On Friday, Nokia announced the appointment of Steven Elop as President and CEO, replacing Olli-Pekka Kallasvuo. Elop’s tenure will begin on September 21st 2010. He was, most recently, President of Microsoft’s Business Division, and a member of Microsoft’s senior leadership team. Interestingly, he had led the deal that Microsoft inked with Nokia last year, to make Office available on Symbian platforms. Before joining Microsoft, Elop was the COO at network infrastructure company Juniper Networks, and had been President and CEO of Macromedia when it was acquired by Adobe in 2005. While he was at Macromedia, the company had entered into a strategic relationship to deliver flash player capabilities to Nokia devices.
What Happens To Olli-Pekka Kallasvuo?
Kallasvuo had a 30 year long career at Nokia, the last four years of which were at the helm of the company, at the cusp of a change in the handset market dynamics that have seen Nokia struggling to keep pace, as Apple’s iPhone and Google’s Android OS continue to capture consumer imagination. His last four months at the company were spent with the knowledge that Nokia’s Board was looking for a new President and CEO, and his time had run out. There had been calls for his ouster from analysts, and he had clearly lost favor. Jorma Ollia, the Nokia board Chairman, and the man Kallavuo had replaced, said that the move to replace Kallasvuo had been initiated by the board, “It was not easy” and “we have been conversing with Olli Pekka every second day, and that’s been open, transparent, no slamming of doors, and professionally handled by Olli Pekka.”
During the press conference announcing Elop’s appointment, Jorma Ollila said that Nokia’s strategies had been underwritten and supported by the board, but they were not quite happy with some of the implementation. Elop, he said, has a track record in Change Management. Later in the Q&A, Elop added that Microsoft had also needed change: “Indeed, when I went to Microsoft, it was at a time when Microsoft itself had a need for a significant change. In the nearly three years that I was there, I led a significant portion of Microsoft through a portion of that change, this advent of cloud based computing, to the point that Microsoft is the undisputed leader in that space, a fundamental change for the organization.”
Nothing revolutionary has been announced yet. Elop first needs to get a sense of what is going on within Nokia. He intends to initially spend time “listening, learning and adjusting based on what I hear from all of our stakeholders – customers, employees, partners the entire ecosystem that makes up the broad Nokia family. From that work, our team will introduce the changes that are necessary to ensure that Nokia can take advantage of all of the opportunities that are here…”
Elop is planning to establish a residence in Helinski. His role, in his own words, “is to take Nokia through this period of fundamental disruption”, with the advent of the cloud based computing strategies, the delivery of services from the Interent, and communication using social media. Pointedly, Elop added that while Nokia and its partners have the resources to take advantage of changes, “things are changing so quickly that we have to listen and respond and react to whatever solutions that make sense to them (consumers) today.”
There’s a lot that’s to be said about the last line in the paragraph above: Nokia just hasn’t been able to adapt quickly enough to this change in paradigm. Nokia is playing every segment – from the lowest cost devices to the most advanced, competing with specialists in each segment. These companies are more nimble, with ears closer to the ground, and not only a better understanding of consumer needs, but also a quicker product development cycle. Nokia launched its Dual SIM handset only recently, while such phones have been around since 2007. There are handsets that use pencil cells, offer 30 day standby battery life, those that have an ABCD keypad instead of QWERTY, and then there are low cost QWERTY devices, because QWERTY has bling value.
At the higher end, ubiquitous, cross-platform operating systems are powering multiple devices, and services on it. Kallasvuo had once pitched higher margins in services – above 40% – to Nokia investors. The services battle doesn’t look like a battle that Nokia will win, when faced with an Android platform that delivers competing services for free, and has a strong developer ecosystem on top of that. Nokia may have the distribution muscle in Asia, but it won’t match the combined distribution might of multiple handset companies. Elop has his work cut out.
What they’re saying
- OPK was fired because Nokia tried to do VAS: Asymco explains the situation perfectly, in a post titled ‘Why OPK Was Fired”:Nokia tried to move from handsets to mobile value added services (rather, solutions), a complicated business model that has billing integrated with telecom operators; businesses like music subscriptions (Comes With Music), email, photo sharing, and navigation, offering device integration with services, with consumers paying a marginal amount. The problem: it’s a complicated business to manage across telecom operators across the globe, and consumers chose data plans and smartphones, with many of these services free. Kallasvuo’s biggest mistake? The acquisition of NAVTEQ for $8.1 billion, which was made free recently. More here
- Just the first step for Nokia: MorningStar says that Elop’s history doesn’t indicate a close connection to any of the major North American wireless carriers, notable design expertise, or experience in building wireless software platforms. More here.
- CNET asks if it’s too little too late, suggesting that time is not on Nokia’s side, and Elop needs to ink carrier deals in the US, and join the Android bandwagon. Unlikely, since Nokia is putting all its smart phone cards in the Symbian 3 basket. More here.
- Forbes, among other things, suggests that Elop’s move might lead to closer ties between Microsoft and Nokia. Nokia and Microsoft are already collaborating for Microsoft Office to be available on Symbian devices, but during his remarks, Elop clearly spelt out that there are areas of partnership, and areas of competition (between the two companies). “It is safe to say that the lines of communication are more open than before, and there may be opportunities for the companies to do more work together,” he said.