How leaders like Nokia loose their way

Nokia’s CEO Stephen Elop recently gave his warts-and-all view on the company’s decline in a leaked company email. Specifically, he gave his take on the brand’s loss in market share of smartphones to Apple and phones using Google’s Android system. He also highlighted the drop in brand appeal saying that “In the UK, our brand preference has slipped to 20%, which is 8% lower than last year.”

It seems that he shares some of the views in my post of last year on Nokia’s problems.

– Neglecting the core product “sausage”: Somehow Nokia have just not been able to match the core product experience of the iPhone. As Elop himself says, “The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience.”

– Losing out on innovation: I posted last year on Nokia being left behind by Apple and Google as the market action shifted to music and then apps. Elop commented in his email: “Competitors are taking our market share with an entire ‘ecosystems’ that include applications, search, communications and many other things”.

On this side Nokia has waved the white flag and surrendered. It recently announced it was closing its Ovi music service in 26 of the 33 markets it operates in, and scaling back the offer in the UK. And last week Elop announced that Nokia was ditching their Sybmian operating system and forming an alliance with Microsoft to use Windows Phone. Time will tell if this works. “Two turkeys don’t make an eagle” is the how Vic Gunotra, Google’s VP of engineering, described the alliance in a Tweet on the day of the announcement!

But how the bloody hell can this happen? How can a leader brand such as Nokia lose its way so badly? Here are some ideas, again drawing on Elop’s email:

1. Arrogance: leaders can get too big for their boots, and dismiss competition, especially from brands outside their industry. Perhaps Nokia thought Apple was not a serious threat?

2. Stuck in the treacle: getting big can create too many systems and layers and processes that create “treacle” that slows down decision making. Elop says: “We haven’t been delivering innovation fast enough.”

3. Inward focus: leaders can lose touch with what’s happening in the wider world. Elop seems to think this, saying: “We missed big trends, and we lost time….we now find ourselves years behind.”

4. Forgetting what made you famous: Nokia seems to have belatedly recognized that they are a hardware not a software company. If it had been clearer on this sooner, all efforts and money could have been focused on the core product, rather than on attempts to compete in operating systems and music.

5. Lack of leadership: most damning of all is Elop’s view that the company lacked the right leaders to address the issues outlined above. “We have lacked accountability and leadership to align and direct the company through these disruptive times.”

In conclusion, Nokia’s sorry story shows brand growth is about not only gaining leadership, but also retaining it. And in fast-moving markets like mobile phones, this is incredibly difficult. In order to help keep leadership, brands should respect the competition, wherever they come from, be externally focused and ensure thay processes and systems don’t get so complex that they slow the company down.

Easy to say. Hard to do. It will be fascinating to watch how Elop gets on….