Under Kallasvuo Nokia embarked on the most dramatic shift in its business since entering the mobile phone business in the early 90s.
The shift was not into mobile software which began in 2001 under his predecessor. It was not into enterprise solutions which also preceded his tenure. OPK’s main contribution was the move into mobile services.
The concept of mobile services may be an unfamiliar one for casual observers because it has not become a visible business for operators and certainly not for handset vendors. It’s also a complicated business model that requires some deeper understanding of the way the telecom industry is structured.
What Nokia had in mind was to offer various value-added, billable services to operators which would be enabled by Nokia handsets. The types of services included music subscriptions (Comes With Music), email (several acquisitions), photo sharing, and navigation.
The idea was that since many operators would not be capable of rolling out own brand services and could not do the heavy back-end lifting or the integration with handsets, someone could step in and roll out white labeled solutions world-wide. Third parties would also find it impossible to integrate and would lack the relationships Nokia had with operators world-wide.
For example, Nokia could enable a South American operator to offer email services to all their customers (with or without smartphones) and that service could be offered at a certain incremental price over the basic voice plan. The client implementation could be device independent but Nokia devices would probably work better. This would lead to higher ARPU which could be shared with Nokia.
Anyone can see that this is a complicated business plan and is therefore unlikely to be successful. But what makes it a complete failure is the realization that most buyers will resist the idea of paying for individual services separately. $1/mo for email, $2/mo for music, $3/mo for maps, etc. is repulsive. Users stampeded instead to unlimited data plans and smartphones which offered all these services and hundreds more for free or at prices negotiated with third party providers, rather than the untrusted network operators.
And therein lies the entire cause of Nokia’s strategic failure: an operator centric point of view. It led to poisoned devices and irrational business plans.
Which leads to the question in the headline. Is this mistake recognized and is it big enough to cause such a disruptive CEO dismissal?
I argue yes. Strategic errors are forgivable, but the they become a capital offense when they turn into a derailment of the core business. Instead of being enhanced with value-added services, the core business collapsed under the disruptive attack of unlimited data.
But it gets worse. Like the capital offense that Robbie Bach was guilty of at Microsoft, there has to be some direct accountability. To add insult to injury, OPK single-handedly pushed through the biggest and stupidest acquisition in Nokia’s history. To support this flawed vision of mobile services OPK bought Navteq for $8.1 billion in October 2007.
Intended as a service that could be rolled out on all phones and monetized through operator billing, Nokia maps is a free service that will never return anything to shareholders.
Missing where the puck was going is one thing but burning precious capital is another. This, in my humble opinion, is why OPK was fired.
Speaking of pucks, here’s hoping fresh Canadian eyes will see where it’s going.