Nokia CEO speaks out with uncanny lucidity

This was published yesterday from an internal memo to Nokia employees from Chief exec Stephen Elop about abrupt changes in the fast moving world of the smart phone. Brilliant stuff. Found on a blog called iClarified.

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 mere 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 mere seconds to react. He could stand on the platform, and inevitably 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.

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

I have learned that we are standing on a burning platform.

And, we have more than one explosion – we have multiple points of scorching heat that are fuelling a blazing fire around us.

For example, there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.

In 2008, Apple’s market share in the $300+ price range was 25 percent; by 2010 it escalated to 61 percent. They are enjoying a tremendous growth trajectory with a 78 percent earnings growth year over year in Q4 2010. Apple demonstrated that if designed well, consumers would buy a high-priced phone with a great experience and developers would build applications. They changed the game, and today, Apple owns the high-end range.

And then, there is Android. In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers. Android came in at the high-end, they are now winning the mid-range, and quickly they are going downstream to phones under €100. Google has become a gravitational force, drawing much of the industry’s innovation to its core.

Let’s not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally – taking share from us in emerging markets.

While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, 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.

We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.

At the midrange, we have Symbian. It has proven to be non-competitive in leading markets like North America. Additionally, Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements, leading to slowness in product development and also creating a disadvantage when we seek to take advantage of new hardware platforms. As a result, if we continue like before, we will get further and further behind, while our competitors advance further and further ahead.

At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us.

And the truly perplexing aspect is that we’re not even fighting with the right weapons. We are still too often trying to approach each price range on a device-to-device basis.

The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.

This is one of the decisions we need to make. In the meantime, we’ve lost market share, we’ve lost mind share and we’ve lost time.

On Tuesday, Standard & Poor’s informed that they will put our A long term and A-1 short term ratings on negative credit watch. This is a similar rating action to the one that Moody’s took last week. Basically it means that during the next few weeks they will make an analysis of Nokia, and decide on a possible credit rating downgrade. Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness.

Consumer preference for Nokia declined worldwide. In the UK, our brand preference has slipped to 20 percent, which is 8 percent lower than last year. That means only 1 out of 5 people in the UK prefer Nokia to other brands. It’s also down in the other markets, which are traditionally our strongholds: Russia, Germany, Indonesia, UAE, and on and on and on.

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.

We are working on a path forward — a path to rebuild our market leadership. When we share the new strategy on February 11, it will be a huge effort to transform our company. But, I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future.

The burning platform, upon which the man found himself, caused the man to shift his behaviour, and take a bold and brave step into an uncertain future. He was able to tell his story. Now, we have a great opportunity to do the same.

Stephen.

Jordan’s king fires Cabinet amid protests

This article caught my interest from the Washington Post today. Where will unrest in the Middle East actually stop?

AMMAN, Jordan — Jordan’s King Abdullah II fired his government Tuesday in the wake of street protests and asked an ex-prime minister to form a new Cabinet, ordering him to launch immediate political reforms.

The dismissal follows several large protests across Jordan- inspired by similar demonstrations in Tunisia and Egypt – calling for the resignation of Prime Minister Samir Rifai, who is blamed for a rise in fuel and food prices and slowed political reforms.

A Royal Palace statement said Abdullah accepted Rifai’s resignation tendered earlier Tuesday.

The king named Marouf al-Bakhit as his prime minister-designate, instructing him to “undertake quick and tangible steps for real political reforms, which reflect our vision for comprehensive modernization and development in Jordan,” the palace statement said.

Al-Bakhit previously served as Jordan’s premier from 2005-2007.

The king also stressed that economic reform was a “necessity to provide a better life for our people, but we won’t be able to attain that without real political reforms, which must increase popular participation in the decision-making.”

He asked al-Bakhit for a “comprehensive assessment … to correct the mistakes of the past.” He did not elaborate. The statement said Abdullah also demanded an “immediate revision” of laws governing politics and public freedoms.

When he ascended to the throne in 1999, King Abdullah vowed to press ahead with political reforms initiated by his late father, King Hussein. Those reforms paved the way for the first parliamentary election in 1989 after a 22-year gap, the revival of a multiparty system and the suspension of martial law in effect since the 1948 Arab-Israeli war.

But little has been done since. Although laws were enacted to ensure greater press freedom, journalists are still prosecuted for expressing their opinion or for comments considered slanderous of the king and the royal family.

Some gains been made in women’s rights, but many say they have not gone far enough. Abdullah has pressed for stiffer penalties for perpetrators of “honor killings,” but courts often hand down lenient sentences.

Still, Jordan’s human rights record is generally considered a notch above that of Tunisia and Egypt. Although some critics of the king are prosecuted, they frequently are pardoned and some are even rewarded with government posts.

It was not immediately clear when al-Bakhit will name his Cabinet.

Al-Bakhit is a moderate politician, who served as Jordan’s ambassador to Israel earlier this decade.

He holds similar views to Abdullah in keeping close ties with Israel under a peace treaty signed in 1994 and strong relations with the United States, Jordan’s largest aid donor and longtime ally.

In 2005, Abdullah named al-Bakhit as his prime minister days after a triple bombing on Amman hotels claimed by the al-Qaida in Iraq leader, Jordanian-born Abu Musab al-Zarqawi.

During his 2005-2007 tenure, al-Bakhit – an ex-army major general and top intelligence adviser – was credited with maintaining security and stability following the attack, which killed 60 people and labeled as the worst in Jordan’s modern history.