(This was an article I wrote in April 2nd, 2010 and sent to the Nokia Executive Board – Times have changed and, as the saying goes, “The Rest is History”)
Today, we face what might be seen one day as the biggest and sharpest crisis in Nokia’s history: we’re being attacked on all fronts – being a big market leader, as a friend put it, sucks: you are usually attacked at high-end, middle-range and low-end at the same time – you have to fight battles on many fronts and nobody in human history ever won many battles at the same time. If Nokia cannot find a niche, however big it might be, it is condemned to either shrink significantly, become a supplier for other mobile phone companies or … something even worse.
But how could this have happened? What are the reasons and what might be the remedy?
Without going too much into detail of how businesses develop, i.e., are created, grown and stabilized and at one point decline (if they don’t adapt to change), I will try to give an overview of my personal view of what has happened.
Nokia, the market leader in manufacturing and selling mobile phones, i.e. a HW-product oriented company, missed, as it’s called in Germany, the “Signs of Times”: the shift – the significant shift – from hardware to software.
To paraphrase Michael E. Potter, you are either in the Business of Being Better (BBB) or in the Business of Being Different (BBD). BBB is the approach which looks at processes and costs – optimize processes to produce even cheaper and cheaper and one can compete only on price.
BBD, on the other hand, is the approach of looking at revenues – producing/offering something different to consumers such that one can ask any price up to the price-value-matching point of the consumers. There is no need to compete on the price.
BBB requires ever better and better, more streamlined processes, i.e. knowledge is used as input in order to make products/services better – BBD, on the other hand, requires higher and higher knowledge to be inserted as input into new products and services.
Nokia is in the Business of Being Better but not anymore in the Business of Being Different.
Many people within Nokia might not agree with this as we keep producing different device models every so often – so often, that even our customers, the consumers, get confused on what we are doing. The fact is, though, all of these devices are… just devices – just another mobile phone, slightly better than the one before – or can anyone tell me the difference between E71 and E72 – or, for that matter, between N97, N97m and X6? I know, there are many technical differences such as … what exactly? … from the perspective of the consumer, not from our perspective?
Are we redefining the consumer experience with our products or services? Are we contributing to changing markets, businesses? No, we don’t – we used to, back in the 90ies and begin of the naughties (200x) – but we became such a big behemoth, such a big near-monopoly, such an elephant that we stopped dancing – we became an immovable, inflexible dinosaur! We are nowhere near what we were when we overtook Ericsson in the 90ies as the #1 mobile phone manufacturer – nowhere near the Nokia which introduced the 6210i, one of the best mobile phones ever built (from consumer perspective) with the first LiPolymere battery. Back in the 90ies or naughties, we redefined what was a mobile phone – we democratized the mobile industry – and made a nice profit out of it – we had earned that profit, too…
Now someone else is redefining what is called the smartphone – a segment we have helped to create.
In the PC industry, I experienced the same story – the same situation where a company helped shape what is known as the PC – but then, that company became so self-sufficient, so inward-looking that it forgot what was the most important factor for a company to succeed: consumer happiness with their products! That company nearly collapsed, nobody had any hope anymore – some people in the industry even suggested to close down the company and give the money back to the shareholders.
Now the same company, near-dead about 13-14 years ago, is the biggest attacker – biggest danger to Nokia’s existence.
What is the lessons we can learn from that company with the bitten fruit as it’s logo? Let’s look at it’s biggest mistakes, shall we? (bear with me, I’m just recollecting my memories, this is in no way a scientific analysis).
I was, and am still, one of the biggest fans of that company – I developed, and still develop, privately, software for their desktop computers – but then, in 1993, I decided to stop developing for them anymore as they became mediocre by producing model after model, each of them slightly different from the previous one but with significant quality problems on hardware as well as software.
This company had democratized the graphical UI in the 80ies, revolutionized the way we used PCs – but then, they just stopped there. This company forgot what it was that made it so great in the first place: doing things differently, introducing revolutionary, ground-breaking software technologies, re-defining the consumer experience – redefining what consumers saw as computers.
Their software, the operating system, for example, became mediocre. They “forgot” to introduce memory protection, multi-tasking, object-oriented development, and so on – all technologies consumers were starting to ask for. Instead of igniting new revolutions, this company had become something we called “box-shifter” – they were merely selling computers with a crappy OS, crappy software, crappy experience, crappy service – and still trying to ask a high price for it.
When they realized that consumers wouldn’t pay a high price for a crappy piece of …, they started competing on price – and this was a battle they could not win.
Near-dead (some may say, already decaying) the company called back one of it’s founders – in the hope that he would bring back the “Secret Recipe of the Original Success”.
And so he did – he brought back the Secret Recipe of Orignal Success: he immediately killed the licensing business, killed 90% of all computer models, introduced a short-term plan with the introduction of the iMac (“Think Different”), which was more of a marketing tool towards the company itself than to the outside world and set in motion the development of what became the most successful world-changing piece of software since then: OS X!
He relentlessly asked for the highest quality in consumer experience, accepted, though, buggy software for developers for a short time (I remember OS X 10.0 – not as bad as OS 9.x but still a crappy piece of … in today’s standards) – and kept delivering, every 12-18 months, a more advanced, more comfortable version of the software.
He shifted the companys focus from shifting boxes to creating and selling worlds most advanced piece of consumer-software/consumer-OS. OS X, by it’s very nature, was revolutionary: until it was introduced, nobody in the computer industry was convinced that an UNIX-OS was ready for consumers. Nobody, not even I, believed that you could tame that wild-horse called “UNIX” to be consumer friendly – nobody, not even I, believed that you could harness 100% of UNIX-power and make it so consumer-friendly, that, today even my mother-in-law (65 years old) could use it to stay in touch with her children, grandchildren and friends all over the world (and this, dear reader, is probably the biggest contribution to my life: staying in touch with anyone on this ever smaller and smaller world).
Most people assume that this fruit-company is making money by selling hardware – this is one of the biggest follies in the industry, as this is so far away from truth that it’s impossible to believe.
This is the truth: That fruit-company makes money by selling software! They just package the software differently – they just deliver the software with a piece of hardware.
Let me repeat this: The company from 1 Infinite Loop, Cupertino, California makes it’s money solely by selling software.
The reason why they package it in hardware is that they so much want to control the user experience, the Total Consumer Experience, that they don’t trust anyone on this world to produce hardware good enoug for their software. That’s all! No magic, no box-shifting.
The Value Add Shifted from Hardware to Software
The biggest reason, apart from our quality problems, that we are struggling and are being easily attacked on all fronts is that we so far missed the change happening around us.
The value in mobile industry is significantly changing away from shifting boxes, i.e. selling mobile phones, towards selling software – giving the consumers the best possible experience.
Giving consumers the best possible experience has nothing to do anymore with creating ever newer devices, which are slightly “better” than the previous one.
The consumers value perception of mobile phones, especially those of smartphones has changed: the smartphone was defined as a something a little less dumb than non-smartphones: a mobile phone with which you could do something slightly more than with “normal phones”.
Now consumers’ expectation regarding smartphones is this: a full-touch device with an excellent user experience (“The phone works the way I as a consumer work”), a near-perfect app-store, i.e. a one-stop source of extending the devices functionally flexibly and a huge selection of additional functionality I can keep adding – i.e. expanding the value of the device over the complete course of it’s lifetime!
According to this definition, the fruit-company sold over 80m devices and Nokia sold less than 30m so far – however, the selection of apps (“Extending the functionality”) for Nokia phones is about 1/20th of that from the fruit-company. And no, let’s not talk about the user experience…
When one looks at the consumers’ definition of smartphone, nowhere can be found the technical specs such as 12 mega-pixel camera, xenon-flashlight, multi-tasking, … and many, many other things consumers really don’t care about.
Every time I talk to a consumer about his/her definition of smartphone, it boils down to: I want to stay in touch with my friends via Facebook, Email, I want to play some games, I want to easily access our companys exchange server (including reading attachments), listen to music, watch movies, get train/flight/bus schedules, order pizza, take pictures and upload to Facebook, Flickr, take movies and upload to YouTube, use Google Maps, search for restaurants, bars, read news, … in fact, “making phone calls” shows up as one of the last “important” items on their list – and they tell me: “I dunno, maybe more, but if you have an app-store, I’ll find other things there, won’t I? Other things I might want to do with my smartphone…”
What it boils down to is The Primacy of Software, and more importantly The Primacy of the Operating System.
Consumers want a device with clear specs (capacitive multi-touch full-screen, unibody) and keep adding functionality by loading more and more software onto it.
This is the change happening the last 3-4 years and we have completely missed it – yes, we realized, we saw it, but we have missed it because we haven’t changed fast enough.
To be honest, we earn to lose market share as we still refuse to give consumers what they want – we are still so arrogant of a market-leader that we still believe that we can tell the consumer what he/she wants! We’re still on our “high-horse” and look down on the upstarts and even worse on our users.
That’s the change that has to happen – everybody within Nokia needs to start thinking only about the consumer – every single employee and manager must, day-in / day-out start thinking on how we can make the life of our customers, our consumers better – how we can redefine their experience – how we can take back the lead in mobile communication from the up-start coming from California.
In order to do so, we have to re-define what is the driver of all our process within Nokia: not the devices anymore but software – more specifically: Holistic Mobile Operating System (HM OS) – but completely oriented on the consumer’s needs and desires – wishes and dreams – wants and expectations.
Holistic Mobile Operating System (HM OS)
I chose HM OS specifically and on purpose – it means Holistic Mobile Operating System, yes, but it also has to stand for: Her Majesty, the Operating System!
Our processes, our organizational structure must be changed to put the development of the operating system into the center, make it the focal point of all our activities. The operating system must drive device development.
I want to spend a little time on what I mean with “Operating System” before switching to what I mean with “HM OS”.
Operating System for me is not only the Kernel – it’s the piece of software which, yes, of course, manages the hardware-resources as well as the applications – but it also encompasses the network communication, it defines the user experience (UI), has well defined APIs for developers to access all of it’s functionality thus unleashing an unprecedented level of creativity; it encapsulates and enables access to all cloud-services, integrates social functionality and so on.
In the Linux community, the OS is the Kernel – but an OS in consumers’ perception is not the Linux kernel, but the Linux distro – such as Ubuntu! But in my definition, Ubuntu is an OS but not an HM OS.
HM OS in my definition incorporates the app-store, the music-store, the video-store -, i.e. all the media-store, as well as all social networks, cloud-services and such – in a way and with clearly defined and standardized APIs that every developer can access any of those services in his/her application and add an unseen level of functionality on top of that – i.e. expand the value of the device in the consumers’ perception!
HM OS also includes full cloud-services, i.e. if a developer creates an app which requires server-side functionality and if he/she cannot/does not want to run servers 24/7, that service must be part of the HM OS – only then does an OS become an HM OS.
From the process perspective, all device creation, development and shipment, services, support, and anything else must orient itself on the HM OS roadmap.
Currently, at Nokia, we have the Primacy of the Device – everything is geared towards the device-requirements. For Nokia to survive, this must change – and change must it fast!
I have drawn a chart on how I see how things have to work:
The picture is crude, but you get the picture – the HM OS development is the center, the focal point, the driving factor with milestones, etc.
What is important is that the devices derive their specification from the HM OS roadmap, and not the other way around!
The Importance of 3rd Party-Software Developers
If the Operating System is “Her Majesty, the Operating System”, then the 3rd party developers are the lords, counts, and barons – the people who make money from the land of Her Majesty.
The second reason for Nokia’s crisis is our neglect of the needs of developers. Here, I sum up developers, i.e. people writing software and publishers, i.e. companies/people trying to make money with that software under the same term as the distinction we used to have in early days of software development changed significantly with the advent of smartphone development.
I’ve been personally trying to develop software for our platforms and was very frustrated trying to even installing the development environments. At Apple, I just enter developer.apple.com, log-in and start downloading one, admittedly huge, file (2.5GB) onto my Mac. Once it’s downloaded, I double-click it, it installs and I can start developing.
Moreover, I have a huge amount of documentation describing each API clearly and providing many examples. I can also rely on the APIs being stable, functioning and available – with lots of examples to build on.
On our platforms, I had the choice between WRT, Symbian Native, Java, Qt, PyS60. Seeing PyS60, I decided to use that (admittedly being a big Python fan). I then realized that Python is not installed on our phones by default and I need to install it on every phone I want my app to run on.
Being a new Nokia developer I wanted some good sample code to tweak but couldn’t find any.
I decided to go for Symbian Native (I don’t like Java) and gave up when reading about the way you develop software (it was so 90ish) and how night-marish that was.
So I decided to use WRT: it took me a whole week to figure out that my app looks different on E71 from N97 from 5800, etc – there was no common UI, each time either the font was too small or too large or the buttons didn’t work or something else was bother.
So, I decided to use Qt: I downloaded Qt on my Mac, installed Aptana, etc just to realize that I cannot develop for Qt on my Mac and instead needed a Windows PC. So I installed Parallels with Windows 7. Having done that, I found a great video describing on how to setup the Qt Development environment.
The video describes how to download seven(!) different packages from seven different sources, install them in specific order and do some manual configuration – just to prepare Qt Development Environment installation. Today, I’m still in the middle of everything as one of the packages just doesn’t want to install.
Still, in parallel I looked at code and documentation and couldn’t find anything satisfactory. I will not give up and hope to one day being able to develop a small app based on Qt for our phones – but then, where to run it on? Currently, we have not one device where I could run my Qt application without the need to install 10-15MB of Qt libraries – for my 100kB app??
Why don’t we have a clear offering – as clear as Apple’s? One big file to download, containing fantastic documentation, supporting and documenting all APIs and providing tools to develop, build and publish directly to Nokia Store?
Example code: where is this?
Even with Qt: why are we spending time and money on things like Qt for Windows CE (“Qt is available for everything, from PCs to coffee machines, but not our phones” was one of the complaints I heard – and I agree), etc instead of finally having it available, with a great UI, for our devices, platforms, including Symbian and Maemo 5 in a format which I can immediately use to develop and publish? Why does Qt still not have the mobility APIs? Instead we boast things like Qt for Windows CE, embedded Linux and actually advertise that Qt for Maemo 5 has the same functionality as the Qt on X11 version??
We need to integrate all our so-called services (I call them enablers) directly into the operating system and provide APIs for these in Qt, WRT and Java! Even though I personally don’t like Java, we must support it and provide all APIs in Java as well in order to be competitive as we are losing the Smartphone war and cannot win it in the foreseeable future if we concentrate only on that. We must use our strength of the installed S40 and Symbian base until we can have the future platform (MeeGo) ready. If we concentrate only on the future, which is by most developers seen as just another unfullfillable promise by Nokia, we’ll lose this battle. We must enable all of our installed base as a platform for developers – for developers to make money on.
This brings me to another point: how are developers supposed to generate revenues if the only way to charge for content is Pay-per-Download? We are, I know, preparing InApp-Purchase, Advertising and other features. But we were planning this for long time now and still are nowhere near where we want to be because our business is still driven by devices-teams. All software resources are directed/prioritized by device needs.
OviStore 2.0 requires Client Platform 2.0 – which currently is scheduled only for Vasco, which currently … well, when will it ship? And then? Should OviStore 2.0 only be available for users of Vasco? What about all the hundreds of millions of S40 users?
Why would or should any one developer run through the hassle of downloading those packages, learning something completely new (and complicated), try to develop code on an unreliable SDK if the target market is miniscule compared to our competitors?
According to the Consumer’s definition of “Smartphone Market” (full-screen multi-touch device), Apple shipped 80m devices and we shipped only 30m by end of 2009. Why should anyone in his sane mind consider developing for our platforms with all its intricacies and difficulties? With it’s steep learning curve and no way of making money?
Why should anyone in his sane mind consider our platform with an effective revenue share of around 40% for him, instead of the 70% Apple gives? Operator Billing is breaking developers’ business – and our neck!
When we look at what makes developers happy, there are only few things we have to get right: Market Size (installed base), Business Models (Profitable Revenue Options such as PPD, InApp-Purchase, Micro-Transactions, InApp-Advertising), Standardized APIs, Availability of world-class SDKs/Tools with world-class documentation and examples, Standardized Great UX, and finally Ease of Publishing.
What we have to do here is not easy, but it is necessary:
- Take back ownership of the OS for our devices
- Extend platform priorities from MeeGo to Symbian and S40
- Horizontalize all OVi-functionality: SSO, Store, Music, Share, Messaging, Location – as basic “Kits” with open APIs for any developer to use through standardized SDKs => This will require converting the services to cost-centers from being profit centers
- Standardize SDKs for Java, WRT, Qt: Provide every API in all three SDKs
- Create world-class development environment including world-class tools, documentation and example code
- Implement OviWallet for MicroPayments
- Introduce true 70:30 revenue share, or preferably 95:5, charging only for the added value we provide to developers (added value being standardized billing mechanisms) and charge on top for premium placements only
- Fix our UI/UX – goal should be to be at least as good as Apple’s UI/UX
- Introduce all necessary business models: PPD, InAppPurchase, InApp-Advertising, MicroPayments
Nokia’s Other Enemy: Aligning Ourselves, Forum-Decisions, Making Compromises
A third reason for Nokia’s crisis is as big a contributing factor as the currently existing Primacy of Devices: The Committee-Based Decision-Making.
Today, most decisions within Nokia are made either within boards, forums or teams, which results in compromising on the future. Additionally, the requirement to “align ourselves” (one of the probably most-hated words within Nokia now) reduces the quality-expectations to the lowest common denominator. A chain, as we know, is only as strong as it’s weakest link!
Nokia currently does not make any bold decisions anymore – nobody takes responsibility, responsibility is dispensed among members of committees, boards, alignment-meetings – but not single, identifiable persons!
Any great idea brought into a meeting is discussed to the point of becoming pointless, is watered down, there are so many arguments why that great idea “… cannot be done at Nokia…” or “… needs to be aligned with xyz…” or needs to “… get approval from abc…” that nobody within Nokia brings such ideas to the board anymore. Even top managers bring proposals into meetings only if they know for sure that that proposal will be approved. Nobody is ready to fight for his/her ideas anymore. Main reason for that is that right after they joined Nokia, most of them fought hard for great ideas – just to see these ideas to be watered down in committees, boards, meetings, – seeing these ideas aligned with x, y, z such that when it had passed all those forums, it had no commonality with the original idea anymore – it was made what I call “Nokia-compatible”, it was made into a “Nokia-idea” and the person who brought that idea didn’t want to identify him-/herself with the result anymore.
The result was that the idea was “owned” by everyone in the forum, i.e. owned by nobody anymore – and anyone who has read about the “Tragedy of the Commons” knows what happens with common-ownership… it gets destroyed, depleted, and everyone suffers in the end.
An idea without one (or at most two but not more) dedicated owners is destined to become a mediocre thing at best – or not get implemented at all in worst case. An idea without one owner is an orphan – we at Nokia are like an orphanage for ideas: we have many people taking care of the orphanage but nobody takes care of the orphans anymore because they are no-one’s children…
We need to create the notion of ownership – again. And this is what brings me back to bringing back the Secret Recipe of Original Success: Nokia, from what many long-time Nokia-employees told me, used the have the Notion of Ownership.
We used to make things differently and we used to have Owners – that is what Mr Jobs brought back to the fruit-company: Secret Recipe of the Original Success!
Ownership brings with itself the linking of accountability, responsibility and the authority to make decisions. Only by giving people ownership of an idea, linking responsibility, accountability and authority can we become a world-class company again – take back what is ours and more – and start eating our breakfast, lunch and dinner ourselves….
I’m begging the board and calling for:
- Putting the Consumer in the center of all our activities
- Taking back ownership of our platforms: responsibility, accountability and authority about what our platforms are
- Primacy of Software, more specifically: Primacy of HM OS – Her Majesty, the Operating System
- The Understanding of the Importance of 3rd Party-Software Developers: The Pursuit of Happiness of Developers
- Integrating all our “services” as APIs into our platform thus creating cost centers out of services as profit center
- Killing all forums, boards, alignments – let’s bring back the Notion of Ownership!
I felt the responsibility for this Plea; I am fully accountable for any consequence of this Plea; Lastly, I took the authority for the Plea from being a Nokia Director, Nokia Manager, Nokia Employee…
(This was an article I wrote in April 2nd, 2010 and sent to the Nokia Executive Board – Times have changed and, as the saying goes, “The Rest is History”)