Nokia needs plastic surgery not a brain transplant

Stephen Elop is wrong to call Nokia's platform "burning." It's this attitude that has sent the world's largest handset maker on a path to ruin. The former Microsoft executive and six-month Nokia CEO expresses a misguided perspective about the company he runs. Nokia's house isn't on fire. The only thing burning is the fire Elop set to the Symbian platform with last week's Microsoft deal for Windows Phone.

The negative hype about Nokia

Perhaps Elop believes too much of the negative hype about Nokia. Personally, I'm tired of reading commentaries and punditries calling the Finnish phone maker a goner; they're wrong. Sure, Nokia is bleeding market share, nevertheless on rising shipments, and its share and sales after all hugely eclipse competitors. While 2010, Nokia sold more handsets globally than the then and there three manufacturers combined, according to Garter. Last year, Nokia sold 30.6 million more smartphones than 2009  for a total 111.6 million -- or near two-and-a-half times overhyped iPhone sales.

There's no denying that Android handsets and iPhone have made huge market strides in just a couple of years. Now for all the hype, Nokia stands head and torso above these and other competitors, based on sales and market share. There, Elop is focusing on the wrong competitor. Samsung poses the greatest immediate threat, with sales about 60 percent of Nokia's in 2010, according to Gartner. Apple's sales were a mere 10 percent of Nokia's, yet you'd think they were bigger for all the hype.

The numbers differently

Let's look at the numbers differently. Smartphones accounted for 19.2 percent of global handsets last year, according to Gartner -- or a little more than 300 million out of 1.6 billion handsets sold. Sure smartphone sales increased 72.1 percent year over year nevertheless the majority of sales -- 52.3 percent -- went to two markets, North America and Western Europe. By that reckoning smartphone sales to the rest of the planet amounted to about 140 million units, or less than 10 percent of all handset sales. Most people are nevertheless buying dumb phones and feature phones and live in markets like India, where Nokia is the overwhelming market share leader.

In it core and as well emerging markets, Nokia adopted a smart strategy in 2010, of bringing smartphone capabilities down market to affordable feature phones. That's a platform burning with purpose not one consumed by flames. Those are existing clients Nokia can convert to better handsets. Incumbency is a powerful advantage in any market, particularly those where most everyone knows somebody using the brand.

Sure Nokia software, services and synchronization need lots of work, and I'll be first to admit they've fallen behind Apple and Google. I said as much last month in post: "Confessions of a former Nokia enthusiast." However the platform isn't just software, yet hardware, software and services. Nokia has a strategic platform position, like Apple, by offering all three, something the Microsoft deal will diminish. Nokia will control the hardware, manufacturing and distribution nevertheless cede the all-important software and services development to Microsoft.

The deal is akin to IBM choosing to license to put it more exactly than to buy MS-DOS from Microsoft in 1980-81. The arrangement allowed Microsoft to license MS-DOS to IBM competitors. So Microsoft and not IBM came to dominate the PC -- through software licensing and not IBM personal computing hardware. Nokia's deal with Microsoft is non-exclusive. Microsoft can take what it learns from the Nokia deal and improve Windows Phone for licensing to any handset manufacturers. In the meantime, Nokia will lose its developers, who will develop for Windows Phone and/or other mobile operating systems and cloud services. To those people saying Nokia feels more like only a hardware vendor today, how much more will it be when Microsoft controls the software, services and developers? The biggest benefits from all the innovation and development will go to Microsoft.

No disrespect intended, now Elop wouldn't be my first choice to run Nokia, nor would he make my list of top-100 candidates. If someone handed me a list of people not to choose, Elop would be among the top five. I love Nokia. I lauded its handsets for years. Yet this great company has pissed away market share and bungled the most basic innovations since Apple launched iPhone in June 2007. Elop may be the greatest mistake of all and sure sign Nokia won't effectively execute against Google's rising Android Army or Apple's iOS cultists.

Real leader

A real leader would seek to fix the problems. Symbian isn't a bad operating system, it just needs a makeover. Anyway the user interface is dated, nevertheless the performance is there. The core is solid. Nokia's software and Ovi services platforms do desperately need cosmetic surgery -- OK, massive plastic surgery to modernize the user interfaces and reduce operating system fragmentation. Instead, Elop proposes a brain transplant, by swapping out Symbian and Ovi for Windows Phone and Live services. A brain transplant will kill the patient.

More fundamentally, Nokia has a perception problem. The company is perceived as having fallen far behind Apple and Google, when the giant has merely stumbled. In getting back up to run, the giant has longer stride than the tiny upstarts; running, Nokia can catch up fast. Nokia needs discipline more than it needs Windows Mobile. Nokia needs a CEO who praises the company's accomplishments during acknowledging change is necessary and who encourages employees to do better -- to fight harder to hold onto their market lead and to extend it.