The event was considered particularly exciting for investors. He was an executive valued by investors, customers and reporters, who were accustomed to hearing bold statements from him.
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Seemingly cheerful, he thanked the Nokia World audience for the 20 year journey and made his exit from stage, as they applauded. In addition to the new Communicator, Nokia launched four new smartphones. He pointed out to the audience that Nokia was selling , new smartphones daily, which was more than Apple and Android put together. Savander promised a sale of 50 million devices for the models presented in London. He also thanked Olli-Pekka Kallasvuo for a fine year career in Nokia.
A large customer also spoke at Nokia World.
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Vittorio Colao, CEO of Vodafone, the British network provider, was of the opinion that the best markets for device manufacturers as well as network providers to be in were in developing countries. Colao complimented Nokia on its ability to survive the smartphone battle and said he was well pleased with the ambition Nokia was showing. The day after the event, Elop did make an appearance after all. He met with customers but not the media. Officially his duties would not begin until the following week.
Olli-Pekka Kallasvuo left behind him an organization in which three corporate divisions — smartphones, feature phones and services — competed for the resources, power and attention. The smartphone unit would have needed support from the services unit, but came only second in the pecking order after external paying customers. The product portfolio of the company was exceptionally large.
By the vast product range had become a burden. There had not been a best-selling product in several years and the situation had started to gnaw at the sales staff, especially. The company had in its hands a huge number of products that did not sell well. The still high sales volumes were blinding.
The Million Dollar Parrot: 25 Brief Stories for Big Breakthroughs
Attention was focused on the positive fact that the company was selling million phones annually even if the majority of the sales volume came from 30 euro basic phones which had next to no impact on the bottom line. The constant delays in the phones-to-market schedules increased the burden. The prototypes of feature-rich lead products were developed fast, but the completion and testing for the mass market entry took too long.
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Management time was wasted in the meetings that focused on minor details such as a minor software adjustment. Sometimes more than ten vice presidents were present in such meetings. The product schedules were perpetually delayed until it became evident that demand for such products would no longer exist at market entry. With over 6 million lines of code, the software platform had become unmanageable.
Time, money and mental resources were wasted to tweak the outdated Symbian for each product. There were so many product lines that the product managers could not manage to keep up-to-date what was going on. Although considerable strategic weight was given to the software development and services, Nokia, in essence, was a pure hardware manufacturer in regard to its profitability, money-making mechanisms and operating principles. Up to then, the company had managed to cover its costly software in the phone pricing, but now this strategy no longer worked as competitors had started to launch phones of superior quality.
A Nokia analyst at an American venture capital investment company remembers having a critical view on the capability of Nokia to switch over from basic phone business to smartphones. The analyst also states that Nokia was focusing on the wrong technology platform and using billions of euros to its software development. Nokia was more vulnerable compared to its competitors. Korean Samsung, as a conglomerate, manufactured computers and other electronic devices in addition to mobile phones, and was therefore not so susceptible to suffer from a slowdown in one of its product segments.
Samsung was able to sell its mobile phones for retail businesses at a lower wholesale pricing, as their transactions also included other products than just mobile phones. Apple secured their profitability with expensive Mac PCs and iPods at the time when iPhones were not yet bringing in much revenue.
According to many interviewees, Nokia as an organization had drifted into a state of inertia. Elop would soon find himself in the middle of a battlefield of middle-aged men. Instead of external competition, the competition was internal. Common interest had been replaced by the optimization of the vested interest. The famous Nokia-spirit was had begun to ebb away.
The Million Dollar Parrot: 25 Brief Stories for Big Breakthroughs
Constant organizational changes confused the working environment as employees had to reapply for their positions. People were somewhat arbitrarily transferred to new positions. There were employees, whose projects had been ed, but they got to keep their jobs. The matrix organization structure played a key role in the management problem: People were part of a project under different teams, but nobody had an overall responsibility of the end product.
The team spirit killed any individual creative spirit.
Ideological and innovative individuals were labeled as lone wolves. Yes-men with no opinions of their own would flourish. For example, the normal trial-and-error software development technique was no longer used in Symbian software development. A person who was in charge of software development says that the problem was in the management which adjusted and fine-tuned projects ad nauseam.
When the engineers were left alone to do their work, the results came forth. The lack of strategic agility and rigidity resulted in playing safe. In the technology driven business, that marks the beginning of the end. A sugar-coated picture was given to the management. An employee working in the strategy department resorted to check the true status of upcoming phone projects from a friend working in development, because the official status given could not be trusted. Nokia was the emperor with new clothes, but nobody dared to say it out loud.
The layoffs had started in When money was becoming an issue. The organization had been streamlined many times over, but the scope of the operations remained unchanged. At every decline of the financial outlook, streamlining continued. There were divisions which had been fully reorganized 3—4 times within a year. The Group Executive Board was equally stagnated. According to an outdated Nokia principle, it was considered beneficial for the executives to hold several different positions to increase their competence.
During the growth era the principle had worked. But when the phone sales started to decline, new people and fresh ideas would have come in useful. The company had gone to the dogs, at least partially. But what would the customers think of the situation? Elop knew that the feedback was not going to be good.
The customer base was divided into two.
Network providers traditionally had long-term commitments with phone manufacturers and they continued selling Nokia phones like business as usual. The feedback from the large electronics companies and other retail businesses with shorter order cycle was more hard-edged. The French retail chains were wondering why Nokia force-fed its own music applications and other applications to its phones even if the customers wanted iTunes or Spotify.
Nokia had not entered into strategic alliances with service providers, because it believed that it can produce such services by itself. According to a former Nokia sales director, Nokia should have integrated popular services such as Spotify into its phones and advertised to its consumers how the services worked best in Nokia phones. Instead of doing this, a lot of money was spent to fight against such services.
As a device manufacturer, Nokia was not as agile in the service segment as the service providers. Network providers were also slowly awakening to reality. They were worried about the inflexibility of Symbian which meant that it was not a popular platform among application developers. Network providers compared the data usage of smartphone users. Users of Samsung Galaxy running on Google Android used ten times more data compared to the highest data users with Nokia phones. So the users of Galaxy, which offered a seamless user experience, stayed in the network using data applications for much longer periods of time.
And the network providers started to be more insistent in demanding to know what Nokia was going to do to increase the data usage in their phones.
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