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Nokia's Stephen Elop Didn't Start the Fire–But His "Burning Platform" Certainly Lights One

Kara Swisher — Wed, 09 Feb 2011 14:15:21 +0000

Memo to tech CEOs everywhere: Now that’s how to write an internal memo.

That would be the 1,300-word one that Nokia CEO Stephen Elop (pictured here) apparently penned for employees at the Finnish telecom giant, which inevitably leaked to the media (in this case, kudos to Engadget for getting the whole thing, which is below).

Elop uses the harsh but cogent metaphor of a burning oil platform to take a bracing opening shot at turning around Nokia, which has lost market share–and, more importantly, mindshare–to both Apple’s iOS and Google’s Android mobile operating system.

This is not breaking news to anyone in the wider tech world, of course. But for the CEO to say it so flatly and brutally to the insular troops at Nokia makes it remarkable.

As you can read, it’s dramatic all right, and just the kind of thing a lot of leaders at troubled companies–Hello, Yahoo!–could learn a thing or two from.

That’s because it’s honest and also genuine, and with enough of a direction and glimpses into pending action–to be revealed later this week at an event to unveil a new strategy–that it’s not just a diatribe by a new manager about how bad the previous managers were.

There is clearly plenty of that, of course, which is no surprise. But with rumors of an imminent significant management overhaul–which few execs ever do enough of at the start of their tenure, when it is easiest–there seems to be teeth to the memo too.

And although the burning platform part will get all the attention, perhaps the most important observation was in one particular passage that outlines exactly the giant challenge Nokia faces to catch up:

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, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. 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.

Because, as it has turned out, it is all about ecosystems and using them to provide consumers with the best and most seamless experience possible.

Walt Mossberg and I will be interviewing Elop–the former Microsoft exec, who is neither a Nokia insider nor Finnish–about all this and more at the ninth D: All Thing Digital conference in late May.

Obviously, there will be a lot to talk about.

But, until then, here’s Elop’s memo below in its entirety.

I also reposted a video interview I did with Elop in April of 2009 in which he talked about making Microsoft a more open and innovative place, the changing business model of software and more.

Also below is a video Elop ordered up while running Microsoft’s Business Division as part of an “Envisioning” series.

These see-into-the-future videos were done by Microsoft Office Labs as part of a “Productivity Future Vision” series that sketched out a landscape of smartphones, touchscreens everywhere and a whole lot of cool interacting.

It would be nice if he can drag Nokia back into that world–although Elop’s memo is a good start.

[ See post to watch video ]

Hello there,

There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire. In mere moments, he was surrounded by flames. Through the smoke and heat, he barely made his way out of the chaos to the platform’s edge. When he looked down over the edge, all he could see were the dark, cold, foreboding Atlantic waters.

As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or, he could plunge 30 meters in to the freezing waters. The man was standing upon a “burning platform,” and he needed to make a choice.

He decided to jump. It was unexpected. In ordinary circumstances, the man would never consider plunging into icy waters. But these were not ordinary times–his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a “burning platform” caused a radical change in his behaviour.

We too, are standing on a “burning platform,” and we must decide how we are going to change our behaviour.

Over the past few months, I’ve shared with you what I’ve heard from our shareholders, operators, developers, suppliers and from you. Today, I’m going to share what I’ve learned and what I have come to believe.

I have learned that we are standing on a burning platform.

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

For example, there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.

In 2008, Apple’s market share in the $300+ price range was 25 percent; by 2010 it escalated to 61 percent. They are enjoying a tremendous growth trajectory with a 78 percent earnings growth year over year in Q4 2010. Apple demonstrated that if designed well, consumers would buy a high-priced phone with a great experience and developers would build applications. They changed the game, and today, Apple owns the high-end range.

And then, there is Android. In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers. Android came in at the high-end, they are now winning the mid-range, and quickly they are going downstream to phones under €100. Google has become a gravitational force, drawing much of the industry’s innovation to its core.

Let’s not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one third of the phones sold globally–taking share from us in emerging markets.

While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.

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 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.

We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.

At the midrange, we have Symbian. It has proven to be non-competitive in leading markets like North America. Additionally, Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements, leading to slowness in product development and also creating a disadvantage when we seek to take advantage of new hardware platforms. As a result, if we continue like before, we will get further and further behind, while our competitors advance further and further ahead.

At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us.

And the truly perplexing aspect is that we’re not even fighting with the right weapons. We are still too often trying to approach each price range on a device-to-device basis.

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, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. 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.

This is one of the decisions we need to make. In the meantime, we’ve lost market share, we’ve lost mind share and we’ve lost time.

On Tuesday, Standard & Poor’s informed that they will put our A long term and A-1 short term ratings on negative credit watch. This is a similar rating action to the one that Moody’s took last week. Basically it means that during the next few weeks they will make an analysis of Nokia, and decide on a possible credit rating downgrade. Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness.

Consumer preference for Nokia declined worldwide. In the UK, our brand preference has slipped to 20 percent, which is 8 percent lower than last year. That means only 1 out of 5 people in the UK prefer Nokia to other brands. It’s also down in the other markets, which are traditionally our strongholds: Russia, Germany, Indonesia, UAE, and on and on and on.

How did we get to this point? Why did we fall behind when the world around us evolved?

This is what I have been trying to understand. I believe at least some of it has been due to our attitude inside 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. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.

Nokia, our platform is burning.

We are working on a path forward–a path to rebuild our market leadership. When we share the new strategy on February 11, it will be a huge effort to transform our company. But, I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future.

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.

Stephen.

The Swiss Army Knife of Portable Videos

Katherine Boehret — Tue, 30 Jun 2009 22:50:04 +0000

Every once in a while I watch an online video that’s good enough to send to a friend, share on Twitter and Facebook or save its URL so I can watch it again later. The final piece of the puzzle would be moving the video onto a mobile device to have it with me wherever I went.

Enter RealPlayer SP beta (realplayer.com), the latest in RealNetworks Inc.’s (RNWK) long line of media players that the company has churned out since 1995. RealPlayer SP—the SP stands for social and portable—is a free download that, once installed, grabs videos from the Web, converts them to the right format and transfers them to over a dozen portable devices. While other software programs perform two or just one of these tasks, the RealPlayer SP’s trio of talent makes it like a digital Swiss army knife.

[ See post to watch video ]

After using the RealPlayer for moving several videos of all kinds to an iPhone, BlackBerry Curve 8900 and Palm Pre, I felt like I had more control over my portable devices and the media they held. And the freedom of knowing that this player is compatible with almost anything—including Apple (AAPL) and Palm (PALM) devices, Research in Motion’s (RIMM) BlackBerrys, T-Mobile’s G1 and Sidekick, Nokia’s (NOK) N97 and certain basic cellphones—is a major plus.

Behavior Problem

My biggest problem with using the RealPlayer SP has to do with my own behavior. Most of the videos I watch online and share with friends are less than five minutes long. This means that grabbing, converting and transferring videos to a portable device using the RealPlayer SP—albeit a relatively quick process—could easily take more time than the length of the video, itself. And many of the longer videos that I would want to move to a BlackBerry or iPhone are copyright-protected and thus can’t be downloaded by the RealPlayer SP.

Another factor is that more devices now have their own built-in app stores for downloading content to the device, without plugging into a computer for transfers like with the RealPlayer SP. The iPod touch, for example, can now download movies, music videos and TV shows over Wi-Fi thanks to a recent $10 software upgrade.

Mac Version Coming Soon

The RealPlayer SP works only on Windows PCs right now; a Mac version is due out by the end of this year. Likewise, it doesn’t work on Apple’s Safari browser but does work on Firefox, Internet Explorer and Google’s (GOOG) Chrome browser; I used all three with success.

If you’re not interested in using the RealPlayer SP for transferring videos to portable devices, you can still use it for downloading videos, saving them onto your computer and sharing them with friends via Twitter, Facebook or email. Tiny icons representing each of these sharing options appear in-line beside freshly downloaded videos. I shared videos of last week’s Congressional Luau at the White House via Facebook and Twitter, but the icon to share videos via Twitter doesn’t automatically shrink URLs to fit into a tweet. I shrunk the URLs myself, but this took an extra step¹.

And though I’ve mostly focused on the RealPlayer SP’s ability to grab, convert and transfer (RealNetworks calls these tools the Downloader feature in the player), it also works as its own media player or helps you discover new content.

RealPlayer SP Beta downloads, converts and transfers videos from the Web to a variety of portable devices.

A premium version called RealPlayer Plus SP is available for $40. Premium features include DVD burning, DVD playback (if your computer can’t play DVDs) and video conversion to a special format called h.264—though the free version performs these conversions for videos being moved to Apple devices.

I jumped around the Web visiting sites and playing videos, which prompted the RealPlayer SP to display a small “Download This Video” message above videos that aren’t copyright-protected. Downloading videos worked on most sites, including AllThingsD.com, Slate, YouTube, Salon and CNET. As expected, I wasn’t so lucky with videos from the New York Times, BBC and Hulu, which hosts loads of TV shows and music videos. That’s because videos from these sites were copyright-protected and didn’t allow for downloading.

A Glitch

In one instance with a WSJ.com video, only the short ad that played before the video was downloaded, even though the download prompt indicated that the WSJ video was obtainable using RealPlayer SP. RealNetworks says this is a glitch it knows about and plans to correct.

The RealPlayer SP’s ability to download videos and transfer them to devices, rather than just copying them onto computers, forced me to be choosier about the videos that I downloaded due to the limited memory of the devices. Because of this, I wished the RealPlayer SP Downloader had a better built-in way to discover downloadable content. Currently, a link to something called the RealGuide pulls up suggestions, but I had a hard time finding clips there that I wanted to download. RealNetworks says it plans to improve the video-discovery process in the future, including adding things like YouTube keyword searches built right into the Downloader.

The Downloader Window

When I did find videos I liked, I clicked on the prompt to download the clip, found the clip in a tiny Downloader window, and chose to move the clip to a device (there’s a list of all available devices) or share it via Twitter, Facebook or email. Transfer times depend on the length of the video.

RealNetworks provides simple instructions on making sure your device is set to transfer when plugged in. For example, BlackBerrys must be set to mass-storage mode, Palm Pres should be set to USB mode and Apple devices synchronize with the iTunes library, where RealPlayer’s converted videos are sent for transferring to iPhones and iPods.

RealPlayer SP can be a real help when it comes to putting the content that you want on your portable device. Its ability to assist from start to finish—finding videos, converting and transferring them—saves time and avoids confusion. To succeed, RealPlayer SP needs to do a better job of helping people find worthwhile videos to transfer, or they’ll stop using it after just a few tries.

Corrections and Amplifications

¹ Real Networks says its RealPlayer SP Beta’s Twitter video sharing capability has an automatic URL-shortening tool built in. This week’s Mossberg Solution product said the product lacked such a feature, because it never activated itself in our tests.

Edited by Walter S. Mossberg

Write to Katherine Boehret at mossbergsolution@wsj.com