Nokia looks to speed, resolve to regain leadership

Finnish phonemaker must move fast in executing Windows Phone 7 strategy and pushing through internal reorganization to regain pole position in mobile market, CEO Stephen Elop acknowledges.
Written by Kevin Kwang, Contributor on

KUALA LUMPUR--Nokia has undergone a "behavioral shift" internally to deliver on its strategies and regain industry leadership, following the company's announcement to adopt Microsoft's Windows Phone 7 operating system (OS) on its mobile devices.

Stephen Elop, president and CEO at Nokia, revealed that since he took over the helm at the Finnish phone company, he has been "very open, direct and transparent" in his communications internally with regard to the organization's strengths and weaknesses. The executive was speaking at a media roundtable here Wednesday, during a stopover in the Malaysian capital city to participate in the company's regional sales and marketing meeting.

Alluding to the memo he sent to all Nokia employees, which was made public, Elop said staff response has been "very positive" because he had addressed some key concerns such as lagging platform innovation and device appeal that customers had voiced out in various markets.

With internal restructuring currently taking place as well as its partnership with Redmond, the handset maker is seeing "behavioral shifts" that he is confident will help Nokia "stake out a position of leadership" in the mobile industry, he said.

"Urgency is now emphasized and employees are moving quickly to speed up the release of Windows Phone 7-based Nokia phones into the market," Elop said. "We are also adopting a posture of 'sisu', roughly translating to 'perseverance' in Finnish, to push through challenges and barriers that are hindering our restructuring process."

The executive was responding to ZDNet Asia's query on how his management team was dealing with potential pushback from employees, particularly in Finland, regarding the adoption of another OS and job cuts that might follow as a result of the Microsoft deal.

Reassuring key stakeholders
News agency Bloomberg also highlighted industry concerns resolving around restructuring issues as well as the lengthy wait before the first Nokia-Windows Phone 7 will be released into the market.

In the report, IDC analyst Francisco Jeronimo also questioned whether ongoing negotiations with Finnish worker unions over job cuts, particularly in the research and development (R&D) unit, will hinder Nokia's execution of its long-term mobile strategy. "They cannot afford to lose time on internal fights when they have to win against competitors who are faster," he said.

Elop reiterated today that Nokia-Windows devices will "ship in volume" by 2012. Addressing the issue of staff layoffs, he said talks have already started with employees to provide "clarity" on the company's strategy and it will release more information on the number of jobs to be cut by end-April.

As for R&D spend, the CEO stressed that investments in this area will not be neglected. However, because it has procured a mobile platform from Microsoft, "certain R&D activities will be reduced".

He added that research efforts would now focus on technologies that differentiate the company from its rivals. Its R&D efforts were previously dedicated to developing "base platform capabilities that did not provide differentiation", he noted.

Building Windows Phone 7 ecosystem
In terms of providing a "third ecosystem", which was stated in Nokia's Microsoft partnership announcement, Elop said the company's "principle competition is relative to Android". To this end, Nokia is contributing key assets such as its mapping and location-based services to the ecosystem and these will be available to all other participating handset partners utilizing Microsoft's platform.

Within the ecosystem, however, he pointed out that the company would be looking to differentiate from other phonemakers such as LG and HTC through "hardware, software and services". Through hardware, for example, app developers can build software optimized for Nokia's camera capabilities, he explained.

That said, Elop emphasized that the handset maker would not be differentiating to the point of fragmenting the entire ecosystem, citing the J2ME (Java 2 Micro Edition) ecosystem which started out as an industry standard but was eventually bogged down by differing visions for the platform, as a cautionary tale.

Quizzed about Nokia's existing Symbian platform, he said investments will continue to be made to support the system. Furthermore, the wide device reach that the company has with its Symbian-based devices, which currently stands at over 200 million globally, is a major incentive for developers to continue their support for the OS.

He pointed out that Symbian phones would continue to plug the gap for mid-to-top-range smartphones before the first Windows Phone 7 device is launched next year.

Research firm IDC had forecasted that because of its change in platform strategy, Nokia is likely to surrender its market leadership in the Asia-Pacific region to Android-based devices as early as 2011.

As more brands come out with lower price-point Android devices, this will not only buoy demand for smartphones in emerging markets but also encourage feature-phone users in the region to consider upgrading to smartphones, IDC said.

Kevin Kwang of ZDNet Asia reported from Kuala Lumpur, Malaysia.

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