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Poor old Olli-Pekka Kallasvuo. Can you imagine climbing all the way to the top of Nokia, achieving a lifetime’s ambition, your hands on the levers of the most magnificent mobile phone manufacturing operation known to man, what can go wrong?
A few months into your CEO-ship, out of left field, comes the bloody iPhone.
“Respond!” the cry goes up from analysts, customers, colleagues and journos.
‘Cripes,’ you say, ‘but I’m only a lawyer. I don’t know tiddly squat about making phones. I look at ROE and ROI and talk bollox to analysts.’
So Olli made the damn-fool remark that the iPhone is a niche product.
A friend of mine, who has a couple of high-flying BP-ers as neighbours, told me that they didn’t know the first thing about drilling.
For the BP-ers, digging wells was something for oily-fingered erks, happily several zillion levels of hierarchy removed from their own exalted positions.
So I reckon Olli thought like the BP guys: ‘These chappies who make these phones, whoever and wherever they are, will soon make a better phone than the iPhone.’
Three years on, and they haven’t.
On the other hand, I bet Steve Jobs sits in on the iPhone development meetings and knows everything about what and why the next product is going to be as it is.
That’s why iPhone profits are five times Nokia’s total profits though Nokia out-sells the iPhone 15 to 1 in units.
It all goes back to the modern belief that you don’t need to know anything about the business you’re in to run the business you’re in.
Peter, Nokia is not a HW company anymore. They see themselves as a SW and services company. To that image the new CEO fits perfectly.
It´s all confusing. Apple is of course a HW company, but in the cell phone business it´s not. You could argue that it´s only a GUI company. Thats where they shine.
Anyway, if Nokia wants to beat Apple they are not seeing the real enemy. They should be looking at Android.
Apparently not, Peter, in all the thousands of words written about his appointment, not one relates to any previous experience with phones. A career which started with training as a computer engineer, followed by a management training course, with subsequent jobs at Adobe, Juniper and Microsoft, sugggests not. Maybe the Nokia recruitment committee forgot to ask that question.
The i-Phone is technically inferior to any Nokia Smartphone but despite the Apple Fan Club, better PR, better Apps Store and User Experience Nokia still outsells Apple by over 2 to 1 in the SmartPhone market segment.
Does Nokia’s new CEO know anything about phones?
That would be a good law, Mike, when you look at the two worst-hit UK banks in the credit crunch which were HBOS and RBS, and neither the Chairman or CEO of HBOS, or the Chairman or CEO of RBS, had a single banking qaulification between them.
El Rupester – I totally agree with your comment but would point out that I did qualify my comment with “engineering companies” by which I was thinking of electronic engineering. GEC under Weinstock was really just a bank that happened to loan money to a lot of engineering companies 🙂
I also agree things go in cycles and companies need to constantly re-invent themselves – something Silicon Valley companies seem adept at and others not.
However Apple was only a financial basket case during the era Jobs wasn’t there and it was run by the Pepsi man who fired him. The fact they recovered after his return, and long before the iPhone, surely proves that it should actually be made law that all companies of any discipline are run by somebody qualified in that discipline, as Nokia was pre the lot that got them in this current mess.
David, Mike
You are wrong in saying “modern belief” or “since the 90s”
The idea of “managing by the numbers” and ” you don’t need to know anything about the business you’re in to run the business you’re in” is far older than that.
It certainly dates from the 1960s, with the rise of the conglomerates. ITT was the famous one, but closer to home GEC was very clearly run by accountants and not be creative types.
There’s always been a balance, and all things go in cycles.
Don’t forget, for many years Apple was a financial basket case, and Nokia was golden…
Unfortunately, Mike, it’s anti the modern zeitgeist to have creative people at the top of companies. That’s probably why Apple is so uniquely successful.
Thanks, VO, that’s extremely interesting. Sounds as if, somewhere along the way, Nokia’s management became disconnected from its phone designers. If only the phone designers had become the managers!
Just to add to all of this…. Nokia had (thru the research arm NRC) developed tens if not hundreds of touch screen concepts. By 2000 all these projects were rejected because they were considered futile. And this was years before the iphone.
Just imagine how many millions did that wise decision cost. That, of course, has nothing to do with Kallasvuo.
Steve Job’s first job was at HP so of course he sits in on technical and marketing discussions, as did Hewlett on many occasions for the best HP products. If he said a product wasn’t good enough to have his name on it then it was changed until he liked it.
Unfortunately since the 90s the trend to have engineering companies run by MBAs has destroyed that sort of input from the top. The only board level input to a product nowadays is “can we make it cheaper ?”.
Regarding Apple’s market share, it has dropped below Android but the projected growth in the smartphone market more than compensates for this and Apple should be highly profitable for years to come.
The annoying thing with Nokia is they did work on some very innovative prototypes about 6 years ago which then disappeared without trace, just about the time that Olli-Pekka became COO and then CEO shortly afterwards.
A change of management was essential and another board member went today but is it too little too late ? Quite probably.
Meanwhile of course HP now have a great opportunity for a reshuffle so as to bring in Walter Hewlett as President but you can bet they won’t do that either. Another great companies firmly on the slow road to ruin.
Absolutely true, all of it, Aki Bola, and yet when you think of Nokia’s history and experience, and you think in June 2007 the iPhone was launched, and you think why oh why couldn’t they make an adequate response – maybe a me-too for a holding pattern, and then something special to try and get ahead of the game. Nokia used to be able to make stylish, classy, surprising phones, but lately their stuff’s been boring – and that’s no good for the young people.
It may have something to do with Apple’s management being well integrated with marketing/development, but that’s not the whole story. Apple are selling proprietary and overpriced hardware/software but have a willing pool of starry eyed consumers. Nokia are competing with HTC, Samsung, Motorola, etc.. and profit margins there are thin. Droid OS has already overtaken iPhone but who will make any serious money on Droid phones? There’s your comparison.
Sometimes you can make money as a small player, if you own the small market, as Sony did with betamax for many many years. All the VHS manufacturers were killing each other and making razor thin margins. Sound familiar?
Wise words George, when an accountant, an MBA or a lawyer get into the top spot – scarper.
I’ve always had a problem with the concept of “you don’t need to know anything about the business you’re in to run the business you’re in.” My complaints about have usually been met with contemptuous, sneering explanations (in words of one syllable) that I was obviously too simple-minded to understand.
Mr. Jobs is, indeed, proof of my point. The best way to run a business well is to understand exactly what you are doing. When the bean-counters take over, its time to get out. The company is headed downhill!