Had I been the Nokia CEO, would I have done what Stephen Elop did?

I am sure a number of you would have seen the mailer from Nokia CEO this week to his employees. In case you have not seen the mailer it is available here:

http://www.ndtv.com/article/profit/standing-on-a-burning-platform-nokia-ceo-to-employees-140252

 This mailer has evoked a debate among the corporate circles with people saying it was the right thing to do and some others saying that this was not needed. I will attempt to present my point of view here.

I had the privilege of working with Nokia in their global headquarters in Finland for 30 months and I really admire this company and feel sad for the current state of affairs. I actually would support Steve's candidness and guts to call spade a spade and present the realistic albeit gory picture to all the stakeholders. I am sure he would have evaluated the fall outs of this mailer and has taken this conscious decision. This is just the beginning and he being the new kid on the block at Nokia we will need to wait and watch how he goes about strategising and executing the revival of Nokia in the coming months.

Nokia is really a 'burning platform'. Their products today are no where near Apple's iPhone which was introduced as early as 2007. In a consumer market where a few months can make or mar a market leader, being 4 years behind the competition is hardly a enviable position. Their Symbian platform is far outdated and keeping it any longer will only lead to demise of Nokia in the face of competition from iPhone and Android. Symbian was meant for a different age and has far outlived its utility.

Even if I were Steve I would do the following to regain the confidence of all stakeholders in Nokia:

1)   Customers:  Nokia has lost market share and is rapidly losing market share as we speak. As as CEO of Nokia I would not worry about the next 3-6 months loss of customer market share. I would look at the long term revival and regaining the position as the numero uno brand for customers. If I have an action plan say for releasing the new models of Nokia phones on a Windows platform in 2 quarters from now which will be a formidable competition for iPhone then I better let my customers who are drifting away from Nokia know that there are exciting phones coming from Nokia. Even today there are Nokia aficionados and many of them might postpone the decision to buy an iPhone if the Nokia road map is known to them. The customers are also fed up of poor quality of products and customer service and if they know that Nokia’s CEO is very serious about getting back Nokia to the numero uno position and means business and will take tough calls then it is only ‘Nokia Brand’ which will gain from this exercise in the long run. Nokia was a brand which had 80% market share in the past and it has the wherewithal to get its act right if given the right strategic direction and operational focus by its CEO

2)  Employees:   Employees know about the crisis that the organization is in and I would believe they would love the candidness of Steve. In a technology company with hundreds of mobile industry thought leaders who do realize that they are behind the competition and missing the bus, it is no secret that Nokia will not exist unless it changes the rules of the game . This message from Steve will help foster a common cause and a sense of unified direction to its employees and will motivate/ give a sense of purpose to the stars to fight the battle which lies ahead of them to garner market share by developing world class products. As far as the prospective employees are concerned it will give a message that Nokia is on a serious revolution path and a movement to set things right and it would inspire leaders who are keen on taking up challenges and changing the rules of the game to join Nokia and make a difference and be a part of the future success story.

3)  Investors:  The Nokia stocks are not doing well in the market and the market share us plummeting. If it continues this way it is only a matter of time when Nokia declares bankruptcy. It is a great move by Steve to garner the support of all stakeholders including investors by including them in the war to regain the lost ground and making it transparent to all of them. This is the only way he can get the support of the shareholders when he takes the next steps ( which are likely to result in some blood bath in terms of taking decisive and concrete steps like changes in top management layer, layoffs, closing down  dud businesses  etc.)

4)  Society:  Nokia is a household name in Finland and contributes substantially to the GDP of the country as well as participates in a number of CSR initiatives across Finland. At one point on time it employed 10% of the Finnish population. This message provides a pointer to the society that not all is well with their favourite and assures that concrete and tough actions are being taken to bring back their favourite company to the top of the charts!

Now R&D and Innovation for emerging markets?

It has been a practice in the past that stripped down versions of products designed for developed economies were positioned as a low cost and cheap alternative in the emerging markets. This will no longer be a successful strategy and the bitter truth has been realized by many global vendors servicing the developing economies.

Now-a-days the mantra is to carry out focused R&D efforts targeted at creating products that are specially designed and adapted to the emerging economies. The needs of the emerging markets are different and so are the price points and value realized by the consumers in the emerging markets. The design of a product that gives full value to the consumer in an emerging market and serves his needs fully needs a different thought process all together.

This needs innovations and inventions in core technology areas such as material sciences, electronics, fluid mechanics, power systems and the like. Consider the example of the Nano car developed by TATA motors which needed multiple inventions/innovations in technology and also needed cross functional teams working on different engineering disciplines to come together to solve complex issues and provide solutions while at the same time meeting the targeted price point.

The key is to provide a reasonably good solution that meets all the basic needs of the consumer at a lower price point that is affordable to the consumer and at the same time not being perceived as a low end product or a stripped down version. TATA motors calls this discipline as “Frugal Engineering” which is an art as much as science.

Similarly consider the portable medical scanning devices from GE that have been used successfully in the Chinese market for diagnosing patients in rural areas in mobile clinics. This needs a different thought process and every component in the machine needs to be designed and innovated to provide value at that price point. Merely stripping down the frills of a medical scanner used in the US and selling at a lower price does not work in China as the desired consumer value is not provided by such a device.

There is a huge market potential waiting to be tapped in the emerging markets if the consumer behavior and consumer needs are well understood and if specially designed products invented/adapted/innovated for these markets are introduced. To quote CK Prahalad, there is indeed huge potential fortune at the “middle and bottom of the pyramid” which is untapped and directed innovation can help unleash this potential.

Infact there is also a term being heard in the management circles called “Reverse Innovation” where in the products designed for emerging economies are taken back to the developed economies and positioned there as ‘value for money’ products. This shifts the center of gravity where in the products once designed for advanced economies were stripped down and sold in developing economies where as now the innovations made by MNCs in the emerging markets are taken back home to the advanced economies.