I think it would be good to talk a little about the “Burning Platform Memo”. I have never really addressed it as much as I should. Tomi Ahonen on the other hand has talked about it a lot. The interesting part is that when the memo came out, Tomi Ahonen really agreed with it.
He did! In a level so deep he even said following:
“The point is that I – Tomi Ahonen – TOTALLY AGREE with all major sentiments in this supposed memo. I am not in denial about any of the issues reported in it, as being problems with Nokia. I am finding astounding faults in how it is written – on specific items that to me, are not professional, and to me, could not have been expressed as they are written. That is why I feel this is a hoax. I have never said in this blog that the main points of that supposed memo are not true. I AGREE with the memo, ok? I just believe, that a Nokia CEO would not be making these basic errors in basic facts. Are we clear now? Tomi fully agrees with the ‘sentiment’ of that memo. Not partly agrees, fully agrees! Ok?” 
What did the memo say so that Tomi agrees so much with it? These are some key points from the memo:
- Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.
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.
- The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience.
- 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.
- 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.
- We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough.
We haven’t been delivering innovation fast enough. We’re not collaborating internally.
- 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.
And these are same topics from Tomi’s blog (told you he said he agrees):
- “Nokia had somehow managed to offer some of the most innovative phones, with the best customer satisfaction, while also offering many of the cheapest phones – and to do this all profitably. What we know from applying competition theory – is that it must be, that Nokia was not really facing ‘full competition’ up to 2006. Motorola was a weak rival, they were drastically lost in the transition from 1G to 2G, and they had their brief hurrah moment with the Razr, which they could not carry further and fizzled away. Several of Nokia’s traditional rivals, Siemens, Philips, Panasonic – quit the handset business. In Smartphones the biggest rivals to Nokia came from North America – where smartphones were still considered only to be business phones – hence RIM, Palm were the main offering. And then there was the little HTC out of Taiwan with the quirky Microsoft Windows Mobile OS. Of Nokia’s ‘real rivals’ Samsung, Motorola, LG and SonyEricsson – all made smartphones primarily on the Symbian operating system where Nokia was biggest co-owner, so Nokia would never be ‘blind-sighted’ by rivals doing something wild and weird – like Apple managed with its bizarre touch-screen phone.” 
- “At the ‘customer satisfaction’ end, where Nokia was head and shoulders above all rivals in 2006, after Apple came onto the scene, today clearly the world’s highest loyalty is with the iPhone. Nokia lost the corner where it used to rule as the best phone at usability.” 
- “The worst part is that its ‘partners’ all abandoned Symbian and went to support Google’s Android – so Nokia smartphones are not even ‘second best’ in that category, being stuck using the obsolescent Symbian OS, which no matter how much you may love Nokia, is not up to par in terms of usability compared to iPhones or Androids. Yes, Symbian is getting better, but this is a race of catch-up, and Nokia has to also prepare MeeGo its new OS, which is the only one that can hope to fight for the future.” 
- “Nokia is not fighting on even terms for customer love, it is losing that fight. We saw it in the UK customer satisfaction survey last year, when even those Nokia current owners who did say, that they wanted their next phone to be also a Nokia – were not willing to recommend Nokia to friends – they were, in effect, ashamed to own Nokias. This is not a recipe for market success in loyalty. Nokia has just about lost this front, of the war already. Compare that to Apple owners – who will stick their brand new iPhone in front of the noses of anyone, to show how incredibly cool and clever their latest iPhone is. That is the difference. While Apple owners proudly display their iPhones, Nokia owners hide their gadgets in shame. If Nokia had been managing to make a come-back, then in Q4 they should have sold Nokia N8 models in comparable numbers to Samsung Galaxies and iPhones and HTCs – they did not. Not even close.” 
- “Then the innovation front. Nokia has been promising us wonderful things, but has not delivered. Rather, Nokia has issued apologies and delays. Take the N8. It would have been a hot phone in early Q2, before the iPhone 4, if facing off against the iPhone 3GS and very early Android devices. But it got onto store shelves for Q4, by that time there was the ‘Retina Display’ iPhone 4, and the magnificent Galaxy 2 series of Samsung phones, and vastly upgraded Blackberries and HTCs and Motorolas etc. The N8 could have been a contender half a year earlier, but was not shipped in time. Nokia was not fast enough, or – its rivals had learned to become faster than Nokia, whichever way you want to see it. Now what of the truly hot new phones? Apple created the phone in 2010 that had the sharpest screen ever produced (not Nokia). Among the major brands, Sharp created the world’s first phone with a 3D display (not Nokia). And Samsung’s Galaxy Beam was launched in 2010 as the first phone with built-in Pico Projector (not Nokia). Around 2005 – 2006 – 2007 – 2008 Nokia top end N-Series and E-Series phones astonished the industry with phenomenal technology – remember the N93? With 3x optical zoom – the ‘real’ zoom that only ‘real’ cameras have. And with TV out. With QR reader. Etc. A technology masterpiece, years ahead of rivals. Now Nokia has lost this lead, and its N97 or its N8 or its N900 or its E7 are only ‘me too’ devices, nowhere near the real global leadership. Nokia has lost the battle in the second of the corners.” 
- “And what of the last of the three fronts, the low cost corner? ZTE and Huawei and G’Five and other Chinese and Indian manufacturers are carving up the low-cost markets. Nokia is there, but is losing the low price war. Part of it is Nokia’s brand, trying to do ‘world phones’ but these markets need their own peculiarities, like dual SIM slots for example. Samsung was there a year before Nokia doing dual SIM slots for its low-cost phones. As to low cost smartphones – yes, the ‘marketing spin story’ sounds good, that Symbian was designed to run on phones with modest technical requirements, ie weak power CPUs and low memory requirements etc, but Moore’s Law moves on, we have faster CPUs at low cost, as well as more memory at low cost. Samsung introduced its bada OS to target low cost phones – and had the most successful new OS launch ever selling over 5 million bada devices in its first half-year, and meanwhile Android – being free – is being used by the low cost manufacturers like ZTE, Lenovo, G’Five etc to sell cheap smartphones in the Emerging World markets. Nokia is fighting a three-front war, and is losing at all three” 
Those were the six topics he agrees with the memo so much he had to really underline that “Tomi fully agrees with the ‘sentiment’ of that memo. Not partly agrees, fully agrees“. Fine. We should not be surprised. Here’s Tomi’s blog writing captions prior to memo. First of all he aligns quite weel to the “loud explosion, which suddenly set his entire oil platform on fire” part:
“For the first half of the year 2010, Nokia grew rougly as fast as the industry. It ended year 2009 with 39% market share in smartphones. At the end of Q2 it had 39% market share. Then in Q3 and Q4, suddenly – catastrophically – Nokia growth slowed to anemic, for the first time for as long as I can remember, Nokia’s quarterly growth was the slowest of any of the biggest 6 smartphone makers, and far slower than the industry. Nokia’s market share crashed to 33% after Q3 and down to (about) 28% after Q4. In six months, Nokia destroyed 11 points of market share – it abandoned one quarter of its total market – in half a year!” 
Furthermore, Tomi ahonen made it clear that Nokia’s dive was unlike anything he has heard before:
“This level of Nokia market share loss is pretty much unprecedented. I have been a close follower of global business for over thirty years, I honestly do not remember any such instance in any industry where any major global brand lost a quarter of its total customer base in a period of only six months. Even airlines with air crashes or devastating strikes do not suffer this badly. Cars with ‘unintended acceleration’ (ie ‘killer cars’) like Audi experiences in 1995 did not destroy a quarter of their customer base globally in six months.” 
And even finds the situation so bad he described it as a death-spiral and compared to Motorola (falling down to 2% market share):
“Nokia’s market share is in death-spiral, crashed from 39% to 28% in just six months and warnings from management suggest Q1 will continue the bad news, so it may end somewhere near 24% by end of March and who knows where the bottom is. Motorola was in a similar position in 2006. They had 21% market share. The crash-dive started, Motorola went from very profitable to very unprofitable, and lost customers everywhere, and the blood-letting ended in 2010 when they managed to stop the decline – and found themselves with 2% of the market.” 
So Tomi indeed was not denial of Nokia’s problems. He was afraid Nokia might lose market share to some unknown rock bottom. But then we get to the memo. When it got out Tomi said he agrees with it but finds certain things incorrect and therefore thinks it’s a hoax. You probably read it before that he is finding astounding faults in how it is written – on specific items that to him, are not professional, and to him, could not have been expressed as they are written. So what were those things?
- Statement about Apple owning 61% of the ‘over 300 dollar phone’ segment is patently wrong, more proper would be 38%.
(Would need to check. This could be that measurement stick was not unit sales but profits, where Apple indeed takes huge chunk.)
- The memo mentions MediaTek but it does not mention Chinese brands like ZTE, Huawei, G’Five etc. by the name.
- Memo dismisses Samsung and talks only about Android. This ignores Bada. Also, Tomi Ahonen wants to point out that “Samsung is using its world-record speed to catch up on Nokia (and has now in public even stated that its goal now is to become number 1).”
Good point, Samsung should definitely have been mentioned more in the memo. But that would only add to the “platform is burning” intent, not somehow revert it.
- Tomi Ahonen agreed that Nokia has recently been executing poorly, and its early steps in new areas have been clumsy. But in his opinion Nokia did not “miss big trends“.
Perhaps it is wise to refer to my english translation of the T&T article (visit link) as it points out that Nokia did not miss new technology, but missed the trends themselves. So Tomi actually was wrong here. (One bullet here or there, no big deal, moving on.)
- Tomi Ahonen could see, that last summer, when the N8 was again delayed, and Symbian S^3 had not shipped, that perhaps, perhaps a Nokia CEO could say, they were ‘years’ behind. But not today. Symbian S^3 sold on 5 million handsets, on only 3 Nokia models, vs Microsoft’s brand new and fresh ‘from the ground up’ OS, Phone 7, which on about a dozen phone models from several manufacturers, shipped 1.5 million units in the same period.
Good argument, good point. “Years behind” sized gap was indeed a bit narrower when bringing in Symbian^3. It would have been nice to have MeeGo ready, too but it wasn’t as we have read before from Story of Nokia MeeGo: (visit link)
- Furthermore, Tomi Ahonen did not buy the statement of “by the end of 2011, we might have only one MeeGo product in the market.” In his opinion if the CEO wanted, he could easily accelerate MeeGo development and give it resources and bring more devices to the market. (Time to read the Story of Nokia MeeGo in the previous link if you did not do so yet.)
- Qt is not mentioned in the whole memo. Apple or iPhone four times and Google or Android four times but no mention at all of Qt.
- Memo says “Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes.” Tomi points out (refers to Canalys numbers about Android OS overtaking Symbian in Q4 of 2010) that the Canalys report was not supported by any other report.
Now let’s get this one straight here. Canalys is not mentioned in the memo. And it’s Nokia CEO speaking. he has on his table almost full set of contracts for shipments that will take place in Q1 2011. He knows that in week or two any contract made will no longer ship in Q1 2011 but Q2 2011. He should be quite aware if Nokia has somehow “reversed” the trend of losing market share to Android. So is he refering to Canalys? Could be. But he knows it’s the first report of something that either has already happened or will happen before the end of quarter. I find it weird Tomi counts this as something “Nokia CEO would never say”, considering the info Nokia CEO should have in front of him.
- No mention at all of NTT DoCoMo, Nokia’s biggest remaining partner in Symbian.
Now Tomi actually was then – and has always been a bit off with this topic. Why would there be mention of NTT DoCoMo? NTT DoCoMo never used Series 60 UI so there was no direct dependency. Heck, NTT DoCoMo got its phones from Fujitsu, Mitsubishi, Sony Ericsson and Sharp – not Nokia. Nokia stopped selling non-Vertu phones in Japan year 2008. Oh yes, according to Wikipedia NTT DoCoMo users could not install C++ apps to their phones. So no matter the user base, there was no 3rd party developer ecosystem benefit.
- There is a contradiction between ecosystem chapter and “years behind” chapter.
- Tomi Ahonen agreed about the fact that Nokia loyalty and customer preferences are in decline, and that is very bad for Nokia but could not understand why UAE is in the list, especially since according to Tomi “Nokia has been bleeding markets share in China and in India“.
As said, he agreed on the memo, found some details to be lacking and added some very good points to the topic. I assume Tomi could have helped to fine-tune the memo. Actually, I totally encourage to read Tomi’s pre-strategy change post about memo. It is here: (visit link)
What I find rather interesting that Tomi Ahonen one year later said that “so-called facts in the memo were wrong throughout“. I hope he won’t go on that path again now that 2-year anniversary approaches.
But my short thoughts about the memo:
- Was it damaging?
Absolutely. CEO Elop said that himself.
- Was it planned to be leaked out?
Of course not. There would have been no benefit in such.
- Should Nokia CEO realize it will leak out anyway?
Definitely he should and absolutely he did not.
You see this is the problem: Stephen had (I don’t know but hope still has) faith in his employees. He assumed they do the right thing. My previous post had tons of stuff about lost Nokia values. Those were things Stephen was bringing back before I left. Respect, trust, honesty. Now there were employees not worth the trust as they leaked the memo. Stephen sticked with the honesty and admitted it was his writing.
I’m confident he would have never written the memo the way we know it had he known it will leak out.
- So was the memo even necessary?
Not in a million years.
If your company is in trouble, do not create a panic mood by telling everyone that “platform is in fire”! Encourage people, fix the problems in internal operations, focus, focus, focus. Don’t distract people with fire alarm.
So we do agree with Tomi that memo addresses right topic but does it in a harmful way. And we both agree Nokia had done better without it. That being said, let’s have the memo rest in peace. Nokia cannot act as if it never happened but they need to move on, not stick with some past blunders.