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.
Nokia's fall in numbers
36.4% Nokia's share of handset market in 2009.
46.9% Nokia's share of smartphones in 2009.
28.9% Nokia's share of handset market in 2010.
37.6% Nokia's share of smartphones in 2010.
22% Fall in Nokia's pre-tax profits, to €833m (£718m)in Q4 2010.
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