Can a Microsoft man fix Nokia? Here are 6 things that have to happen

Can a Microsoft man fix Nokia? Here are 6 things that have to happen

Summary: Stephen Elop is the new CEO of Nokia. Can a guy who led Microsoft's business division prod Nokia to innovate on smartphones?

SHARE:

Nokia has named Stephen Elop CEO beginning Sept. 21. Olli-Pekka Kallasvuo will step down over 30 years that saw Nokia surge to be a global mobile leader, branch out into software and then lose momentum to Research in Motion, Apple and Android. The big question: Can Elop turn Nokia around before it loses more momentum?

Elop's resume indicates that he has the experience to turn Nokia around. Elop led Microsoft's business division, one of the software giant's two key cash cows. Simply put, Office is huge. Elop also worked at Juniper and Adobe. That experience will come in handy at a company with Nokia's scale.

Nokia Chairman Jorma Ollila said in a statement:

"The time is right to accelerate the company's renewal; to bring in new executive leadership with different skills and strengths in order to drive company success. The Nokia Board believes that Stephen has the right industry experience and leadership skills to realize the full potential of Nokia. His strong software background and proven record in change management will be valuable assets as we press harder to complete the transformation of the company. We believe that Stephen will be able to drive both innovation and efficient execution."

A few notes about Ollila's statement. For starters, Nokia doesn't have any choice in the timing. Nokia either gets it together---especially on high-end devices---or it's lead and profit margins are toast. Nokia also needs to delight with its software to keep up with Apple and Android. And more importantly, Nokia has to innovate on design.

Naturally, Elop is excited about harnessing Nokia's "unique global position" and "great brand."

Highlights from Nokia's press conference:

  • "There are critical moments when fundamental change takes place," said Elop, referring to graphical user interfaces, the browser and mobile phones. Today, cloud computing, smart devices and tablets are creating "a fundamental moment of disruption." This disruption can be an advantage for Nokia.
  • "My role is to lead this team through this period of change...and disruption," he said.
  • Elop will start a listening tour and then introduce changes necessary.
  • There's a tremendous partnership with Microsoft as well as areas of competition, said Elop. The lines of communication are more open than others before. There are areas of common ground.
  • Elop was asked about Nokia's software strategy and platform. Elop said "there are a range of experiences that need to be delivered" across the globe. He added that it's too early to determine what parts will be used for these various ranges, but Nokia has to be clear on its software strategy and communicate that to developers.
  • Elop had to field a lot of questions about his knowledge of Finland and the cultural importance of Nokia.

Analysts are just happy that Nokia is finally making a few changes. Andrew Gardiner, an analyst at Barclays Capital, said:

"We receive positively the appointment of an executive with significant software and U.S. tech experience. Nokia's struggles over the last few years in the area of software and operating systems has caused it seek a President and CEO from outside the company, an unusual move after all prior CEOs have all been Finnish and home grown. Furthermore, such an appointment likely indicates some change will come, as it is hard to see such an executive move all the way from Seattle to Helsinki without a mandate to stamp his own view on the business."

It remains to be seen whether Elop is the right guy for the job. At Microsoft, Elop struck folks as more manager than visionary. Nokia needs product, vision, new software and the ability to leverage its vast scale. It's an interesting line to walk. Nokia isn't a startup and may never be nimble. But it does have the Symbian OS to harness so it has a start.

What does Elop need to do? Here are a few thoughts:

Pare ventures that don't matter. Nokia is into a bunch of different services like music subscriptions, email and navigation. Nokia delivers these services through carriers, but the model is complicated. Does Nokia provide services or hardware? We know Nokia can do hardware well, but things like Comes With Music are a distraction.

Either leverage Symbian or cut bait. Symbian is the leading mobile OS in the world, but under Nokia share has been slipping. Nokia has new versions of Symbian on deck for cell phones, but hasn't been able to keep up with Android or Apple. Some analysts argue that Nokia should adopt a third party mobile OS like Android. Like RIM, Nokia is primarily a hardware company that dabbles in software and doesn't exactly excel. Related to the Symbian question is the overall software strategy. Simply put, Nokia needs one. Nokia can't take forever to get new smartphones out the door.

This chart highlights Nokia's waning momentum: Figure out what to do with Nokia's R&D budget. Nokia spends 3 billion euro annually on handset R&D for little return. Elop either needs to get better returns or cut the budget. Gardiner said in a research note:

With Nokia's EUR3bn annual handset R&D budget clearly inflated relative to the competition. If Elop can come in and show a willingness to use more 3rd party Operating System and reduce R&D, then we see 2011/12 consensus EPS estimates moving higher.

Leverage the enterprise. Nokia is a no-show in U.S. corporations, but in other regions the company can be a major enterprise player. Elop clearly has the enterprise chops to bolster Nokia's standing.

Recruit visionaries and product innovators. What do Nokia devices stand for? It's a bit murky. Nokia's motto is to connect people, but almost every technology company does that these days. Nokia's devices are increasingly standing for low-end models. Nokia needs to dazzle at the high-end of the market. Plot a U.S. comeback. Nokia has basically decided that the U.S. market isn't important. All Nokia has to do is make some headway in the U.S. and its results will look much better. It's stunning that you can talk to someone from abroad and they know all about Nokia. In the U.S., consumers barely acknowledge the company. Nokia may be the only company in the world that sees the U.S. as an emerging market. Why bother with the U.S.? For starters, U.S. handset makers---notably RIM and Apple---are eating Nokia's lunch. At the very least an encroachment in the U.S. would give them more intelligence on how to compete in the smartphone market. Elop's first calls should be to U.S. carriers about making Nokia a real player.

Related:

Topics: Enterprise Software, CXO, Microsoft, Nokia, IT Employment

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

21 comments
Log in or register to join the discussion
  • Well, I do not know

    much about Stephen Elop. All I know is that MS's business is very different from the mobile phone business and that as a general rule, visionaries probably do not come from MS.<br><br>Having said that I certainly wish Mr. Elop all the best in his new position at Nokia and hope he manages to make Nokia a force in the high end smart phone and derivatives business. Some more competition can only help drive down prices and increase consumer choice.

    Edit: interesting commentary:

    http://www.theregister.co.uk/2010/09/10/nokia_ceo_analysis/
    Economister
  • Elop clearly has the enterprise chops to bolster Nokia?s standing.

    Enterprise chops are irrelevant. Consumers have better mobile equipment than enterprises. The iPhone was inserted into the enterprise by consumers who did not want to use enterprise approved monopoly defender WinMob devices and who were embarrassed that their children's equipment was better than theirs.

    Elop is from a failed company with a failed handset strategy; he ran one of its monopolies as a monopoly defender. Why would his experience be useful to Nokia?
    Jeremy W
    • Failed company...?

      @Jeremy W
      Last I checked, Microsoft was doing quite well, with billions in the bank. That's in spite of any "failure" in the cellular/smartphone market. I should have that kind of failure.. Sheesh...

      Microsoft has, to be honest, made mistakes in the Smartphone arena. I'll grant you that much. But they have no 'handset strategy'.. Never have. They do NOT make the hardware. They - like Google - only make the OS. And in that regard, they were caught napping. It was in dire need of an overhaul - and they are in the final stages of that process.

      There is exactly ONE constant in this universe. And that is the fact that things change. Today's top dog is tomorrow's has-been. Today's has-been can be tomorrow's leader.

      Now... You ask a question and yet, you answered it yourself. Elop ran one of Microsoft's "monopolies" as a "monopoly defender"...

      Now go to the top of the article and look through it, look at the graph and pay CLOSE attention to where Nokia's line sits - at the top. They still have more market share than Android, iPhone, RIM and everything else. However, they're share is declining. It would seem to me that the purpose of hiring him on is to turn that slide around. Maybe he can do it.. Maybe not. It's hard to say. I don't know Elop personally. I say give him a chance and let's see what he can do.
      Wolfie2K3
      • He said "failed handset strategy". There is NO argument that Microsoft has

        NOT failed in this area. But, that said, Elop my not be responsible for that, and could be the right guy to shake things up at Nokia and get them going in the right direction. We will see.
        DonnieBoy
      • Uh Let me type this out very s-l-o-w-l-y for you...

        @DonnieBoy
        I'm aware of what he said. And I corrected him. Microsoft does NOT make handsets. Comprende? They provide the OS and the specs needed to make it run. Period. Repeat after me: Microsoft is NOT a hardware company.

        Now look at the chart at the top. What do you see listed? Symbian, Android, iOS, RIM and "OTHER". Other would include Windows Mobile. It's the line in light blue.
        Wolfie2K3
      • One more time, s-l-o-w-l-y. He did NOT say they made them, but they DO make

        the OS, and that has failed. Get it?? Do we have to draw a picture??
        DonnieBoy
  • Make 20 great apps, bundle them with phone

    They should make 20 great applications and include them as standard with the phone.

    Work with the developers, put effort in with the few that can make the grade and work with them to make those 20 apps really great.

    Because that is what sells their phones, not the 2000 fart apps, or the 4000 web page links. It's the 20 clever carefully designed applications.
    guihombre
    • Re: Make 20 great apps, bundle them with phone

      @guihombre I like the idea, but how long until people get bored with those apps and want others? Or, when they need an app that isn't included? If they can do this as well as offer an app place, it would be a good way to go.
      tqen
  • This will be good if he extends the MS/Nokia relationship from Silverlight

    on symbian to full blown WP7 on nokia handset hw. If they come out with some great WP7 devices in the next 6 months they could instantly have the best smartphones on the market. Elop ran MS Office and knows WP7's great Office support and get emterprise managment features are key to getting into the enterprise in a big way. And he's got the insider knowledge to know that even though WP7 hasn't launched it's marketplace yet the apps that are already ready for it completely blow away the iphone/android apps. If on the other hand the existing corporate culture convinces him to stick with symbian there will sadly be mo turn around...
    Johnny Vegas
    • That could be the death of Nokia to put a failed music player OS on their

      phones. They would be much better making the best Android device, with an interface distinctive Nokia style front end. But, they also have the Linux (Maemo) and Symbian cards in their hand that might come in useful. Nokia has the scale to offer a variety of smart phones.
      DonnieBoy
  • I disagree, it's ALL about the software.

    And that is where they must concentrate their efforts. Innovate, build out some great ideas, and then build the hardware to support them.
    NoAxToGrind
  • 2008 Nokia launches 'iPhone Killer', 'world's most advanced

    mobile computer'.<br><br>Daily Telegraph:<br>"Nokia launches 'iPhone killer' N97 phone<br>Nokia has unveiled the new touch-screen multimedia N97 smartphone designed to take on Apple's iPhone<br>The Finnish mobile phone giant has dubbed its new N97 handset the "world's most advanced mobile computer"<br><br>... with Flash!<br>... with a QWERTY keyboard!<br><br>"With the N97, Nokia has produced the first phone that will truly challenge, and even transcend, Apple's best,"<br> wow!!!!!<br><br>flash foward 2010 :<br><br>"Nokia fires CEO due to collapsing marketshare'<br><br><br>
    Davewrite
  • RE: Can a Microsoft man fix Nokia? Here are 6 things that have to happen

    As i've said before, Nokia has 2/3 the world's market share in mobile. The US market is marginal, at best. It's too small to be considered that relevant. Microsoft fails in China and India. (For those who don't know, China and India hold 2/3 the world's population within their borders). That alone means there's a larger market share that no American market can either topple (or reasonably compete against). Another thing to consider, Everywhere (except North America) is primarily using GSM/GPRS as their wireless/data standard. Nokia is a non-carrier centric GSM handset provider company. They make sense for anybody who doesn't live within US borders, because they've had way more advanced smartphone technology before America knew what smartphone technology was. All of their devices came equipped for enterprise office use and you can still do more with one nokia communicator than you can do with an actual office setup (office equivalent software, send/receive faxing, vpn, etc). At best, this new MS-turned-Nokia-employee is only good for leveraging the innovation of Nokia's product-line to the US enterprise (because there's not a whole lot else he's qualified to do) IMHO.
    richardanelson000
    • No they don't

      @richardanelson000

      Playing fast a lose with facts? Look up China's, India's and the world's population and do some VERY simple math. You will discover that you are WAY off base. It is closer to 1/3 than 1/2, and CERTAINLY not 2/3.
      Economister
  • "U.S. handset makers notably RIM"???

    RIM is Canadian
    PeteG_5
    • RE: Can a Microsoft man fix Nokia? Here are 6 things that have to happen

      @PeteG_5 Beat me to it. I was starting to think the US invasion of Canada hadn't been reported in the news!
      DJL64
  • RE: Can a Microsoft man fix Nokia? Here are 6 things that have to happen

    You now, that really does make a lot of sense dued.
    www.anon-vpn.us.tc
    zoojing
  • Rooting for a Nokia comeback

    I am a former owner of two Nokia phones. For the technology of their time, they were incredible phones. Design was innovative for the time (sometimes breakthrough design - Nokia had the first phones without clumsy protruding external antennas, for example), the interface was friendly at a time all others were complicated, and the batteries... Ahhh, Nokia batteries... You charged them and forgot them, no one came even close to them!

    I left Nokia when they missed the bus, started walking in circles and producing phones that looked old and worked as old phones. But deep in my heart I still remembered fondly how great their phones used to be in the old days. THAT was how they won all that market share. I never understood how they let themselves get stuck forever in yesterday's technology. And I always rooted for a Nokia comeback in grand style. But it never came.

    So, it was with hope and a smile that I read this story. Like many, I don't think that a former Microsoft man with a conservative profile is what they need - Nokia needs freshness, boldness, vision. Still, let's give Elop some goodwill credit and time. I hope he does it for Nokia, because it bleeds my heart to see a company I once admired so much getting stale as they did. Good luck, Nokia!
    goyta
    • RE: Can a Microsoft man fix Nokia? Here are 6 things that have to happen

      @goyta - My story is similar too. I think they were good till 2005-06 and they were among the first to launch smartphones ( the N & E series ) which were insanely great value for money. But somehow, they missed the new wave unleashed by iPhone & Android Devices in 2008-2009.

      They need to improve their OS and have a faster development cycle for the OS, spend a part of that R&D to build new out of the box Apps for their phones & make the Ovi Store intuitive.

      At present, my E63 is hardly any different from the N72. As the author correctly puts it, Symbian was not Nokia's are and if Nokia can give various OSes like WP7, Android & Symbian, they can very easily compete with the likes of HTC, RIM & iPhone.

      Nokia is popular in India & China (I am Indian, btw) for the fantastic rugged, all terrain hardware and they should leverage it with Software.

      The important part is, Smartphones are a rage in US & Europe, but the whole world is yet to heavily ride on the Smartphone wave. Nokia's competence lies outside the US & they can surely build on it. Even if they capture a small share in the US, the potential gains will be much larger in terms of Brand recognition & acceptance. Time for Nokia to come up in the US with one strong Smartphone. Will the N8 do it?...
      Rahul Mulchandani
  • Well

    First you write that they lost momentum. Then you write that they should do something before they lose momentum like one sentence from each other. Kinda funny.

    I don't think that Nokia should go with Android. If they do they will have to go full in or it will fragment Nokia even more and be a distraction. Android my look good for now but that's just because of the industry's inability to innovate on their own. It's amazing that Google had to come in and provide Android for HTC, Motorola, Sony and every one else to move forward. Totally amazing. Companies does not jump all over Google because it's super. They simply have no other choice if they want to stay in business. Windows Mobile as it's now is simply dead. Windows Phone 7 will change that though. Symbian have had a hard time to compete with iOS. New versions of symbian will how ever get more competitive. And since the industry could not license iOS, they had to go with Android. Android provided them with all they needed and a chance to go against Apple. I think Android will have more growth but when Windows Phone 7 and Black Berry OS 6.0 and the next version of Symbian will mainly compete with Android, not iOS in my opinion. Both Symbian and Windows Phone 7 want to get on as many phones as possible, just like Android. So Android is enjoying a great ride here because there are simply no other alternatives at the moment. Android will probably over take iOS in the future, if not soon. It's inevitable. Not because it's a better OS but because it can be embraced by any manufacturer and it is being embraced. Any one can build a phone with Android. It's free. But I still think that Apple iOS will be a stronger card than Android even with it's outnumbered. Just like Apple has carved out s space for itself on the computer space, they have in the mobile space. Apple compete with quality a stemless experience. Others have to compete with price and volume. Android not have enjoyed this ride if it was in any one company's hand.

    I also would like to mention this.
    Apple has been hailed for the tight integration between iOS and it's devices and that is the key for fast innovation and great user experience. Suddenly with out knowing it, many are making a 180 turn hailing Android like it's the best of the best. Suddenly tight integration is forgotten and not so hot. I think that tight integration is a great advantage, especially for Apple. But it could become a great weapon for other companies as well. RIM can play on it with Black Berry OS 6.0, Microsoft want's tighter integration between Windows Phone 7 and phones to ensure a great experience. I think that Android's openness will fall on it's own grip. Android is too easy to fork and spread to any device you want, different versions, different customizations. Eventually this will be great pain for manufacturers and developers and frustration for consumers and we are already seeing this.
    Viklund