Nokia CEO Stephen Elop has written a brutally honest memo to employees within the company, saying that Nokia’s platform is “burning” and that they have fallen far behind the competition.
The memo, which was unveiled through numerous reports, details how Nokia is falling behind in all markets, contemplates how they got there and rallies for the company to become a competitive force in the future.
The burning platform
The letter starts by Elop describing a story about a man working on an oil platform on the North Sea which caught fire. The man had to choose whether he should remain on the burning platform or jump into the icy waters to escape the flames.
Elop said he jumped and survived the fall. He said the man experienced a radical change in his behaviour thanks to this choice on the burning platform.
He equates the ‘burning platform’ story to Nokia’s current situation, saying the company has “multiple points of scorching heat that are fuelling a blazing fire around us.”
‘Nokia has fallen behind’
Elop notes that these multiple points come in the forms of Apple’s phenomenal success with the iPhone causing them to “own the high-end range” and Android’s growth helping them win the mid-range market.
The low end of the market was in jeopardy, too, as Elop described how MediaTek supplied reference designs for phone chipsets to let China manufacturers produce phones at great speed and a low price.
He said their brand has declined, slipping to 20pc in the UK and was down in general in any other market. He acknowledged that Nokia “fell behind, missed big trends and lost time.”
“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 two years ago, and this week they took our leadership position in smartphone volumes. Unbelievable,” said Elop in the memo.
MeeGo and Symbian
Elop wrote that while Nokia had brilliant sources of innovation, it was not bringing them to the market fast enough. He admitted Nokia may only have one MeeGo product out by the end of 2011, in spite of long delays.
He also said Symbian was proving “non-competitive in leading markets like North America.” He said the mobile OS is becoming an “increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements,” creating a disadvantage for them.
War of ecosystems
“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, e-commerce, advertising, search, social applications, location-based services, unified communications and many other things,” said Elop.
“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,” he said.
Elop revealed that Standard & Poor has told the company it is putting Nokia’s A long-term and A-1 short-term ratings on negative credit watch. This is due to concern about Nokia’s competitiveness.
Nokia’s next move
Contemplating as to how Nokia got to this point, Elop believes it is due to attitudes within 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,” he said.
“We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.”
Elop states that Nokia will transform the company with their new strategy, which will be unveiled on 11 February.
“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,” he said.