Killing Nokia. Frank Confession of the Former President of the Company, continued

Hey.

In the first part of this material, we focused on what led Nokia to collapse and who became in this process Risto Siilasmaa, who came to the company as an independent director and later became president. In his book “Nokia. Survival strategies ”, he reveals many details of what happened then, but gives his own interpretation of events. I have a completely different view of this. What happened to Nokia could not lead to the death of the company. Perhaps a drop in market share, a crisis, but not the disappearance of Nokia smartphones, the closure of Symbian and other promising areas. Please read the first part of this material so as not to get lost in this text. This is a story of betrayal that requires a detailed story.

On January 22, 2011, a week before the Nokia board meeting, Stephen Elop gathered all the executives who had an idea of ​​the plan to ditch their own operating systems. At this meeting, there was no talk about any attempts to preserve their own platforms, to continue their development, the question was much simpler – what to choose for your own smartphones, Android or Windows Phone. Stephen Elop actually made the decision about the death of Symbian, the termination of the development of MeeGo, as well as Meltemi, it only remained to convince everyone else of this so that there would be no surprises later.

For the previous several months, all information was presented exclusively in black colors to Nokia’s management. If you believe these words, then the company had no future, it was already collapsing from the inside and time was playing against it. The death of Nokia was a foregone conclusion, as those who were supposed to keep the company and develop Nokia’s business said.

For top managers, such radical views are rare, they usually take a moderate position and do not speak out so harshly. But inside Nokia everything was exactly the opposite, the anomaly was that the company’s CEO, Stephen Elop, exaggerated about every aspect of what was happening at Nokia. Anything that could be shown in a negative light appeared in it and a little more pessimism was added to it.

Fraudsters often use the same trick that Stephen Elop did inside Nokia. They put their victim in front of the need to make a quick choice, not to hesitate for a long time, but to decide on a step that will correct the situation. For example, someone from the bank’s security service calls you and claims that your money can be stolen; in order to secure it, you need to dictate a code that the employee will send to your phone. The whole conversation with the victim is on the rise, there is emotional pumping (the threat of losing money), the inability to take a breath to think and, as a result, the wrong decision. The victim should not be able to think and realize what is happening – she needs to react and this will allow her to be stolen. About the same trick was done inside Nokia, the gradual escalation of the situation, the isolation of individual leaders who could act in opposition and the lightning speed of decisions.

At the meeting, it became clear that Stephen Elop, between Android and Windows Phone, is leaning towards the second option. But he did not put pressure on the audience, he offered to speak. It was a training session in front of Nokia’s board of directors, the voting did not play any role, but it was important in order to see the balance of power. All voted unanimously to choose Windows Phone as the only system and against Android. It also meant ditching all of Nokia’s own systems.

A consultant from McKinsey who worked on the Sea Eagle project, investigated the possibilities of Nokia, was the only one who at that meeting objected to the choice of Windows Phone, here is a quote from the book, “The only difference between the two options is that Windows Phone gives us everything in black. white paints. He has to fit Nokia well to win, otherwise Nokia’s story will come to an end. In the Windows Phone scenario, Nokia will become the largest seller of the system. For an ecosystem to be successful, it needs to reach a certain size. Having reached these dimensions, Nokia will automatically begin to prevail in the market. But if this critical mass is not reached, Windows Phone will crash and Nokia will crash. There are no intermediate positions here. And with Android they are. “

The McKinsey consultant was not a prophet, he just turned out to be a sane person that correctly assessed Nokia’s prospects on this road. The entire top management of Nokia supported Stephen Elop that he chose Windows Phone as the uncontested future for Nokia. At all subsequent meetings of the board of directors, where a man from McKinsey was present, he did not express any more objections, according to Risto Siilasmaa, he did not want to oppose Elop, but rather to be on his side. His report could be interpreted as support for Windows Phone and the chosen path. “We all wished Steven the best of luck. We all wanted him to be right, ”wrote Risto Siilasmaa about this day.

On January 26, at a meeting of the board of directors, the choice of Windows Phone is approved. But in theory it is still possible to play back, as on February 11, 2011 in London will be “Investor Day”, an event where Nokia investors will discuss the company’s plans and results of work.

To finally outline the situation inside Nokia, it should be noted that top managers did not receive any information about Microsoft’s capabilities for the development of Windows Phone, according to which price segments the company was targeting. Risto Siilasmaa claims that Nokia trusted the capabilities of Microsoft and did not test them. At the time of discussion of the choice of Windows Phone, this platform had only 8 supported languages ​​(versus almost fifty for Nokia), which sharply limited the geography of sales. And the approach of Microsoft, which he voices on the pages of the book, was as follows – only the American market plays a role, smartphones must have an English-language interface with a set of programs that are popular in the United States. Moreover, these should be smartphones of medium and high prices, those devices that will appeal to Microsoft employees. None of this was discussed by the top management of Nokia, the only thing that was enough was Microsoft’s promise that they would do their best to make the cooperation successful. This story seems surprising, but it is the correct preparation of information, the recruitment of supporters inside Nokia from Elop, one of them was, willingly or unwillingly, Risto Siilasmaa.

Stephen Elop’s Public Betrayal – Burning Bridges

Stephen Elop’s problem before Investor Day was simple, the support of top managers did not mean that on the part of investors, and Nokia employees were clearly not on his side, many saw the prospects for both Symbian and MeeGo, Meltemi. Nokia engineers understood that all problems can be solved and nothing fatal happens inside the company. In voicing his plan, Stephen Elop threatened to run into opposition from ordinary Nokia employees, who could mix all the cards, he needed to work proactively, to make sure that the voices of Nokia employees were not heard.

On February 8, 2011, Elop strikes Nokia, which can be considered fatal. The company’s CEO, on his behalf, is sending out a letter to employees depicting the horrors of Nokia’s plight and announcing that the company will announce its new strategy on the 11th. Read this letter, it tells you a lot about what Elop did.

Hi,

There is a story about a man who worked on an oil platform in the North Sea. One night he was awakened by a loud explosion, his oil platform was on fire. In a matter of minutes, fire was everywhere. Through the smoke and heat, he barely made it to the edge of the platform. He looked down over the edge, and all he could see was the dark, cold waters of the Atlantic.

As the fire approached, he had a few seconds to react. He could stand on a platform and inevitably be consumed by the flames. Or he could dive 30 meters into frozen water. The man was standing on the “burning platform” and he had to make a choice.

He decided to jump. This was unexpected. Under normal circumstances, a man would never have thought of jumping into icy water. But these were not ordinary times – his platform was on fire. The man survived both the fall and the water. After he was rescued, he said that the “burning platform” had changed him a lot.

We, too, are on a burning platform, and we must decide how we are going to change.

Over the past few months, I have shared with you what I have heard from our shareholders, operators, developers, suppliers, and from you. Today I’m going to share what I learned and what I believed in.

I learned that we are standing on a burning platform.

And we have more than one explosion – we have many burning points that ignite a blazing fire around us.

For example, our competitors are getting extremely hot, faster than we ever expected. Apple has reshaped the market by rethinking the smartphone and bringing developers into a closed but very powerful ecosystem.

In 2008, Apple had a 300 percent market share in the 25+ price range; by 2010, it had grown to 61 percent. In the fourth quarter of 2010, they are enjoying a steep growth trajectory. Profit for the year was up 78 percent over the same period last year. Apple has demonstrated that with the right design, consumers will buy an expensive phone with a better user experience, and developers will build apps. They changed the game and today Apple owns a high segment of smartphones.

And then there’s Android. After about two years, Android has created a platform that attracts application developers, service providers, and hardware manufacturers. Android has made it to the big league, now they are winning in the middle class, and are quickly moving into the € 100 segment. Google has become a gravitational force, attracting much of the industry’s innovation.

Let’s not forget the low price range. In 2008, MediaTek provided a reference design for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an incredible pace. By some accounts, this ecosystem currently produces more than a third of the phones sold worldwide and is taking a bite out of our share in emerging markets.

While competitors were eating away at our market share, what happened to Nokia? We fell behind, we missed key trends and wasted time. At the time, we thought we were making the right decisions; but looking back, we see that we are behind.

The first iPhone was released in 2007 and we still don’t have a product that comes close to it. Android hit the market just over 2 years ago, and this week they took the lead in smartphone sales. Incredible.

We have brilliant sources of innovation at Nokia, but we don’t get it to market fast enough. We thought MeeGo would be the platform for flagship smartphones. However, at this rate, by the end of 2011 we may only have one MeeGo product on the market.

In the middle segment, we have Symbian. It has proven to be uncompetitive in leading markets such as North America. In addition, Symbian is becoming an increasingly complex development environment to meet ever-growing consumer demands, which leads to slower product development as well as challenges when we seek to take advantage of new hardware platforms. As a result, if we continue as before, we will lag further and further behind as our competitors move further and further.

At the lower end of the price range, Chinese OEMs are launching devices much faster than, as one Nokia employee put it, only partly in jest, “the time it takes to hone a PowerPoint presentation.” They are fast, cheap, and they challenge us.

And the truly confusing aspect is that we don’t even fight with the right weapon. We still try too often to get close to every price range and build device after device.

The battle of devices has now turned into a war of ecosystems, where ecosystems include not only device hardware and software, but also developers, applications, e-commerce, advertising, search, social applications, location-based services, unified communications, and more. Our competitors do not occupy our market share with devices; they occupy our market share with the entire ecosystem. This means that we will need to decide how we will build, catalyze, or join the ecosystem.

This is one of the decisions we need to make. In the meantime, we lost market share, lost our minds and wasted time.

Standard & Poor’s announced on Tuesday that it will place our long-term and short-term A-1 ratings in negative credit ratings. This is a similar decision to what Moody’s made last week. Basically, this means that over the next few weeks they will analyze Nokia and decide on a possible credit rating downgrade. Why are these lending agencies considering these changes? Because they are concerned about our competitiveness.

Nokia’s consumer choice has dwindled worldwide. In the UK, our brands are chosen less frequently, with choices down to 20 percent, down 8 percent from last year. This means that only 1 in 5 people in the UK prefer Nokia to other brands. The same is happening in other markets that are traditionally our strongholds: Russia, Germany, Indonesia, the United Arab Emirates, and so on, and so on.

How did we get here? Why did we lag behind when the world around us was developing?

This is what I was trying to understand. I believe that this was at least partly due to our attitude towards Nokia. We spilled gasoline on our burning platform. I believe we lacked the responsibility and leadership to align and guide the company in these disruptive times. We had a series of misses. We are not innovating fast enough. We do not cooperate internally.

Nokia, our platform is on fire.

We are working towards the future – a way to regain our leadership in the market. When we share the new strategy on February 11th, it will be a huge effort to transform our company. But I believe that together we can meet the challenges we face. Together we can shape our future.

The burning platform on which the person found himself forced the person to change his behavior and take a bold step into an uncertain future. He was able to tell his story. We now have a great opportunity to do the same.

Stephen.

The letter was not sent to top managers of Nokia, only to ordinary employees. The management of the company learns about the letter from the press, where it “leaked” almost instantly. This post by Stephen Elop is reprinted by thousands of resources and is the most talked about event in the IT world. The letter is discussed not only in the press dedicated to technology, it appears in the news columns of the largest TV channels in the world, for the widest audience. The style of the news items is about the same, the CEO of Nokia admits that their products are bad and cannot withstand the competition. This is a shot at Nokia and sales, the letter does many things at once.

Inside Nokia, the letter evokes different feelings, but the heads of the Nokia Leading Team support Elop, they are assigned the role of convincing all those who disagree that this is the right choice. They grind internal resistance, ask to postpone hasty conclusions and not to escalate the situation at a difficult moment. The main task at this moment is to prevent the start of a corporate war within Nokia, to isolate those who disagree and to reduce the intensity of emotions. It looks like a planned action.

It is noteworthy that the letter exists in two versions. The first was sent out by Stephen Elop at his own peril and risk, he did not coordinate it with anyone. The second edition was sent to all Nokia employees after the text was changed by lawyers and signed by Jorma Ollila. This gave the letter legitimacy and removed questions about whether the company’s management was aware of what was going on. Jorma clearly fell into a trap, since the letter was already widely discussed outside Nokia, there was little choice – to go to a confrontation with the CEO and get him to leave, or agree with him and then try to fix the situation. The second option was already missing at that time, but no one could guess about it. Unbeknownst to Jorma, Stephen Elop was communicating with the board members, instructing them on the Windows Phone deal, and communicating with a number of employees, who became the conduits of his ideas and broadcast them inside Nokia. There was a raised conversation between Jorma and Stephen, after which it can be assumed that there could be no talk of any cooperation between them. Behind Jorma Ollil’s back, a company was taken away, which he could safely consider his brainchild, and the hijacker was going to speak to investors and destroy everything he had built.

Two turkeys, no eagle will come out – plans of Nokia and Microsoft

On February 11, it was warm in London, it was raining with sleet, and fog occasionally came. The weather did not create the most friendly mood. Nokia Investor Day was not hiding anything, the public was ready for Stephen Elop to announce a new strategy. The day before, it became known that Windows Phone would become the preferred choice for Nokia, this is another leak that “accidentally” added fuel to the fire. But there were no details that shed light on what was happening.

To outline the position of Nokia at that time, I must say that the company employed 132247 people, Nokia’s share in the smartphone market was declining due to increased competition, but at that time 200 million Symbian smartphones had already been sold, and the company remained the undisputed leader in this. segment. A third of the smartphone market was behind Nokia, in absolute numbers, sales did not fall, as the smartphone market grew rapidly. And Nokia was a key player in this market.

Stephen Elop took the stage with his namesake, Stephen Ballmer, then president of Microsoft. Ballmer’s expressive manner is well-known, he turns himself on and begins to quickly move around the stage, breaks into a run and no longer loudly recites something, but simply shouts. On the announcement of cooperation, nothing changed, he eclipsed Stephen Elop and many had the impression that it was Nokia that had a subordinate side, which had nothing, and came to bow to Microsoft. This was largely due to Elop’s letter about the burning platform, it prepared the public for such a perception of the situation. This is despite the fact that Nokia’s share of the smartphone market was 29% at the time of this historic event, and Microsoft’s share was barely approaching 2%.

Killing Nokia. Frank Confession of the Former President of the Company, continued

Stephen Elop was eager to eliminate all waste roads for Nokia, to make sure that the company could not deviate from the course he had chosen. The CEO that declares the inability of his own company to produce competitive smartphones, and also declares from the podium that this direction is closed and will not develop, looks at least strange. All forces are thrown on Windows Phone, since this is a joint development, so many Nokia engineers are not needed, there will be a staff reduction ahead. The company’s plans are illustrated with a funny schedule, where the sale of Symbian smartphones smoothly flows into those on Windows Phone.

Killing Nokia. Frank Confession of the Former President of the Company, continued

Nokia believes it will be able to sell another 150 million smartphones until it fully migrates to Windows Phone. This is a strange calculation, since Stephen Elop does everything to prove in practice that Symbian is dead. He does not comment in any way on the timing of the appearance of the first Windows Phone smartphone Nokia, and he cannot do this – there is no working group within the company, the cooperation has not yet begun as such. He sold Nokia to a pig in a poke and a promise that everything will be fine. This is clearly not enough to be able to plan for the future.

We are in a position where we already know history and how everything turned out. The first Nokia smartphone on Windows Phone was Lumia 800, it was shown on October 26, 2011, it went on sale only in December. The smartphone was created using all the resources of both Microsoft and Nokia, but even in this case, it turned out to be raw, devoid of many features of Symbian smartphones. It was a clear loss of the alliance between the two companies, sales of the Lumia 800 were relatively good due to the perception of the Nokia brand, but lower than that of the company’s flagships a year earlier. Moreover, the consumer perception of this smartphone was generally negative. Nokia has pushed its loyal audience to choose Android smartphones or iPhones.

Killing Nokia. Frank Confession of the Former President of the Company, continued

An inconvenient project is MeeGo, a promising system, agreements with Intel, and something needs to be addressed with this. Elop proposes to make this system open to any developers, in fact pushes it to Intel, but does not transfer the developments that are inside the company. This is very typical for Elop, he does not develop a promising project at Nokia, but he cannot give it out, as it turns out that he can shoot. The MeeGo project needs to be destroyed and everything is ready for this, but this will happen later.

Investors react to Elop’s speech as expected, few people believe that cooperation with Microsoft, abandonment of its own operating system Symbian is the right move. Nobody believes in plans to sell devices on the killed system. Nokia shares on the European stock exchange fell 14.2%.

Killing Nokia. Frank Confession of the Former President of the Company, continued

Vic Gundotra, vice president of Google, writes on his Twitter, “Two turkeys will never make an eagle.” And this is how this cooperation is perceived in the market, excluding Microsoft, the company sincerely believes that the games have been played and now Windows Phone will become an equal participant in the race. Stephen Elop even voiced these dreams at the presentation – “now it’s a race for three horses.” It has already buried Symbian, the strongest horse on the market, and is set to compete against Android and iPhone with Windows Phone.

February 2011 is a turning point in the history of Nokia, Stephen Elop was able to convince a number of top managers that he was right, burned all the bridges when he publicly announced the failure of Symbian (it was not there!), Isolated Jorma Olilla from other managers and led him around his finger … But it was in February 2011 that Stephen Elop became known as the Trojan Horse. Many journalists and ordinary people, without delving into the details, discerned malicious intent in his actions and the fact that he was deliberately destroying the company that hired him. And all indications are that this was indeed the case.

The material turns out to be voluminous, so we will have to interrupt and wait for the next part. In it, I will focus on little-known facts – how Samsung wanted to buy MeeGo, but Nokia refused to do so, as well as the sale of any developments of “unsuccessful” systems, about the hasty destruction of promising prototypes inside Nokia, about how betrayal developed inside Nokia. Surprisingly, it all started with the actions of one person, which were never wrong – they were clearly planned and thought out. Hope these articles show this in plain form.

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