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Leadership, Burning Platforms and Nokia

Posted: 05/02/2011
Process Excellence Network
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The burning platform memo released by Nokia chief executive officer Stephen Elop earlier this year fanned the flames of a debate about innovation and competition within the telecoms market.

Apple ignited the spark with its iPhone platform, an innovation which Elop describes as "redefining the smartphone", which attracted developers and instigated the development of the now ubiquitous apps.

Not content with domination of the internet, Google then poured petrol on the flames with its Android platform, which is rapidly gaining in market share and is forecast a bright future. Nokia, meanwhile, was left choking in the smoke.

Recalling the story of the man standing on the platform, deciding whether or not to jump into the sea, Elop said this is similar to where the industry now stands.

"We have more than one explosion – we have multiple points of scorching heat that are fuelling a blazing fire around us," he noted.

Innovation in Telecommunicatons

Elop's conclusions about Nokia's position were simple, yet damning. The manufacturer is years behind leading players, having missed or chosen not to take opportunities while the smartphone market was still developing.

The innovations it has are not making their way to market fast enough and a dramatic shift in direction is needed to ensure it can once again go up against the industry behemoths like Apple and Google.

Indeed, the phenomenal growth being experienced by the latter shows being late to the party does not necessarily mean missing out on the market.

Analysis from ABI Research shows smartphone sales are set to continue rising, experiencing a 71 per percent increase in 2010, and Android is the operating system original equipment manufacturers (OEM) are banking on.

Kevin Burden, ABI Research vice president, described the market as being "disrupted during a period of record growth."

Nokia saw its share dip from 39 percent to 33 percent, although Android's growth suggests Apple has not yet got a complete stronghold on the market.

"As competitors flood the Android ecosystem, Motorola wants to become known as the OEM that brings Android devices to business. Meanwhile Samsung is hoping that it can convert its feature phone customers to smartphones, on the backs of both Bada and Android. And Nokia has now moved away from a purely proprietary OS strategy," senior analyst Michael Morgan said.

Future of the Smartphone Market

Despite the general agreement that Nokia has come late to the game in developing its smartphone offering, there are still experts which say it could still go on to capture a reasonable proportion of the market in the next couple of years.

In its Form 20-F submission, filed on May 11th, Nokia said it is to collaborate with Microsoft "to combine complementary assets and expertise, to form a global mobile ecosystem and to adopt Windows Phone as our primary smartphone platform".

Michael Morgan, senior analyst of mobile devices at ABI Research, said if some of the Windows Phone 7 handsets are on the market by the end of the year, Nokia could be poised to achieve a 10 percent market share in 2012.

He added its essential work on the Windows 7 devices start as soon as possible so it can "counter the losses they will experience from the deflating Symbian OS", although expressed Nokia may still have issues differentiating itself.

Elop told Reuters later in March that work has begun on the first smartphones to be produced under the partnership.

"We're right now, today, having people work on the first Windows Phone devices from Nokia. That work is already under way. If this was an acquisition scenario, that wouldn't be possible," he told the news agency.

The true test of whether Nokia survived its leap from the burning platform will come once its smartphone offering has been on the market for a few months, although it has certainly already highlighted the continuing need for innovation within the telecoms industry.

Elop at least believes the company can regain its market share and become a competitor to the likes of Apple. He concluded his memo by saying "I believe that together, we can face the challenges ahead of us."


Thank you, for your interest in Leadership, Burning Platforms and Nokia.