Killing Nokia. Frank confession of the former president of the company

Hey.

For me, as for many people on the planet, the name Nokia is not an empty phrase. It is Nokia that is associated with the mobile phone industry, it was the first in most things that once delighted us – the camera, smartphones, touch screens, music and gaming phones. Style, prestige and technology that direct competitors did not possess. Even mistakes in strategic planning did not throw the company back, development slowed down, but did not freeze. It was impossible to imagine that one day this company would leave the mobile phone market, dissolve into oblivion. Even the very thought of such a thing sounded like blasphemy. After all, the Nokia brand was not only the pride of Finland, it was a country-forming company that supported all aspects of the economy of its native state. How could it have happened that this strongest player surrendered without a fight and actually drowned instantly?

The answer to this question is obvious to me, the company was destroyed from the inside, at the moment when Stephen Elop was invited to the position of CEO. In the Finnish press, it is often called a Trojan horse, in my opinion, it turned out to be just that. But he could not have succeeded in breaking the company if other people had not helped him. In communicating with Nokia employees, I often heard the name Risto Siilasmaa, that he consistently supported most of Stephen Elop’s initiatives, supported most of his initiatives and the rejection of his own developments to the company, the transfer of intellectual property to Microsoft, and it was he who was behind the sale mobile unit. And many said he betrayed the trust of the man who brought him into the company as an independent representative on the board of directors.

Passions for the majority of those who participated in those events have long subsided. Recently in a bookstore on the shelf I came across the book “Nokia. Survival strategies ”, by Risto Siilasmaa.

Killing Nokia. Frank confession of the former president of the company

This is an amazing book, it can be called a kind of confession, an excuse for actions committed in the past. The work was written in collaboration with a journalist, which is a familiar story for top managers, their stories lead to the canons of business literature. The book is conceived as a description of Risto Siilasmaa’s successful work within Nokia, how his genius led the company to success. These are teachings for others about what to do in crisis situations and how Nokia is thriving today. Neither the first nor the second is true. The disaster that happened to Nokia is not over, the company has not been able to recover from the blow to this day. In Risto’s eyes, his decisions saved Nokia from bankruptcy and made it a technology leader with a strong presence in the market. My eyes are devoid of rose-colored glasses, as Nokia is experiencing big problems, the volume of operations is noticeably less than it used to be, and the prospects are at least vague. But Risto’s confessions are not just interesting, it is a rare look from the inside, with facts that he interprets in his favor and presents as excellent solutions. For me, this is a confession of betrayal, fixed on paper.

Surprisingly, Risto Siilasmaa sincerely believes that Nokia is a successful company and nothing threatens it, the book was written in 2019, and it claims that Nokia is “one of the two leading players in the global market for digital communications and wireless infrastructure”. At least Huawei and Ericsson will definitely disagree with this, although here, apparently, the starting point is important. Reading page after page, I stumbled upon such absurdities all the time, reread, shook my head in surprise and went back to the Internet to refresh certain questions without relying on my memory.

Betrayal is an act that evokes not respect, but rather rejection. Nobody wants to have anything to do with traitors. In 2018, Nokia employed about a hundred thousand people, less than 1% of them were in the company in 2012 – I rely entirely on the words of the author of the confession, here you can definitely believe him. For him, such a global change means improving the corporate culture, transforming the company, and there is some truth in this. For me, this means the departure of all who could not come to terms with the betrayal, the destruction of the team from the inside. They are simply two diametrically opposed views of the same events.

This story begins in 2008, when Jorma Ollila, the former chairman of the Nokia board of directors, invited an independent director, Risto Siilasmaa, to the company’s board of directors. Jorma joined Nokia in 1985 and was responsible for international operations. In the development of the mobile phone business, he sees a chance for Nokia and consistently convinces everyone that it is necessary to change the company, to change both tactics and strategy. In 1990, he heads the largest division, Nokia Mobile Phones, achieves stunning results in two years and becomes president and CEO of the entire company. In 1999, he chairs the Nokia Board of Directors, the company is fully associated with him, his decisions and strategy. Quite authoritarian, but at the same time overly scrupulous and well-mannered in some matters, Jorma decides that Nokia needs fresh blood. Risto’s candidacy arises for two reasons. First, he is already known within Nokia, as his company F-Secure is a supplier of antivirus for Symbian smartphones. The second reason is that Risto is not afraid to criticize a partner and show what can be improved in the approach to creating devices. Historically, Nokia has created its own development team for each phone (as well as a smartphone), which includes engineers, programmers, and marketers. Firmware for devices operating on similar hardware is written in parallel by hundreds of programmers, their work does not overlap. Errors caught on one model are present in the code of others, they are not immediately corrected, the very structure of the company is clumsy. Often the same work is done dozens of times, this is a monkey’s work. Faced with this hell as a third-party app developer, Risto is ringing all the bells and tries to convince Nokia that this approach is doomed. Jorma the young man reminds him of himself when he came to Nokia. Risto has ideas and they look healthy, and the company needs fresh blood. Without much hesitation, Jorma introduces Risto to the Nokia Board of Directors, he becomes an independent director.

Risto describes Jorma Ollila in the following way: “Having read many articles and interviews about him, I had the deepest respect for his achievements and was ready to learn everything I could from him. I even hoped that we would someday be friends.

Inside Nokia, he was almost a mystical character at all – both respect and fear were felt for him. Jorma has developed a very serious image, preferring conservative dark suits with stylish yet discreet ties and tortoise-shell professorial glasses. He rarely laughed and almost never joked. At the meetings, he sat at the head of a heavy polished table, in a place marked with the chairman’s hammer and a silver nameplate: the indisputable ruler on his throne. ”

Killing Nokia. Frank confession of the former president of the company

The very atmosphere on the Nokia board was typical of a successful company. The board of directors in Beijing was held in one of the best hotels in the city, the board members were met at representative Audi, they were provided with police escort on motorcycles. We returned back on a private plane, where everyone was invited by Jorma.

In May 2008, Nokia’s share of the mobile phone market (including smartphones, then there was no division, although if you look at this segment, then the share there was 44%) was 40%. The company’s capitalization was $ 111 billion, a year earlier it was higher. The closest competitor is Samsung, with a market share of only 15%. Nokia’s leadership was not threatened, but in order to develop, it was necessary to change and do it quickly. In 2007, investments in new products and technologies amounted to 2.7 billion euros, but this was not enough. In 2009, investments reached 3.5 billion euros, the company spent money on several promising areas. It was the time of the iPhone 3G that showed Apple’s potential in this market. Inside Nokia decided to abandon Symbian as the main system, the stake was made on Linux and its own variants of this OS. The strategy looked simple: Nokia is creating a unified, simple interface of the next generation, it becomes the main one for all devices without exception, from push-button phones to the most advanced smartphones or multimedia systems in cars. This is the approach that at that time was already in Android and iOS, but Nokia’s difference was in the choice of different platforms for different price segments. Nokia’s experience showed that one and the same software cannot be successful in different price segments, at least initially. You need to have push-button phones, inexpensive touchscreen models and flagships in the lineup that show the maximum possible in terms of technology.

The push-button phones remained on their proprietary system, which was known as the S30 / S40. Inexpensive touchscreen phones were supposed to get an HTML5 platform with a Linux kernel (Meltemi), and regular smartphones of the middle and high price segments were to go to Maemo. A sound plan with well-defined deadlines.

The beginning of 2009 turned out to be bad for Nokia, sales of devices fell by 53% percent year-on-year, in February this caused a lot of questions and search for reasons. The 2008 financial crisis took its toll on everyone, but was Nokia’s fall because it had the largest market share, or was it just going in the wrong direction? My opinion is that here we see a combination of reasons, sales fell under the influence of external factors, and the crisis became one of them. But already by this moment Nokia was developing new platforms, and it became important for the company to simply keep its sales until they appeared. In the history of Nokia there were examples of such situations, for example, the company missed the boom in color screens, which allowed Samsung to get ahead. A year later, when Samsung was selling push-button devices with 65K color screens, the displays in Nokia smartphones only showed 4096 colors, the visual differences were stunning. But the Nokia brand outweighed the technical weaknesses, and in 2009, nothing changed, the Nokia brand dominated the minds of consumers.

The weakness of Symbian against the background of other competitors, the death of the alliance around this system – all this led to the fact that Nokia reconsidered its plans. Strategic decisions have always been Nokia’s strong point; the company did not try to solve immediate problems, but invested for years to come. You can miss the market in the short term, but you need to build a reserve for many years to come. From the point of view of Nokia’s board of directors, everything went exactly the same as before. The bad year 2009 was a problem, but it was not a fatal problem for the company, it did not put it on the brink of survival. The development plan was adopted and approved.

Risto received an invitation to dinner with Jorma Ollila once or twice a year; in the second half of 2009, he tried to explain that the current problems seemed too complicated to him and required immediate intervention. Jorma replied: “Risto, do not forget that you came to the board from a small company. You just have no idea how global corporations like Nokia work. The Management Board is not an operational management body ”. It is possible that the resentment against Jorma arose at that moment, Risto begins to secretly criticize his decisions, but there is no open conflict. Jorma is the same unquestioning authority within the company.

We can definitely assume that the second half of 2009 is a cooling of Jorma Ollila’s relationship with the young member of the board of directors, whom he himself brought to the company, their communication is minimized. Over the Christmas holidays of 2009, Risto writes a review of Nokia’s strategy, which he himself calls provocative. This is the time when Nokia finished the fourth quarter with the growth of sales of all services and devices, the Highway project is in the works. As of the end of 2009, Nokia had 90 million active service users worldwide, and the company also acquired Navteq, the largest provider of map data in the world. The new project should offer turn-by-turn navigation for all countries of the world, it will be free and available on all devices of the company, including push-button phones. Other projects are also in development, and the year ended successfully.

Nevertheless, Risto writes a long review in which he lists the challenges of the time and the problems of Nokia’s corporate culture. I read the excerpts given in the book, and I do not see this overview of the state of Nokia as important and defining, it is just a listing of large and small problems that each corporation has. Moreover, this is often a naive and very superficial view. Risto understands that this is a provocation and aggravation of the conflict. He wants to give a go to this document, in particular, to acquaint the board of Nokia with it. The first step is to send the document to Jorma’s mail, there is no response for several days. Resend, no answer again. Then the document is sent to the e-mail address of the board for everyone to see.

This can be taken as you like, but it is a conflict and a kind of rebellion. It is possible that this is a turning point in the fate of Nokia, since Jorma sees no reason to change something, the plan has been adopted and is being implemented, but it is long-term. Risto wants quick action, instant steps and see the result instantly. It’s just a different management style, even a worldview. The corporation was built by Jorma and reflects his style, his character. This is also worth taking into account, since the actions proposed by Risto cannot find support within Nokia, these are not changes that can be painless.

The emergence of Stephen Elop, the development of the conflict within Nokia

In 2010, things at Nokia were far from catastrophic; it was impossible to say that the company was sinking or experiencing great difficulties. The situation was difficult, but it was the same crisis as several that happened in previous years. The development of the iPhone, the emergence and prospects of Android – all this forced Nokia to react, North America remained a weak market for the company. Strengthening sales in this region could instantly change the balance of power, and this was important for Nokia. Most of the presentations took place in New York, new products were shown with great fanfare and tried to emphasize that they can work de facto anywhere in the world, including the United States. Nokia’s press service tried to fill the pages of various publications in the United States with stories of the company and products. But every attempt to hack this market turned out to be unsuccessful, he did not give in.

In 2009, the idea arose that in order to hack the North American market, it was necessary as a CEO to invite a person who had grown as a manager in this market, knew and understood him well. The first candidate was considered in complete secrecy, but ultimately the candidate abandoned this position. The second candidate was Stephen Elop, in the summer of 2010, Nokia completed interviews with him, the decision was made: this is the person the company needs. Interestingly, it was Jorma Ollila who brought him to the company, this is his decision and his stake on a person who will help hack the American market.

Stephen Elop introduced several unusual points into his contract, one of which was the provision of his protection. Before that, being in charge of MS Office at Microsoft, he did not need constant security services, but in quiet and calm Finland with a low crime rate, he considered it necessary. It is difficult for me to explain this wish of Stephen Elop with anything other than the realization of what he has to do and what kind of reaction it will cause in Finland, as well as among Nokia employees. Here’s how Risto recalls it: “Does Stephen speak at a general meeting – and a bodyguard looms behind the scenes, or if he comes to his office – and the bodyguard enters right there. These powerful guys were like an eyesore: they were constantly reminded that a foreigner was at the head of the government.

The changes also affected other aspects of Nokia’s life, it was important for Elop to have direct access to all employees, when there are no barriers between him and the team. On the very first day, he sent 60 Nokia employees a letter in which he asked what they like about the company and what problems they see, 2 people answered him. My opinion about such a move is unequivocal: it is populism, which does not bring real benefits. On the other hand, for the new head of the company, this is a direct access to employees and the opportunity to somehow influence the situation, support the efforts that have been made and explain them. Convince people that you are right. From a PR point of view, this is a win-win move.

A CEO’s position is important, but it’s nothing without a team of like-minded people. Stephen Elop came to Nokia alone, he became a Varangian, who took over and began to establish his own rules. The board of directors did not see a direct threat in him, even if he turns out to be bad, then there is always advice that will correct the situation and prevent a negative scenario. After all, Nokia has a corporate culture that has shown its vitality in previous crises.

Since the end of 2010, Steven Elop has been trying to enlist support within Nokia, and allies are vital for him. Was it predetermined that Risto would support him due to the conflict with Yorma Ollila, or was he originally just fascinated by Elop’s management style, but they become allies and support each other. Stephen Elop is trying to raise the status of many managers, heads of areas, he invites them to meetings where they cannot be ranked. It is flirting with managers to build support for their decisions. At the same time, no drastic steps have been taken yet, external consultants have been hired to outline the prospects for Nokia, this is McKinsey.

Jorma very quickly begins to understand that Stephen Elop is not the person who can lead the company to success, this follows from his actions. It forbids the Nokia CEO from meeting with board members without his presence! It looks at least unusual, to say the least.

The first year, together with external consultants, Stephen Elop studied the possibilities of Nokia, this project was called the “Sea Eagle” (Sea Eagle). The challenge looked like creating a new niche in the market in order to withstand both Android and iPhone. At the same time, the company was not doing so badly, the share was declining, but the market grew both in money and in units, it continued to expand. And Nokia was the biggest player in this market. Of course, if we evaluate the market only by the current share, then everything was bad and very bad. Look at how Nokia’s share of the smartphone market has changed, the graph is indicative, isn’t it?

Killing Nokia. Frank confession of the former president of the company

In 2010, the smartphone market grew by 75%, its volume amounted to 302 million units. “Unsuccessful” Nokia, experiencing problems with market share, has shipped about 100 million smartphones! And this is in addition to push-button phones, the share of which was even higher and they brought more income. To understand the situation, you need to look at the share of RIM (Blackberry), at the end of 2010 it was 16.1%, in third place was Apple with 15.7%, and only in fourth place was Samsung with a share of 7.6%, HTC closed the top five with a share of 7.1%.

The numbers speak for themselves, Nokia’s share was shrinking, but it was the largest player in the smartphone market, and nothing threatened that dominance over the next few years. The share could continue to decline, but the company would remain a key player, it was impossible to remove Nokia from the throne. But it happened!

In early 2011, Stephen Elop studied the prospects for MeeGo. The main argument against the system was simple – there are too few devices, they are too expensive, and this will not allow us to attract the developers that we need so badly. Apple’s experience was highlighted as a positive example, but somehow it was forgotten that all iPhones were the most expensive smartphones. Why MeeGo, which did not require building apps from scratch, and Android developers could write their apps for the system with minimal effort, would suddenly fail was unclear.

In an internal meeting with the board of directors, Stephen Elop “detonated the first bomb”, it was the story that the models on MeeGo are not coming out as quickly as we would like. Their sales will be quite low, they will not be able to become massive and take a large market share. I am sure that the colors were deliberately thickened, and the original plan that existed for MeeGo was presented as erroneous. All the strengths of the project suddenly turned into weaknesses. We must pay tribute that Stephen Elop and those whom he was able to win over to his side were able to convince many that everything was lost and there was no chance.

Inside Nokia, ideas began to dominate, which can be called at least strange. It all started with careful criticism of engineers and programmers, then it became a daily occurrence. Delays in the release dates of certain products are common, especially when it comes to something new. And Nokia had a lot of technologies that its direct competitors simply did not have – the radio part, work with batteries, developments in the field of cameras, and much more. At Nokia, software became a weak point, but new platforms had to correct this deficiency. But since the end of 2010, the company’s CEO has been slowly and surely pushing Nokia in a different direction, towards abandoning its developments. There is no point in competing with Apple or Google, they are stronger, and therefore our Symbian is already bad, and the new systems will not be good. We need to make a decision with whom we will go next.

They do not show any interest in Google, for this corporation Nokia is one of the players that will create problems for cooperation with Samsung, HTC. Google’s game has been played and the future is clear, the Android platform will grow, with or without Nokia. I am sure that everyone in the industry at that time understood this perfectly, as well as the fact that Google would not create special conditions for Nokia. This was obviously not an option, which means it was just an imaginary choice. But there was another option – Microsoft and their Windows Phone. This system did not prove itself in the market, it had many congenital and irreparable defects. But inside Nokia it was positioned as the only choice for salvation. We must pay tribute to Stephen Elop, he formed this perception not only himself, he relied on the opinion of external consultants, correctly highlighted the opinion of engineers within the company and heads of areas. The trap was set, but Nokia was still strong and could break free. Therefore, the company needed to strike a blow from which it could not recover. The blow that Nokia CEO Stephen Elop did and did publicly.

About what happened in 2011, how a top manager of Nokia persuaded customers not to purchase Nokia smartphones, how Jorma Ollila paid for the wrong choice of the CEO – all this in the next part of the article. This is a story of betrayal that was played out like clockwork. The story of how a great company was killed from within for the interests of a small number of people and other corporations. Surprisingly, with such details, we have the opportunity to look at this situation thanks to the revelations of a man who thinks himself the savior of the company, but in fact participated in its destruction.

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