This is part 2 of my look into the situation at Nokia during the last 18 months before February 11th 2011, when it made the dramatic strategy shift, abandoning Symbian and Meego platforms in favor of Microsoft’s Windows Phone.
In the first part I talked about how the top managers saw the company situation in September 2009, during its annual Nokia World conference, when they proudly announced a fresh offensive in the smartphone market. And how that offensive fizzled out in the next 6 months.
Today I take a closer look at what happened during the next year and what forced Nokia to abandon the strategy it has been pursuing before, drop its own smart device platforms, and switch to the unproven Windows Phone OS in February 2011.
If you are interested in the longer term view, check out my posts “How Nokia was disrupted“.
February – September 2010. When Symbian/Meego/Qt became not good enough
During Q1 2010 earnings report in April, Nokia managers were forced to admit that they were not able to execute on the strategy outlined in September and December of 2009, and that they are delaying the release of the next generation Symbian OS and new devices, by months. Few weeks later, Nokia issued a profit warning and lowered profit expectations for the rest of the year.
By that time OPK’s fate as Nokia CEO was, most likely, already decided. Nokia’s board saw the precarious situation 4 years of OPK’s leadership brought the company to, and understood that a major change of direction is necessary.
In May 2010 Nokia announced another of its restructurings, and brought Anssi Vanjoki back to the spotlight from the exile in Nokia’s marketing arm, where he was banished after losing a fight for CEO spot back in 2006. Nokia’s Board put Anssi in charge of the most important smartphone division, with a task of reforming Nokia ways and possible promise of the top position. The new CEO search started at about the same time, with Anssi Vanjoki as an obvious front runner. He had to come up with a viable plan for Nokia’s turnaround, sell it to the board, and convince them that he can execute it.
As soon as Anssi started in his new job in July, he issued a very inspiring rallying cry “The fightback starts now”. And got to work on changing things. From what we know now – those changes included:
- dropping incompatible Symbian^4 development in favor of a more evolutionary path we see today
- strongly refocusing all Nokia smart device efforts around Qt
- killing off competing UI projects
- restarting Meego development with the new Qt based Swipe UI
(Most of those changes were announced/came out when Stephen Elop was already in charge, but that was too soon for a man only 3 weeks into the new job, for it to have been purely his decision. After all – Elop himself said that he would spend his first month (October) listening, learning things from Nokia employees.)
Despite the big internal changes, Anssi Vanjoki, Nokia man to its core, was adamant that he will be able to turn Nokia around relying solely on Symbian/Meego/Qt trifecta. And refused to even consider external platform alternatives. Unfortunately, he failed to convince Nokia board to trust him on this.
We’ll never know whether Anssi was right or wrong, or how Nokia boardroom politics played out, but we know the end result of it. Few weeks into the Anssi’s new job as head of smartphone division, Nokia Board made a decision that his plan is not enough.
According to Board’s thinking, Nokia may not be able to survive on its own, the viability of Symbian and current Nokia transition strategy would have to be evaluated afresh, and possibilities of joining other mobile platforms – either Android or Windows Phone – seriously looked into. And Anssi was not the man to do it – they started looking for an external CEO with strong software background to implement the changes.
And they found one in Stephen Elop in early September 2010.
September 2010 – February 2011. The end of Nokia as we know it and a fresh start
Nokia has announced that it has hired Stephen Elop as new CEO on Sept. 10th. His vision and Nokia turn-around plan so obviously rejected, Anssi Vanjoki announced his resignation from Nokia 3 days later. On Sept. 21st Elop started his new job.
The end of Q3 2010 was a very turbulent time at Nokia. The changes Anssi Vanjoki initiated in the smartphone division were starting to take shape. Meego team began working on the new Swipe interface, Nokia N8 – the first Symbian^3 device was about to ship and the plans to streamline Symbian development were in place. On the other hand, market realities were catching up and Nokia’s smartphone market share started dropping too fast – it declined 6% in just one quarter.
The end of the year was even worse. Symbian^1 sales have collapsed. In Q4 2010, during the Holiday Shopping Season, Nokia sold 3.2 million less of its Symbian^1 handsets, then it was able to sell just 3 months ago. Due to previous delays and pent up demand, Nokia’s formidable sales organization was able to push 5 million next generation Symbian^3 devices to operators and wholesale partners. S^3 helped to show a some quarterly growth, and even increased average device price and overall Nokia profitability, but those gains were largely an illusion. Compared to available Android 2.2 devices, the new Symbian phones were uncompetitive and the end consumer demand was pretty low. Failing to sell the devices they already had, Nokia partners started slashing the orders for the next year. For more detailed analysis of Nokia Q4 2010 check here.
The fate of Symbian has already been decided during spring/summer 2010. Looking at an amount of time, efforts and resources S^3 update required, Nokia’s management and the board have already made up their minds about the gradual phase out, in favor of Meego. But the rapid collapse of S^1 sales and a tepid Symbian^3 uptake must have caught them by surprise.
Since mid November 2010 Stephen Elop and Nokia management team were already talking to Google and Microsoft about adding their mobile OSes to Nokia’s offerings. But as 2011 rolled in and Nokia saw the actual sales numbers and projections, the situation became much more urgent.
At the time, Nokia was less then 4 months into the development of the new Swipe interface for Meego, and no guaranties that they will be able to ship it by next September. Furthermore, according to Business Week, in early January 2011 management realized that at the current pace they will only be able to launch 3 Meego devices before 2014. This one device a year release cycle for Meego phones was the part of the original Nokia strategy/roadmap. And Meego team was following this roadmap even after the changes initiated by Anssi Vanjoki during the summer of 2010.
And it might have been a good plan – to have one top of the line champion device a year, to put all of Nokia’s marketing strength behind. If Nokia had a refreshed and moderately competitive Symbian OS, to fill the portfolio beneath it. Alas, with Symbian sales collapsing, instead of orderly transition to Meego via Qt, Nokia was now facing a rapid collapse of its main smartphone platform with nothing to replace it for the next 10-20 months.
To make matters worse, they now had a hard deadline when the new Nokia strategy had to be unveiled to the world. The date for this – Nokia Capital Market days on February 11th, was already set and announced.
Coming to the realization that the platform you have been betting your future survival on is not ready to compete, and may not be ready for years, must have been a pretty big shock to Nokia team. In late 2010, Android or Windows Phone was just an attractive option to broaden Nokia product portfolio, help with U.S. market and smoothen the transition. So after first introductory meetings between CEOs, high level management teams were mostly looking into technological feasibility and negotiating technical details during the meetings in New York and Reykjavik. But in January of 2011 this suddenly became a huge “bet the whole future of the company” decision for Nokia.
Google, riding high on Android success, wasn’t much interested in giving Nokia much leeway, or possibilities to customize the OS to Nokia’s liking. To them Nokia was just another handset maker which will have to adhere to Android Compatibility Guidelines like the rest. And the way Google treated Samsung- stopping already shipping Galaxy S sales over the Skyhook matter last summer, shows what would have happened to Nokia, if it fully committed to Android.
That left only Microsoft’s Windows Phone as a viable platform for Nokia. Using possible Android switch as a club, Elop was able to get the permission to modify Windows Phone OS to Nokia needs, got the commitment of huge marketing support payments from Redmond, made Navteq/Nokia maps the default in Microsoft ecosystem, and negotiated revenue share from the location based services built on Navteq technology. The deal was hammered out during Ballmer’s visit to Helsinki and Jan. 16th Microsoft/Nokia management meeting in London, and finalized on February 10th by the approval of Nokia’s Board. The rest, as they say, is history.
Will Nokia’s bet on Windows Phone be able to turn the company around? We simply do not know yet. We’ll see the first tangible results tomorrow, at Nokia World. But will probably have to wait until next summer to see if the strategy really works.
Wouldn’t Nokia have been better off, if it had doubled down on Meego and made it work? We will never know. But a thing to remember here – is that this decision was not made just by Trojan Horse Elop secretly under Ballmer’s command. Most of the top Nokia management, and Nokia’s Board – with a much better insights into the real state of Meego and Nokia’s business situation at the time, approved and fully supported Windows Phone switch.
Given the cards he was dealt, the Meego and Symbian situation at the time, Stephen Elop played the best game he could. Now we have to wait and see if that was enough.
If you liked the post, you might find these interesting too:
- Nokia’s head of Mobile Solutions (Anssi Vanjoki) resigns
- Nokia’s road to Feb.11th – the last 18 months. Part 1
- Nokia N8 is “the best entertainment phone”, says Anssi Vanjoki
- Nokia’s Q3 results: 2.9 million Windows Phones sold, 3.4 million Symbian devices, still losing money
- Shocker: Nokia officially adopts Windows Phone as its “primary smartphone platform”