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The Nokia Microsoft marriage: what was Elop thinking?

A week after the Nokia press conference last Friday, the industry still seems to be very conflicted about its view of the alliance. After reading most of the industry comments, I still can’t wrap my head around all the implications and come to a clear-cut conclusion. The pessimists view it as a disaster that will destroy Nokia and as a huge win for Microsoft/Windows Phone. The slightly more optimistic view is that the alliance was the best Nokia could do, given their weak position and downward spiral.

Nokia said they rejected using Android to avoid being commoditized and dependent on Google. With the MS alliance Nokia stated that the smartphone market would be a three-horse race between MS/Nokia, Apple, and Android (conveniently forgetting RIM, Bada, and HP/WebOS). Nokia probably has a point. If Nokia had chosen Android as their smartphone OS, Android’s dominance would be inevitable, Google would emerge as the new evil empire, and the handset makers would wind up in a undifferentiated cut-throat competition with each other. Remember, Android is only open source for the developers. For the handset makers, it is a benign tyranny under Google. On the other hand, Android (and RIM) are ready to ship today if Nokia had chosen either of them as a partner. Windows Phone 7 is not yet fully developed and Nokia will wait for the next release (codenamed Mango), planned for October before shipping new models.

What I find incomprehensible is how Nokia could publicly kill Symbian before they have new WP based models to offer the market. Sales of the legacy Symbian smartphones will most likely nosedive during the transition time. If Nokia had been more shrewd, they could have made a limited public statement now about adapting WP for smartphones in the US while maintaining their commitment to upgrading Symbian, but with a lower development budget. The extent of the full alliance with Microsoft could have been kept secret until October when Nokia will “suddenly decide” to give up on Symbian as a smartphone platform and sign an extensive alliance with Microsoft.

However, there are a few slivers of hope for Nokia during this transition time. One lifeline is that some Nokia customers will buy a Symbian smartphone for the camera, UI, maps, email or other factors that are unrelated to the size of the app ecosystem. Another is that the powerful operators have a political interest in the success of the MS/Nokia alliance. If they can keep another ecosystem alive the bargaining power of Apple and Google/Android will be reduced. By subsidizing a few Symbian smartphones they can help to keep Nokia afloat. (This is most likely wishful thinking, from the chatter at MWC it seems that carriers are about to abandon Symbian handsets.) A third market segment is large corporate buyers with integrated backend systems based on Symbian. They are locked in and forced to continue buying Symbian smartphones until they have managed to integrate on another platform, most likely RIM or Android.

The massive criticism against Nokia’s strategy will be hard to overcome. It is exacerbated by emotional reactions and anti-Microsoft sentiments among developers and Nokia old-timers. If MS/Nokia can’t entice developers to join, the entire alliance will be a failure.

It is well-known that Symbian is a horrible platform for developers but I have hardly seen any comments about the developer environment in Windows Phone. Microsoft understands the importance of an attractive development environment. Developer oriented products such as Visual Studio, .Net, and C# show that they can actually get it right. The developer environment for WP will be Silverlight and XNA from Microsoft.

The only analysis of the WP development environment I have found is from a survey last summer by Vision Mobile. In that survey developers rated early versions of WP as rather complicated to work with. The average time for developers to master WP was 9 months, which is significantly longer compared to Android (5 months) or iPhone (around 7 months). It was also considered problematic to create great UI:s with the early version of WP7 from mid 2010. However, developers gave the IDE with the emulator/debugger in WP7 a high rating. This made it possible to code and prototype quite quickly.

If it is correct that WP7 is a completely rewritten OS, there is a chance that Microsoft has managed to dump their clumsy legacy from Windows CE and Windows Mobile. These outdated bloatware platforms were attempts to run full Windows programs on the mobile, which resulted in inferior performance, execution speed, and battery life. If Microsoft has learned their lesson, fine. But I am not convinced that Microsoft’s culture can execute and deliver efficient and lean code.

All in all, I think the announced strategy will be detrimental for Nokia. Nokia has killed Symbian and there is no going back. However, we can still speculate about Nokia’s alternative strategies. Nokia did actually have a viable transition strategy for Symbian. It was based on pushing Symbian down in the stack to hide it from ordinary developers. Nokia wanted to promote the application framework Qt (“cute”) as the development environment that hides Symbian. The cross-platform capabilities in Qt would make it seamless to migrate these apps to MeeGo at a later stage. Considering how clumsily Nokia executed their new strategy I think they would probably have been better off sticking to their old transition strategy.

If Nokia can survive 2011 and they manage to introduce attractive models based on WP in 2012 they still have a chance of a revival. But there are many ifs. Will the WP experience be compelling enough for developers and consumers? Will Nokia be able to manage development projects in an alliance with another organization? Can Nokia leverage their internal capabilities or will the bloated internal bureaucracy slow down product development? Is Microsoft prepared to cooperate with good will intentions or do they have the same hidden agenda as in the 1990s and to enter strategic partnerships with bad faith? Can Microsoft unlearn their ingrained habits?

Even if the MS/Nokia handsets are somewhat uncompetitive on arrival, the operators might step in and save the venture with handset subsidies. Their agenda is to weaken Apple and Google/Android.

On the surface Nokia’s strategic move seems to be the equivalent of shooting themselves in the foot. However, Nokia’s top management and Elop are not idiots. There has to be some rationale that makes this move logical. At least from their point of view.

Perhaps the answer can be found in an extensive feature article in the business section of the Finnish newspaper Helsingin Sanomat from October 2010 (summary here). The article is a damning account of how Nokia lost its way after 2004 when an internal re-organization transformed the agile product-focused company into a matrix organization with three divisions; Mobile Phones, Multimedia, and Enterprise Solutions. The divisions were encouraged to compete internally for staff and resources. This led to endless internal politics, infighting, and bureaucracy. 300 vice presidents, fighting with each other, ensured that innovation was stifled. The results were that Nokia was unable to exploit innovation and their strong internal capabilities. A number of foolish product design decisions followed. Starting in 2001, Nokia had developed their Series 90, a touch screen UI which should have been the basis for Nokia’s iPhone competitors today. But it was cancelled in 2005. In later attempt to emulate iPhone they copied the worst from the iPhone. For example, Nokia phones that do not allow one to replace the battery, models with the micro-SD card reader removed, high end Nokia phones without MMS because some Nokia product manager thought it was “an outdated technology”. The enterprise E series phones could not use the best imaging features because the consumer multimedia division owned the technology and refused access. At the same time, the N series models were denied MailForExchange, and SIP functionality in the same way. The work with Symbian, QT and MeeGo dragged on forever without visible results.

Once a large organization is bogged down by bureaucracy it is very difficult to unravel. Perhaps Elop came to the conclusion that internal reorganization would be risky and too time consuming. The teams working on Symbian, QT and MeeGo had under-delivered for years and Nokia’s senior management had no way of knowing if the under-performance was due to bureaucracy – or if they just were not up to the job. Elop had the choice of betting the future of the company on the internal software teams, or on Microsoft. His bet on Microsoft is a signal of his mistrust of Nokia’s capabilities in software today. (Maybe a new CEO with a strong background in software development would have come to another conclusion. But we will never know the answer to that question.)

I hope Elop’s next project will be to turn the internal organization on its head to unleash the excellent engineering competence and what is left of the aggressive, agile firm from the 1990s.

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