Nokia's Fear of Failure
As I'm sure you probably heard by now, last week Nokia’s board of directors took the long overdue step of replacing its CEO and installing Stephen Elop from Microsoft as the head of the company. Everyone had been talking for months about how outgoing CEO Olli-Pekka Kallasvuo was in trouble, so this development wasn’t exactly shocking, but given how moribund Nokia’s been lately it also wouldn’t have been too surprising if he had stuck around for a few more years.
All of this means that Nokia’s board has finally woken up and realized that something’s very wrong in Espoo. And there is definitely something wrong. Even the most diehard Nokia fanboy has to admit that things aren’t going swimmingly; companies don’t fire their CEO when things are fine (unless that CEO happens to be Mark Hurd, apparently).
Sure, Nokia still sells more phones than anyone else, but when you delve beneath the surface you see a company that faces some fundamental challenges. The majority of their sales are of low-end, low-margin units, and profits have been plummeting: in Q2 of 2010 they were off 40% versus the same quarter a year ago. Though once they dominated at both the high and low ends of the market, they’ve completely lost whatever leadership they once had in that area to Apple, HTC, and RIM (not to mention the renewed efforts of Samsung and Motorola to compete in the smartphone space).
It also blew my mind to find out that Nokia is investing way more on R&D than its competitors. They spent $1.9 billion in Q2 of 2010 (Apple, by comparison, spent $464 million during that same period), and yet clearly they aren’t getting a very good return. Just wait until you see how bad the new N8 is compared with the iPhone 4 or any of the top-tier Android phones, it’s crazy to think about a company spending $2 billion a quarter and still not being able to come out with a decent phone.
So the problem isn’t really money or lack of resources. I mean, could you imagine what Palm could have done with all those billions? (HP bought Palm for less than what Nokia spends in two months on R&D.) The problem is cultural: Nokia doesn’t know how to innovate anymore. I guess that’s pretty obvious, but the situation is the old cliché of a dominant market player caught flat-footed by an outside innovator (mainly Apple, but Android is also a factor here). It happens all the time.
Nokia did really well when the hardware itself was the biggest factor driving handset sales, and even did fairly well during the early years of the smartphone era, but once things shifted to apps and services they were totally left behind (Ovi, anyone?). Nothing Nokia has done over the past few years feels like the product of risk taking, and my guess is that they unintentionally institutionalized a culture which valued taking what always seemed like the safe bet when it came to new products and new services. No one wanted to risk failing, but if you make failure impossible you make mediocrity inevitable.
And mediocre is a pretty good way to describe Nokia’s current and upcoming lineup of phones. Sure, there are some promising things about MeeGo, the mobile OS created when Nokia merged Maemo with Intel’s Moblin (which unfortunately doesn’t rhyme with “goblin”) that will run on future handsets, but as far as I can tell there isn’t anything groundbreaking about it which will make you want to give up your iOS or Android phone (as opposed to Windows Phone 7, which at least has a totally fresh take on how a mobile UI should look and feel). Reaching parity with what else is out there isn’t enough anymore, you have to start things off ahead of the game.
But the point really isn’t how did Nokia get here as much as, What are they going to do now? I’d never heard of Stephen Elop until I read the news about him being hired last week, and while I don’t see much evidence from his background that he’s the guy to turn things around, I’m willing to give him the benefit of the doubt. There certainly must be something Nokia’s board saw in him to merit offering him the top job.
Getting rid of Anssi Vanjoki as head of the smartphone division was a necessary first step because what Nokia needs now someone who understands that above all they need to start making some absolutely insanely great phones. Easier said than done -- it’s not like I’ve ever designed and sold a phone -- but I think there’s something structurally broken at Nokia that is preventing this from happening. Maybe it’s that the organization has become too bureaucratic. Maybe the people designing phones are just out of touch, or that people with good, risky ideas aren’t heard or are discouraged in some way. I don’t know, but I do know plenty of people who work at Nokia who complain constantly that there are so many layers of managers and so many different agendas at work internally that it’s become very difficult to innovate.
That’s why it may be that the best way to fix the problem is to do what Microsoft did when it wanted to create something awesome (like the Xbox): pick someone brilliant and give them the resources they need and their pick of the best and brightest people from across the company to create a startup within Nokia. Don’t give that startup any preconditions about what the final product has to look like, what software it has to run (e.g. if they think they can rule the market with an Android or Windows Phone 7 device, let them do it), or what services or development environment it has to support (I get what they’re trying to do with Qt, but I’d be willing to let go of that). And then if you really want to be crazy, pick your second most brilliant person and have them do the same exact thing, and then a year later fire whoever is working on the worse product and give all the money and people to the other guy. Tech companies thrive on meritocracy, not bureaucracy.
The biggest problem with this is that even if they started today it’d be at least a couple of years before we saw anything hit the market. And maybe Nokia is already a year into this process, and a year from now we’re going to see some really impressive MeeGo hardware. But probably not, because if Kallasuvo were doing concrete things to transform how Nokia creates new products he probably wouldn’t have been replaced. Nokia’s board brought Elop in because they wanted, one would assume, a fresh approach.
Digging in for a couple of years isn’t pleasant, but sometimes it needs to be done. It’s not like all the company’s revenue is going to just disappear, Nokia will keep on selling tons of phones, even if its profit margins will be challenged and it will continue to struggle at the high-end of the market. A few years back Microsoft had to admit that Windows Mobile was a freaking disaster and rather than try and make incremental improvements, they decided to scrap the whole thing and start over. And while it remains to be seen how well it does in the marketplace, most people are impressed with the results so far. There’s no time to waste, but in the grand scheme of things we’re still at the beginning of the mobile era, and it’s certainly better than the alternative of muddling through and dying a slow, undignified death.
Have I turned into too much of a fanboy or do you think I have some valid points?
I felt palmsolo's intro was strong, and he led me into the rebuttal well with a statement that I agree with by quoting easily the weakest part of Peter's argument. However he didn't follow that up well at all. The speculation that Peter hadn't used the latest version of the N8, instantly made me think:
"Peter *might* have used the latest N8, and I assume the palmsolo* HAS used the latest N8. But there is a low likelihood that palmsolo has anywhere near the experience with other high end devices that peter definitely has"
Palmsolo attempted to address this straight away, but it was too late, I had already lost that steam that he had built. If I were palmsolo at that point I would have addressed much more directly why this was such a bad statement, and why the N8 was in fact flat out better than other top end competing products. Possibly in a list form, and not just the new features on the N8, but older features of symbian that things like iOS/Android still can't or won't do.
After that palmsolo brought me back to his side again a little after that by describing parts of the N8s features such as the cover flow. But palmsolo led with "symbian is familiar" as his first, and therefore what I assume he thinks is his strongest argument for the why the N8 is better. This however backed up peters implied argument (and my pre-conceived argument) that symbian was stagnating.
Scattered throughout the post was a lot of catch up language such as "hold its own" or "give the customers a feeling that they have a competitive device". This made me feel like he was arguing to try to get to 'as good' not to 'better than the competition'. This means that I have to accept every argument he put forward to agree with ‘as good’ which will be a stretch any post that long. I would have tried to use more positive language.
I'm starting to run out of time, so I'll summarise the rest my feedback. The RnD costs discussion felt like it excused the expenditure, but didn't step to explaining why nokia's products were any better or worse. The second explanation of the N8's feature set (and why its awesome) was almost entirely hardware based, and therefore not what peter was arguing. (as peter pointed out to me earlier in this thread when I made similar comments).
The second to last paragraph was a good conclusion, and it tied palmsolo’s viewpoints up nicely. I would have ended the post there. The last paragraph I feel pulled away from palmsolos argument. I would have posted that as the first comment in the comment thread to get the feedback, while leaving the argument intact.
Thanks for a good post palmsolo, I enjoyed reading it (I wouldn't have taken the time to write all this otherwise). I hope that this is useful feedback to you.
*I realise palmsolo posted under a full name on the linked article, but I prefer not translate names between mediums
First off the N8 is using a 680mhz ARM 11 processor. An ARM 11 processor would have to be clocked well over 1ghz to be competitive at all. This has been a problem for years. My N900 has better silicon then the N8. Not to mention the amount of RAM on the N8 compared to the high end. Why isn't Nokia helping innovate the guts of there phones or giving themselves any headroom for software updates that may need faster speed.
nHD has gone from ok at the announcement of the N97 in December of 2008 to disappointing at the launch of the launch of the N97 in June of 2009 to so dismal now that the iPhone now has more the same number of vertical pixels the N8 has horizontal. (or vice versa depending on the orientation of the screens) The E7 has the same screen blown up to 4 inches making for worse pixel density.
USB on the Go matters so little that you actually misremembered the name and forgot (and frankly I would never known without a trip to Wikipedia) that the N8 is not the first Nokia phone to have this feature. Pentaband is great. But all he other features have been done before. I'm ignoring the Cam until I can see some results. (Which I'm sure will be mind blowing)
Nokia releases to many devices. The C6 and C7 seem to be stepping on the toes of what should be a new generation of X series devices. They need to make say 10 devices for different market segments. Perhaps a Flag, high and mid end slates, a QWERY slider, a portrait QWERTY candybar, a dumb flip phone, a dumb candybar, a dumb slider, a dumb QWERTY sider and maybe something cool like the touch and type.
Also Matt your caught up in the launch hype, give it few days. Your Nokia is tragically misunderstood in the US talk carry a lot less weight when some one like Ricky Cadden moves to an Android device.
In your post you only pointed out two flaws of the US medias coverage. That Nokia's not as broken as the US media thinks they are, which in light of the fact that Nokia just changed there CEO is ridiculous. Companies don't change their CEO for no reason. As for your other point I think the US media gives Nokia the same amount of coverage that all companies that are not apple receive. I certainly found out about the touch and type and the N8's pentaband HSPA from Engadget and as mentioned above the others aren't news.
Nokia has essentially spent the last three years building a new developer platform, which can be deployed on top of their existing platform offerings (Meego/Maemo and S60). In this time, they have been fundamentally limited in their ability to provide software for any one specific device, by concentrating the majority of their effort on software that is not only cross-device, but also cross-platform (within the company). Thus even though they have been competitive in hardware, no single device has been a perceptible success.
It seems unlikely to me that Nokia would have lost much of its entrenched advantages in manufacturing/distribution and in global reach. Therefore I think that their strategy will eventually pay off - better apps (from both Nokia and third parties) will be continuously deployed above both the proven S60 platform (lower maintenance costs, proven retargetability) and the developing Meego platform (greater possibilities).
Meego will obviously start out as a platform with limited deployment (very frustrating, that new mass-market devices are coming out symbian only!), but it has much greater potential to provide an extensible market-leading platform. In fact, this could prove to be Nokia's key to maintaining high-end relevance; both iOS and, to a lesser extent Android, require their providers to package and bundle facilities into their offerings to make them available to developers. With Meego, anything you can get running on a modern Linux platform can reasonably be incorporated into your Meego application. If Nokia's ovi store can match up to the comparative services, then the flexibility provided by Meego on a range of different hardware profiles should quickly make this the best platform for leading edge application development. Apple may well have the most difficulty in this area in the near future, in adapting their platform to account for changing device profiles and incorporating new features into their APIs.
So, I don't think Nokia have the wrong strategy - I just think they are taking a painfully long time to bring their current strategy to fruition. My major remaining question over Nokia's strategy is: how to convince developers to bring their applications to Qt when they already have iOS and/or Android versions? Nokia's deployed device numbers may be huge, but many of those will be older handsets or third-world devices, so ovi store sales cannot be expected to compete with iPhone app sales on a per-deployed-device ratio.
Has Nokia's dominance diminished in the past few years? No question. Does that mean it's in trouble? No. As Nokia fanboys are always quick to point out, this company still has the largest marketshare of any mobile manufacturer on the planet. And recent projections expect that Symbian will still hold the largest amount of marketshare for mobile operating systems for at least another few years. That's important in this discussion because it means that there are still tens (if not hundreds) of millions of people who will be using Symbian, and that means Nokia will still be a huge player. If Nokia were to scrap Symbian for Android, what makes it any different from all the manufacturers already providing that OS? But if it sticks with Symbian, it has a much better chance of retaining those customers who are so familiar with that OS. Nokia isn't Palm, whose marketshare was so small that it could afford to swing for the fences by completely scrapping an old operating system and trying something new.
Personally, I think Nokia is taking the precise approach that it should: keeping Symbian but updating it, while simultaneously developing a next-generation OS for the high end. This will allow it to keep the current customers who are familiar with Symbian while also providing an option that will theoretically compete with Android and iOS. However, what Nokia DOES need to do is find a way to move faster. Every decision seems to move at a glacial pace and that simply won't cut it in a world where Apple is releasing a new version of its OS annually like clockwork and Android moves even faster. That needs to be one of the first things that Elop addresses.
I think their handsets are fine, great even, however their SOFTWARE is desperately in need of complete do over, in the same way MS had done.
The killer feature of the nokia 5110 era phones was excellent software, now they are cranking out devices that have huge specs, (possibly with the exception of the CPU I'm always a bit hazy on the nokia CPU specs) but software that really is just a slightly shiny version of what was 'good but aging' 5 years ago. That's a LOT of time treading water while the rest have been swimming.
Looking forward the software outlook is not good. I've never got my hands on a n900, but after owning a n800 and playing extensively with it's version of mameo I am would not be betting the future of Nokia on MeeGo.
A 'do over' division may be the way to go.. my recommendation would be to put a ton of work into an OS, (be that android, wp7, webOS, or meego ). But whatever it is make sure EVERY phone out there with it on can be patched to the latest version by end users with almost no effort.
Adding value via software updates will make users love you.
Mobile is unique among products in that it is incredibly hard to disguise poor software or hardware. Both have to be matched well and working in unison, and surprisingly few companies have nailed this. Unfortunately for Nokia, they are among the worst right now when it comes to pairing software worthy of their overblown hardware.
Like it or not, software is a cheap commodity -- abundant, copyable, and its marginal cost is always driven to 0. As more hardware matches or exceeds iPhone specs, Apple is in a weak position in their proprietary software walled garden. Hardware is still where the scarcity lies, so all the margins are still there too.
Nokia's best bet in the mobile device market is to become as IBM is to the server market -- services and hardware with deep supporting (but not central) roles in software. Let the wider software world pull the hardware demand out, rather than pushing out solely from within. The N900 (which I now own) was a great small step in this direction, which needs to be repeated immediately and often.
Maemo on the N900 is such a frustrating work-in-progress, and there are plenty of developer concerns over how they've handled the whole situation.
What they need I thought stemmed from better marketing, and not necessarily *better* software or hardware engineering. A better pan-corporate awareness of what people / users and developers alike - want in a post-iPhone world and to be able to package their corporate face and products accordingly. This seemingly simple statement does have wide ramifications and will require a significant bit of corporate restructuring. But my feeling is that people are concentrating too much on the OS aspects in terms of writing Nokia off. I think it doesn't necessarily need to involve a sea change in their core architecture. They can tear it up and start over, but I think the situation is slightly different to the challenge Microsoft faced.
Im posting this from my N900. I like it a lot but then I have an N810 as well so Im used to Maemo.
Software is a huge issue for Nokia at the moment for sure. They just arent good at designing smartphone software. They have done well with limited functionality using Symbian, but they havnt had the luxury of starting fresh the way Apple and Google have.
Id guess the main issue is one of generation shift. Nokia is an old company doing things in an old way. Breaking free from what has served them so well is no doubt very hard.
Im not sure Nokia needs to innovate at this moment though. They need results quickly perhaps not from a monetary perspective but market share and brand name. Just start doing some serious immitating that compares favorably to their competitors. Set up clear goals and make sure they hit them not delivering some half assed copy. Move innovators to these projects and the rest to Symbian.
The N-Gage was a miserable failure because they clearly had no clue what made a good portable gaming unit. Im afraid they are somewhat lost with regard to smartphone OS as well which is another reason I advocate immitating. Once they have a good foundation they can start playing aound to create an edge.
Of course they need to have "innovation teams" running constantly which Im sure they do, but right now they need to swallow their pride and start immitating for reals.
It's not about forgetting the past, because that took a long time to build. It's about making sure that the future doesn't try to kill the past. What do people still like about Nokia? Is it that it just works, even a decade later? That people want more, doesn't do that reputation any good, if it's not still true. I still know people who stick with the same brand because they know what it is, how it works, & what to expect. What would people do if New-Nokia was something they couldn't relate to, didn't work the same way, & was something totally unexpected? If New-Nokia had bugs to such a degree that it couldn't make calls, didn't last, & just wasn't the same, would it do them any good?
That some may regard the slow pace of change to be a trademark of Nokia, might scare away the people who like this slow pace of change. Not to say that going nowhere is where they need to go, but where is it they need to go?
If software is an issue, an added button, might be the most discrete way of making available an option to boot two different versions of phone software. A standard Symbian OS for those who are used to & like this about Nokia, & an experimental "value added Android". This way you don't scare away the old or the new.
I fear that Mr FormerlyMicrosoft is going to turf Meego in favour of Android or (shudder) Win Phone 7. That would be the death-knell, turning Nokia into merely an also-ran in the smartphone competition.
First their software development is chaotic, with fragmented operating systems. Currently Nokia are actively and expensively investing massively in developing not one but two software platforms (Symbian and MeeGo) when most of their rivals don't even do one. Preferring to outsource the entire cost of OS development to Android.
Why two? Because one is old and clunky and desperately needs updating to be competitive, and the other is new and unfinished. Developing two competing platforms is not an aberration, self-competition seems to be a Nokia theme.
If we look at Nokia's product range there are just too many handsets with seemingly identical feature sets. Watching today, I rapidly became confused about why I would want one device over the other. It's as if they had teams working on each handset, and the teams had labored for months in isolation and come up with virtually the same products.
And finally, not satisfied with that, Nokia has another self-competing strategy which undermines its profitability. It has a long-standing habit of pre-announcing hardware months ahead of it becoming available.
Pre announcing a newer-shinier product stifles demand for existing products - and by the time the new handsets emerge, they seem quite old. We have been hearing about the N8 for months now. And they repeated the same trick with the N900, The N97 and so on. Nokia seem determined to send customers one message; "Don't buy this, there's something better round the corner!"
I would like to see Nokia get its act together. But yesterday we saw the same old company, with the same old mantra.
They've got a reputation, a tradition, & a past that's rosier than the present or how many see their future.
There was a time where people bought Nokia, because they knew that they wanted a new phone in 6 months or a year, & they could sell their old phone at a lesser loss "if" it was a Nokia. This isn't true anymore & the only major difference between an "Original" Nokia accessory & a Nokia "Compatible" accessory is the price. It's called stupid-branding when something doesn't make any profit but it's still being developed, manufactured, & sold regardless of sales or profitability.
If it once was a good idea to show people what the future had to offer, before it's there, simply so people could look forward to it, think about it, & plan to get it. It might not have been the intention to disappoint the present with talks of the future, but more to do with giving them an idea of what the future has to offer. That this also doesn't help stupid-branding, because everyone interested in riding that wave also will be prepared for it, might point out why stupid-branding & getting ready for the future is like shooting yourself in the foot twice.
Even if having several cards up your sleeves winds up costing more than it ever can bring in. Either Nokia-Droid (MeeGo) includes Symbian, or Nokia opens up for Android either offering emulation or at least making it look & feel like Symbian (letting it slowly die), or Nokia offers both Symbian & Android before the parted seas close up drowning Nokia.