With a pop-star-style microphone clipped behind his ear, Stephen Elop takes the stage and gazes out at something he hasn’t seen in a while: an adoring crowd. Hamilton’s McMaster University is inducting him into the Alumni Gallery, its hall of fame for accomplished graduates. The honour couldn’t be more appropriate: Elop, a native of nearby Ancaster and an engineering grad, has ascended through the innovate-or-die technology sector to become CEO of the biggest cellphone manufacturer in the world. But Elop isn’t celebrating his laurels here today. Speaking to the crowd, he weaves one hell of a gripping narrative about the future: how he will save Nokia Corp. from total destruction.
Unfortunately, only half the crowd can hear it. At Elop’s right, a pair of speakers mounted on poles are refusing to co-operate. Suddenly a young audiovisual technician in shorts careens down the aisle to attack the problem. As another techie climbs up to help the first wrestle with the misbehaving equipment, the bemused elder statesmen of Hamilton academe attempt to focus on the Chosen One’s words, now warping in and out of focus as the speakers sputter.
Elop is detailing what ails Nokia, the Espoo, Finland-based handset and wireless networking giant that chalked up $56 billion of sales in 2010 (all currency in U.S. dollars) but is being undermined by competitors both North American and Asian, attacking Nokia from both above and below. When your very operating system is in peril, you are a technology company in a pickle.
Elop himself comes from a software background, having been hired by Nokia last September from the top of the Microsoft food chain. And his boldest move thus far has been to strike an industry-tilting partnership with his former employer. Henceforth, Microsoft’s mobile software will run on millions of Nokia’s devices—a startling about-face for the Finnish behemoth, which employs thousands of software engineers. At one point during the McMaster session, a student cheekily asks whether Microsoft, having flopped in the mobile space itself, had managed to secrete Elop into Nokia’s executive suite in order to save itself. Elop doesn’t wait a second: “The Trojan Horse conspiracy theory! Have you been to the Grassy Knoll, sir?”
As he lectures the crowd through the dysfunctional PA, Elop’s witticisms are almost made redundant by the live-action metaphor: two technicians struggling with wonky technology. Still, what he’s saying is true. With Microsoft as its partner, Nokia is finally ready to dance. The strategy is set, and Nokia’s got a lot of heft to put into the effort, not least because the company is desperate. But the easy part, the planning phase, is over. Now Elop’s got to deliver. And he doesn’t have much time.
Elop was hired because Nokia was in trouble. He knew it, and everyone else in the business knew it, but Elop wanted to make sure Nokia’s board knew it, too. “What I was interested in understanding is whether there was a degree of self-awareness of the challenges that were faced—that was really important,” he tells me prior to the McMaster speech. “The board of directors clearly had a sense that the world had changed around them, and that the company had to respond aggressively.”
In a memo now arguably more famous than its author, the new hire detailed in February what was wrong with the 146-year-old conglomerate. His “burning platform” metaphor compared Nokia to a man standing on a burning oil rig, surrounded by flames and sloshing petrol on himself. He laid out in painfully plain English the problems facing the company. Apple’s iPhone came out in 2007, offering a user experience Nokia simply hadn’t matched. There were also new Chinese device makers such as ZTE cutting into the hold Nokia’s candy bar-shaped talk-and-text units have on hundreds of millions in the developing world.
And then there’s Android—the mobile operating system developed by Google and tossed out free to any device maker who wanted it. Companies no one had heard of (like Taiwan’s HTC) seized on Android, and so did industry heavyweights like Samsung. Together, they propelled the operating system past Nokia’s Symbian platform in number of devices being shipped around the world. For Nokia, a company that produces roughly one-third of all mobile devices sold in many markets around the world (and more than 50% of those sold in the Middle East and Africa), volume is extremely important. What’s more, Android isn’t a rival handset or manufacturer; it’s a rival ecosystem—as disruptive as Apple’s iTunes, say, but even more threatening, since it’s a platform where multiple competitors can congregate, team up and whack Nokia’s market share to pieces by leveraging Google’s software brilliance. “We all talk about the exponential adoption curve,” Elop says. “This is no exponential curve. It’s far more aggressive than that.”