By Emma Haslett Wednesday, 09 February 2011

Nokia chief: 'We are standing on a burning platform'

A leaked memo has shown Nokia CEO Stephen Elop makes no qualms about pointing out exactly how far off crisis point the company is.

It’s not often you get a candid insight into a CEO’s thoughts on their own company, but a leaked memo sent to employees by new Nokia chief Stephen Elop has given an insight into exactly how far behind rivals he thinks the company has fallen. It makes for fascinating reading: Elop begins his memo by likening the company to a man standing on a ‘burning platform’, facing ‘multiple points of scorching heat’ from its competitors. The only way to survive, says Elop, is a ‘radical change in behaviour’ – in Nokia’s case, to come up with a game-changing innovation. It’s rousing stuff – will it have the desired effect?

Elop, who joined Nokia in September after leaving his job as head of Microsoft’s business division, certainly isn’t mincing any words. Nokia’s market share, he says, has rapidly shrunk since the introduction of the iPhone, which ‘demonstrated that if designed well, consumers would buy a high-priced phone and developers would build applications’. In fact, it seems to be the development side Elop is most concerned about: rather than competitors battling it out over devices, these days, they’re ‘taking our market share with an entire ecosystem’ – with entire companies being set up to produce content for Apple’s App Store, or Google’s Marketplace. Nokia’s Ovi store, on the other hand, has failed to make much of an impression.  

It’s not just innovation Elop sees as a problem, though. The company has also been slow to respond to new technologies, opting to compete ‘on a device-by-device basis’ rather than pipping rivals to the post by coming up with its own ideas. He points to the speed at which Chinese manufacturers can come up with new devices as highlighting a relative weakness at Nokia. ‘Chinese OEMs are cranking out a device much faster than, as one employee said only partially in jest, "the time it takes us to polish a PowerPoint presentation".’ Ouch.

As if that wasn’t enough to impress on Nokia employees that they’re going to have to up their game, Elop also cited ratings agencies Moody’s and Standard & Poor’s,  which have put the company’s credit ratings on negative credit watch. ‘Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness.’

All this is running up to a big announcement Elop is planning to make on Friday, during which he will ‘share a new strategy’ which is intended to transform the company. There’s been plenty of speculation about what that’ll mean (some have already suggested a tie-up with Android, although that’s unlikely. Another idea is that Elop is planning to move the company from its Espoo headquarters in Finland to Silicon Valley). But, as alcoholics are fond of saying: ‘the first step to recovery is knowing you have a problem’. And Elop is very clear on what that problem is.

- Read Elop's memo in full

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