Nokia: From ‘burning platform’ to a slimmer management type
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Whilst Nokia chief executive Stephen Elop booked the entire Tarabya lodge in the sphere of Istanbul on behalf of the group’s twelve-monthly leadership discussion by the side of the conclusion of January, he considered a spectacular ending. To the same degree the discussion of 200 senior executives drew to a close, musicians introduced themselves into the space, in performance Ravel’s Bolero, until the in one piece orchestra was existing on behalf of the climactic bars.
“My message was with the aim of the way we would succeed in the sphere of the conclusion was if both of us played our role, and both instrument came in sync to build this beautiful symphony,” Mr Elop says.
The Nokia boss likes a metaphor. It is two years since he stunned the Finnish cell telecoms company and the sector with a memo – quickly leaked – with the aim of warned Nokia was position on a “burning platform”. The company would perish if not it was prepared to recoil into the icy hose. Days soon, on February 11, he announced the leap: A controversial alliance with Microsoft in the sphere of smartphones to build a “third ecosystem” to rival Apple and Google’s machine, and an accelerated pursuit of the “next billion” consumers in the sphere of emerging markets.
By the side of the instant, near were still a the minority inside Nokia who doubted the position was with the aim of dire. The company was, bearing in mind all, the biggest handset manufacturer in the sphere of the humankind. It was still infected with what did you say? Single senior executive has called “the arrogance of Nokia”. But if a little may well not yet smell smoke, they quickly felt the flames to the same degree Nokia implemented a deep restructuring.
Since followed by, Mr Elop has sought to tackle a trio of interior challenges identified in the sphere of a two-part FT analysis in the sphere of April 2011: To turn into additional direct, additional accountable and additional sprightly. But the company, which launched four new to the job policy on Monday by the side of the cell humankind legislative body in the sphere of Barcelona, has yet to answer adequately the nearly everyone worthy question: Yearn for consumers bad deal Nokia’s phones in the sphere of sufficient quantities to assure its opportunity?
Mr Elop is often asked whether he has a “Plan B” if the Windows phone table falters, but near were, and are, the minority other options small of a break-up of the in one piece company. The first-rate of machine to the same degree a smartphone platform would give led Nokia into a disjointed, commoditised, overcrowded marketplace. The Microsoft deal “was the just strategy with the aim of was really to be had to them,” says Richard Windsor, an autonomous analyst and fail of the blog data lines complimentary cell.
Nokia has adapted its assembly and cost immoral to this truth. The company, which employed 65,000 (excluding the Nokia Siemens Networks common venture) in the sphere of premature 2011, at present has 45,000 stick. It has congested or else consolidated 200 banned of 500 sites worldwide. Nokia used to launch with reference to 50 new to the job products a time; it at present introduces 25.
Carry on time, Nokia sold and leased back its Espoo head office, definitely outside Helsinki. A little analysts interpreted it to the same degree a sign of the depth of Nokia’s plight, but corporate controller Kristian Pullola says the decision signalled “nothing is sacred whilst it comes to driving the focus on cash”. Nokia went through all coins stream sources to identify the “owner” of each cash-generating point.
Nonetheless, concerning February 2011 and mid-July carry on time – definitely bearing in mind Mr Elop was enforced to announce a promote 10,000 duty losses – the share cost fell 83 apiece cent. Samsung sudden the layer of world’s biggest handset maker. In the sphere of January, Nokia cancelled its dividend on behalf of the at the outset instant in the sphere of its 148-year history.
Focus, focus, focus
Executives say what did you say? Looked from outside like a deepening emergency rock-hard Nokia’s determination to reform its overcomplicated management systems. Mr Elop claims to give increased the “intensity of execution” of the strategy. “Focus” is the word Nokia executives interviewed on behalf of this article kept back repeating.
Key in dates in the sphere of a reshuffle
February 2011 Stephen Elop urges Nokia to leap from “burning platform”; strikes smartphone deal with Microsoft.
October 2011 Unveils at the outset Windows phones; launches Asha,
A new to the job brand of phones, totally, alert on emerging markets.
June 2012 Reshuffles leadership team and announces 10,000 additional duty losses; debt downgraded to “junk”.
September 2012 Launches “flagship” Lumia 920 smartphone.
January 2013 Handset sphere returns to underlying profitability; dividend cancelled on behalf of at the outset instant in the sphere of its 148-year history.
On behalf of demand, Jo Harlow, who leads the smart policy division, has mapped Nokia’s management assembly anti with the aim of of its US partner, to better efficiency. Nokia formed the roles of programme director, advance of quality and advance of engineering to match parallel roles by the side of Microsoft “so with the aim of engineers can chatter to engineers, quality managers to quality managers, and so on.
“We give taken a batch of the fluff banned of the artifact programme development cycle so with the aim of [product developers] give mature innovations with the aim of they can implement . . . in a timely form,” she says.
Examples include “optical image stabilisation” – which produces steady capture on tape even whilst the camera is heartbreaking – on the flagship Lumia 920, and the entry-level Lumia 620’s “dual shot”, two-tone moulded cover. Under the old Nokia procedure, she suggests, the company would give had to wish concerning an innovative artifact, brought to marketplace dear departed, or else a in good time artifact with excluding innovation.
Single end was with the aim of decisions with the aim of ought to give been taken locally got trapped by the side of working group level by the side of head office. But in the sphere of the “controlled mania” of producing a at the outset Windows phone by the conclusion of 2011, Ms Harlow says Nokia learnt to “give the teams the authority to run faster”. By the side of the same instant, she says the company, guilty in the sphere of the times of yore of overcomplicating new to the job products, has “made tough choices not to accomplish something definitely for the reason that we could”, in the sphere of refining the Windows platform.
Juha Äkräs, Nokia’s advance of soul funds, says single side-effect of suitable less significant is greater co-operation. To his frighten, interior measures of stick satisfaction give continued to better, even in the low-spirited at the outset partly of 2012.
Bumps in the sphere of the road
But Nokia has additionally faced setbacks, notably in the sphere of its attempt to strengthen the succeeding column of its strategy: To go additional cell phones in the sphere of fast-growing markets such to the same degree cups and India. The company admits it was protracted to bring its nearly everyone innovative full-touch featurephones into these markets in the sphere of the at the outset partly of 2012, allowing Samsung and HTC to slip share.
Mr Elop tightened control. In the sphere of June, he brought Juha Putkiranta, in the sphere of charge of factories, food and logistics, and Chris Weber, new to the job advance of sales and marketing, into the senior leadership team. Both would at present tell unequivocally to the chief executive. “We really ratcheted up the degree to which the senior leadership and layers less were involved in the sphere of what did you say? Was up for grabs on,” Mr Elop says.
A “change task force”, position in the sphere of place in the sphere of 2011 became a “turnround leadership group” carry on time to the same degree it became patent, Mr Pullola says, with the aim of Nokia desired to turn into “even additional disciplined and focused” on coins control.
Outsiders still be troubled with the aim of supply lock up shortages – such to the same degree the group’s incapability to cause sufficient Lumia phones into shops in the sphere of cups on behalf of the new to the job time feast – indicate deeper problems. Nokia replies with the aim of demand exceeded expectations. Machinery companies additionally give a prolonged history of crimping supply to the same degree a marketing ploy, but analyst Mr Windsor says it is patent with the aim of “at the very high ranking conclusion, they aren’t the customer of choice” on behalf of suppliers.
Yearn for customers bad deal it?
Additional worrying is with the aim of new to the job Nokia smartphones are not yet the device of first-rate on behalf of customers. “Marketing remains their weakest link in the sphere of conditions of being able to regain with the aim of ‘wow’ cause,” says Gartner’s Carolina Milanesi. While Nokia’s share of the marketplace on behalf of additional reasonable cell phones slipped definitely in excess of four percentage points concerning 2011 and 2012 to 19.1 apiece cent, its smartphone share dropped from 17.9 apiece cent to 5.8 apiece cent.
Better fourth-quarter statistics than likely, in print carry on month, did present the at the outset assured underlying profit margin in the sphere of the meat cell sphere on behalf of a time – to the same degree well to the same degree an upturn in the sphere of its web coins station. Following carry on year’s correction of direction in the sphere of full-touch featurephones, these additional reasonable policy – sold under the sub-brand Asha (meaning “hope”) – are promotion better, and a rejuvenated Nokia Siemens Networks provided unexpectedly resilient support to the categorize.
The sales of Windows phones were in the sphere of line with expectations. Known the amount Microsoft is expenditure to marketplace its wider operating procedure, Ms Harlow believes the customer is definitely preliminary to value the advantages of Windows 8 whilst used on processor, tablet and phone. “The amount of effort up for grabs into Windows 8, the amount of advertising – with the aim of is up for grabs to help,” adds Mr Elop, who on Monday announced new to the job reasonable Windows models and additionally thought Nokia was winning additional corporate sphere.
But Pekka Ylä-Anttila, seek director by the side of ETLA, a Helsinki profitable think-tank, says the “alliance with Microsoft isn’t yet flying . . . No single can say whether it yearn for succeed or else not – even six years before we didn’t know no matter which with reference to iPhones.”
In the sphere of an effort to differentiate Nokia’s products, Mr Elop has pressed the company to emphasise how the new to the job phones yearn for better customers’ lives. He suggests to sales stick, on behalf of demand, with the aim of, more readily than detailing the technical attributes of the Lumia phone’s cameras, they ought to say “it takes heroic pictures by the side of night”: “If you die into these food and look by the side of these policy, it’s tough to ask nearly everyone of them apart. You can look by the side of a quantity of paper subsequently to them and envision it’s got a Snapdragon quad-core blah blah blah . . . [Instead], we asked ‘What are the improved consumer experiences with the aim of really concoct a difference?’”
Pankaj Ghemawat, macro strategy professor by the side of Iese sphere educate, compares Nokia’s broader challenge with with the aim of which faced Nintendo in the sphere of the premature 2000s whilst it was wearisome to cause early in the sphere of the capture on tape game marketplace. Incremental loose change was not sufficient to outperform feuding rivals Microsoft Xbox and Sony PlayStation, so the Japanese company came up with the revolutionary Wii. Nokia “has to build a city and the viaduct to cause to it by the side of the same time”, he says.
Is it sufficient?
Nokia executives seem sure of yourself the company has bowed a corner. The share cost has doubled since carry on July.
The colonization officers by the side of London’s Heathrow airport – whom US-born Ms Harlow uses to the same degree a indicator of communal perception – give on track asking her with reference to Nokia’s new to the job policy more readily than sympathising with her with reference to her employer’s problems. Gartner’s Ms Milanesi believes Nokia has at present conclusively brought in sync the elements of a viable software ecosystem and charismatic hardware.
But insignificant person to boot has stood still. Apple and Samsung are still riding high ranking, and the Apple iOS and machine platforms dominate the smartphone marketplace. Even BlackBerry, which looked to survive falling earlier than Nokia, has bounced back with a well- reviewed new to the job artifact and operating procedure, while “white-label” manufacturers damage away by the side of Nokia in the sphere of emerging markets.
Mr Elop made a individual steadfastness to his senior team in the sphere of Istanbul with the aim of he would “make Nokia sing again”. But he still needs to concoct himself heard beyond an extraordinary disharmony of other powerful voices.
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