Nokia CEO admits defeat: "We're a burning platform"

Recently-appointed Nokia CEO Stephen Elop has all but admitted defeat in the smartphone wars in an internal memo today. According to Engadget, the memo is indeed real and has Elop saying that Nokia is currently a “burning platform,” and that the only way off is to jump into the freezing water. Elop wasn’t vague about it, either.

"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." 

After losing the top spot to Apple, and not seeing a big-time and successful major product launch in a good while, Elop is strategically positioning himself as “the new guy,” the maverick that doesn’t have the traditional Nokia/Finnish background that a Nokia CEO would be expected to have, and the guy that’s going to come in and start taking names and kicking Apple. If this is how he usually composes memos, Nokia is definitely in for a wake-up call.

After such a memo, one would expect some follow-through. It is expected that Elop will be announcing his ultimate plans for the company at the upcoming Nokia Calital Markets Day this Friday, where other big Nokia announcements are typically made.

The full memo, below:

Hello there,

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.

 

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57 Comments

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A partnership with Microsoft may make sense. As the former president of Microsoft Business devision, Elop definitely has some connections to make this happen.

I liked Nokia - my first phone and although some of their new smart devices look really nice physically - the OS doesn't match it.

C-Squarez said,
People still holding on to Symbian are like those still holding on to XP when Windows 7 came out.

No you are comparing one version of Windows to another version of the same. Your analogy would be true if people hold onto S60v3 instead of Symbian (^3 has been dropped from the name due to continuous development).
XP > Vista > 7
S60v3 > S60v5 aka Symbian^1 > Symbian

Edited by liju, Feb 10 2011, 4:44am :

I'd love to see a Nokia Android phone. I used to prefer Nokia phones but I always hated Symbian, it was a bit of a crap platform for apps (compared to say Windows mobile), it was a nightmare to develop for and it just didn't do Nokia's well-built phones justice.
Nokia + Android would be a major win.

Kushan said,
I'd love to see a Nokia Android phone. I used to prefer Nokia phones but I always hated Symbian, it was a bit of a crap platform for apps (compared to say Windows mobile), it was a nightmare to develop for and it just didn't do Nokia's well-built phones justice.
Nokia + Android would be a major win.

Couldn't agree more. I really don't want to see Nokia goes down with WP7. WP7 has very stringent hardware requirements and wouldn't make sense with many of Nokia's lineups.

Nokia's getting rooted out in 3rd world strongholds as well. Chinese dual/ triple sim phones are slicing out a big portion of the market with features just as good as a Nokia + with warranty.

HTC is assaulting the mid range as well.

They became complacent unfortunately.

They built up their market by having 1) stunning high end phones that were open and easy to use and 2) cheaper tacky disposable phones that were easy to use. Their winner in a lot of ways was their UI and that fact they used to innovate. Custom Ringtones, Operater Logos and Snake made them back in the day because they actually made owning a phone fun. When the Series 60 devices came out they were THE phone to own.

Unfortunatly they got on top and stopped innovating instead cheaping up their hardware and making stupid design decisions. They would release a decent phone (N95 for example) then make stupid mistakes which cripped it. They got powned because their is only so long you can stand still in a particular market place before someone is hot on your heels.

As much as I hate a lot of what Apple has done in the market place (trying to enforce their own subsidy system and enforcing restrictions on what you can install and use) they are responsible for the push that has forced all manufacturers to up their game. Apple nailed the User Interface and made high end smartphones sexy and desirable something that Nokia used to do. Hopefully their restrictions will be their eventual downfall as Apples shiny world isn't always the best for the consumer.

The N900 fiasco was pretty much the nail in the coffin for Nokias High End loyal market. Amazing hardware, fantastic concept yet sadly abandoned when it showed such massive massive potential both then and now.


This is a talk to prepare their employees to talk about Microsoft,As Exavir arma said before, this year this two company became together to be the empires of the kingdom again .

this year MWC show us a lot of things

Nokia's problem is marketing and advertising. Launch the already planned devices on their own OSs and go into a marketing overdrive.

liju said,
Nokia's problem is marketing and advertising. Launch the already planned devices on their own OSs and go into a marketing overdrive.

I hardly thing is okay to blame it on those. He said, the real underlying problem is they don't effectively use their internal resources. Nokia has all the required "arms" to make a killer ecosystem but cannot seem to focus the energy.

I'm sorry having the CEO say that they will have Meego on one phone by end of year does not give one confidence for the platforms success. They are better off cutting their loses. Concentrate on building great hardware and adding value added software where it makes sense. They can do it with Windows Phone 7 or/and Android.

Melfster said,
I'm sorry having the CEO say that they will have Meego on one phone by end of year does not give one confidence for the platforms success. They are better off cutting their loses. Concentrate on building great hardware and adding value added software where it makes sense. They can do it with Windows Phone 7 or/and Android.

Did you read what he said? He said they'll be lucky to have MeeGo product - because of the fail.

It's funny how the media is claiming this is real without any confirmation from reputed sources. I don't know whether this is real or not. If I want I too can claim that this is fake because my grandmother says so.
If this turns out to be real and they somehow drop Symbian or especially MeeGo then Nokia is dead to me. I won't be their customer anymore after using only their devices all these years and I'm not alone as most Nokia enthusiast sites' polls reveals the same trend.
If Elop drops MeeGo without even giving a chance and throw away all the work being done around Qt and makes Nokia just another hardware maker then I've to say he doesn't get what Nokia is. If he jumps ship to WP7 then he indeed was/is a trojan.

liju said,
It's funny how the media is claiming this is real without any confirmation from reputed sources. I don't know whether this is real or not. If I want I too can claim that this is fake because my grandmother says so.
If this turns out to be real and they somehow drop Symbian or especially MeeGo then Nokia is dead to me. I won't be their customer anymore after using only their devices all these years and I'm not alone as most Nokia enthusiast sites' polls reveals the same trend.
If Elop drops MeeGo without even giving a chance and throw away all the work being done around Qt and makes Nokia just another hardware maker then I've to say he doesn't get what Nokia is. If he jumps ship to WP7 then he indeed was/is a trojan.

There isn't enough room in the market for MeeGo and Nokia's ship is sinking, it's going to annoy some enthusiasts like you but in the long run for the business to get back to how it was it has to change. Sticking with what they are currently doing will mean they will just die a slow death over the next decade

damn right it is. the just released E7 ... excellent device completely ruined by symbian. I don't really like WP7 but if nokia go that path instead of android i'm sure they'll make a good partnership but if they went android well it would be quite an earth moving thing.

Here's to hoping we'll see an E7 device with different OS which isn't meego or symbian.

Palm, WebOS, and Symbian are dead or dying platforms. The mobile OS wars for the next five years will be between Android, iOS, and BlackBerry. If Nokia chooses Windows Phone as their new OS for their mobile devices, then Microsoft will have a shot as well ... and so will Nokia. Nokia knows how to make hardware, Microsoft knows how to make software. They need each other or both will be out of this market very soon.

sabrex said,
Palm, WebOS, and Symbian are dead or dying platforms. The mobile OS wars for the next five years will be between Android, iOS, and BlackBerry. If Nokia chooses Windows Phone as their new OS for their mobile devices, then Microsoft will have a shot as well ... and so will Nokia. Nokia knows how to make hardware, Microsoft knows how to make software. They need each other or both will be out of this market very soon.


Except that WP7 will significantly limit Nokia's ability to create innovative hardware. They can't even implement features that are quickly becoming standard, like a FFC, 4G/LTE support, etc.

The phrase “Nokia introduces the first phone with _________(insert hardware feature)” will never exist if they are on WP7.

The problem with a Nokia-WP7 deal is that they almost operate in different environments. I have never seen any Nokia CDMA phones in America. There used to be tons of them for AT&T and T-Mobile but they're becoming scarce. If WP7 wants to grow, they need to be able to be on all carriers.

Davo said,
The problem with a Nokia-WP7 deal is that they almost operate in different environments. I have never seen any Nokia CDMA phones in America. There used to be tons of them for AT&T and T-Mobile but they're becoming scarce. If WP7 wants to grow, they need to be able to be on all carriers.

i agree too, but that hasn't kept iPhone's exclusive from being contained lol

The boy stood on the burning platform
playing a game of cricket.
The ball run up his trouser leg
and hit his middle wicket.

I am glad that this is happening and I hope that they die. Soon.

I purchased a Nokia cell phone only a short while ago. Used it for two months. Bam. Dead. Took it to so called NokiaCare, they couldn't fix it because they were unable to diagnose the problem. They told me that they couldn't replace the phone either. For replacement, I'd have to called Nokia customer care at such and such numbers. Did.

Customer care told me that only people at NokiaCare would be able to help me with replacement or fixing the phone. I couldn't be bothered to take another trip to NokiaCare for fruitless answers. I decided to write a final strongly worded email to Nokia which they decided to ignore for their own good.

Great job, Nokia. You lost a customer. Forever.

I switched to iPhone thereafter and never looked back.

yowan said,
Symbian is dead. They should switch to WP7

It makes more sense for them to move to Android in order to quickly regain marketshare. WP7 has potentials but it's still far from being a dominant player.

XIII said,

It makes more sense for them to move to Android in order to quickly regain marketshare. WP7 has potentials but it's still far from being a dominant player.

I agree... They need to fix sh*t now.

Long term effects are great, but droid is also helping in the long run.
Don't risk too much.
WP7 for Nokia might come, but I guess droids can more easily set themselves apart by giving them some nokia tuning and make them special.
WP7 is pretty much locked down unless they get a special deal which I doubt.

GS:mac

GS:mac

I'm a WP7 user (HD7). I like the OS a lot more than Android or iOS. I also think Nokia makes awesome hardware. I would love Nokia built WP7 devices, but I don't know how realistic that is.

Nokia is used to making devices where the software and hardware are all built in house. This gives them a lot of freedom with the hardware. If the hardware guys dream up a feature, the software guys could support it. With WP7 they will be really limited. At present, they won't be able to build in a front facing camera, they won't be able to add NFC, they will only be able to support a subset of wireless technologies, etc. Android, on the other hand, seems to implement these features a lot faster. Android is also extensible, so when a feature doesn't exist they can add it.

Also, Android offers a clear path into the Tablet space for manufacturers of mobile phones. I can't see Nokia ignoring Tablets as a future potential market, especially considering they attempted to enter the netbook market.

Simon said,
2-1: Nokia adopts Windows Phone 7
5-1: Nokia adopts Android
10-1: Nokia keeps with Symbian and MeeGo.

I guess they could fork Android. They must have some talented developers there who would be able to add some unique things to Android. It would be the quickest way to get a working smartphone OS, and could allow them to tap into the Android Marketplace

DomZ said,

I guess they could fork Android. They must have some talented developers there who would be able to add some unique things to Android. It would be the quickest way to get a working smartphone OS, and could allow them to tap into the Android Marketplace

How about this: Release some nice touchscreen phones running a custom version of Android (like what HTC does), but also sell a version that runs stock Android, maybe online only for tech enthusiasts. A lot of people like buying a phone with stock Android that will easily support future updates (and do so quickly), but the only good options for that right now seem to be to buy one of the "Nexus" branded phones.

Simon said,
2-1: Nokia adopts Windows Phone 7
5-1: Nokia adopts Android
10-1: Nokia keeps with Symbian and MeeGo.

Dunno about anyone else, but I quite like the idea of MeeGo, having an actual Linux distro OS on a phone means there's already loads and loads of software that could potentially work on it, with little or no modification.

That said, Android on a Nokia would be cool too, considering their phones are usually quite sturdy in design with good hardware.

If that is "admitting defeat" then a deal with Microsoft, could see Nokia producing luxury WP7 handsets, and becoming associated with quality, I mean the name Nokia still carries a lot of weight in the phone world. Every Nokia I've owned had been sturdy, reliable. This could be a deal to bring Nokia from the edge, and WP7 becoming bigger.

That's a pretty intense memo. Finally they may make some moves which will bring Nokia back into "competitive" status. I've always liked their hardware and for the majority of the time I've used mobile devices (since about 1998), I've almost always had a Nokia. I would happily purchase a Nokia running WP7 or Android, or possibly even a different system if they choose to go that way (though I think that's highly unlikely).

I don't see defeat mentioned anywhere, they are finally starting to do something which seems like the opposite of admitting defeat. The burning platform is Symbian, not Nokia.

The alleged memo is also fairly focused on high-end stuff, Nokia has never really had any major success there.. they make their money with low end 'dumb' cell phones.

macel said,
I don't see defeat mentioned anywhere, they are finally starting to do something which seems like the opposite of admitting defeat. The burning platform is Symbian, not Nokia.

The alleged memo is also fairly focused on high-end stuff, Nokia has never really had any major success there.. they make their money with low end 'dumb' cell phones.

He was talking about the company as a whole, not just the high end but you are somewhat correct. It's not so much admitting defeat. They, or at least him, are willing to take that leap into the water. They are ready to make major changes to become competitive again in all sectors. It's not an admittance of defeat but slacking or tripping up over the last couple years and I can see it more as a guarantee that they accept that they've made mistakes and are ready to do whatever it takes to make things right.

I didn't get a sense that he is admitting defeat.
Instead this seems like an awesome memo to rally the troops.

figgy said,
I didn't get a sense that he is admitting defeat.
Instead this seems like an awesome memo to rally the troops.

This is as close as he can get to admitting defeat. Whatever happens on February 11th, it better be big.

figgy said,
I didn't get a sense that he is admitting defeat.
Instead this seems like an awesome memo to rally the troops.

He's admitted defeat, and is showing that it is the first step to hopefully rebuilding the brand. They've essentially wasted 4 years and are lucky to have as much market share as they still do. As soon as the iPhone was released they should have started working on a similar device, and a new OS (android esque) to compete. And actually get it to market.

DomZ said,

He's admitted defeat, and is showing that it is the first step to hopefully rebuilding the brand. They've essentially wasted 4 years and are lucky to have as much market share as they still do. As soon as the iPhone was released they should have started working on a similar device, and a new OS (android esque) to compete. And actually get it to market.


This.

GS:mac

Glassed Silver said,

This.

GS:mac


i still prefer a Nokia over a touch screen smartphone, i dont have the urge to be online 24/7. i still use my 6230i as i can do phone calls, text messages, MMS, even internet works on it when i am desperate enough. and its virtually unbreakable, all the torture it went through the past 5 or 6 years... im only missing 1 button and a few minor scratches on my screen.
but i even threw it out of the window on the 3rd story in a angry mood and even tho it fell apart, clicking it back together... works fine, it also drowned a couple of times, drying it up and works fine. altho the battery life went back from 4-5 days to ~2 days over the years.
and with me, quite a few people that dont really care for 'OMG I CAN BROWSE WEBZ WHILE WAL KING OR IN TAIN WOOT!' still use nokias.. especially since in europe at least, EVERY home has a nokia charger... and for the smartphones, i seen lots of people carrying their charger (or USB cable) with them, as the phone will be dead <24 hours if not charged, and almost every phone has a seperate plug to charge on

figgy said,
I didn't get a sense that he is admitting defeat.
Instead this seems like an awesome memo to rally the troops.

Same. He himself isn't admitting defeat-he's stating that the previous decisions by the former CEO and his team have led to their current position. He isn't admitting defeat-he is telling everyone that they need to make radical changes. The former CEO would have been able to admit defeat. Elop can't as he hasn't been there to create the framework Nokia currently have, he cannot therefore be responsible for where they now find themselves.

The memo is very well worded and I think were I an employee at Nokia, I'd feel quite optimistic that they will no longer be churning out the same old chuff and there is someone at the helm who is now going to address their problems and help them to move in the right direction. Hopefully we can soon see the decent quality hardware Nokia are well known for but now with a decent OS onboard that will give them the eco system Elop talks of. That being said, I don't see them adopting WP7 as it would be too much of a risk being new and in-established. The only real alternative therefore would be that they adopt the Android platform which could be very interesting indeed!

z0phi3l said,
About time someone over there caught up with reality

And it's the end of cellphones that make artificial improvements. Ability to play polyphonic tones? Ability to play MP3s? Ability to display in color? Ability to browse pictures? Ability to read from SD Cards?

When I got my Orange Smartphone (Windows Mobile 6) several years ago, I got all those capabilities in one go. And Nokia is still busy artificially making small incremental "improvements". And an obsession with Symbian, touted before as the killer of Windows Mobile OS.

No wonder Apple owned them. Apple changed the mobile phone landscape with a great consistent experience for the users. And other brands of phones started looking better, trying to mimick Apple designs and styles. Thank you Apple for waking up everyone, especially Nokia and Microsoft.