The “burning platform” memo

Hello there,

There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire.

[ … ] Not shown: The man jumps into the freezing sea and survives.

We too, are standing on a “burning platform,” and we must decide how we are going to change our behaviour.¹ (Editorial note 1)Editorial · 1Known at the timeThe metaphor carries the whole argument. It says staying put is fatal before it says where to go, so every later paragraph reads as evidence for jumping.

For example, there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.

In 2008, Apple’s market share in the $300+ price range was 25 percent; by 2010 it escalated to 61 percent.² (Fact note 2)Fact · 2Known at the timeThe memo claims these figures but gives no source for them. We have not yet found an independent series for the $300+ segment, so the scorecard leaves this claim open.SourceThe GuardianNokia’s chief executive to staff: ‘we are standing on a burning platform’9 Feb 2011 They are enjoying a tremendous growth trajectory with a 78 percent earnings growth year over year in Q4 2010.

And then, there is Android. In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers. Android came in at the high-end, they are now winning the mid-range, and quickly they are going downstream to phones under €100.

[ … ] Not shown: Low-cost phone makers in Shenzhen, and how Nokia fell behind.

The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes.³ (Fact note 3)Fact · 3Known at the timeOn 31 January 2011 Canalys reported that Android passed Symbian in fourth-quarter 2010 shipments: 32.9 million against 31.0 million. That counts platforms. Counted by manufacturer, Nokia was still the largest smartphone maker, with 28% of shipments.SourceBGRAndroid dethrones Symbian as No. 1 smartphone OS, says CanalysJan 2011 Unbelievable.

We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.⁴ (Fact note 4)Fact · 4With hindsightNokia announced the N9, its first MeeGo phone, on 21 June 2011. By then it had already named Windows Phone its primary smartphone platform, and its first Windows Phones followed on 26 October 2011.SourcesPhone ScoopNokia N9 brings MeeGo to life21 Jun 2011Nokia, Form 6-K filed with the SECNokia and Microsoft announce plans for a broad strategic partnership to build a new global ecosystem11 Feb 2011GSMArenaNokia officially announces the Lumia 800 and the Lumia 71026 Oct 2011

[ … ] Not shown: Symbian in the mid-range, and fast, cheap rivals at the low end.

The battle of devices has now become a war of ecosystems⁵ (Editorial note 5)Editorial · 5Known at the timeThe memo’s central move: it changes the unit of competition from the handset to everything around it. A better phone cannot answer that; only a platform choice can. The frame has outlasted the choice Nokia made., where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things.

Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.⁶ (Fact note 6)Fact · 6With hindsightTwo days later Nokia announced plans for a partnership with Microsoft: Windows Phone would be its primary smartphone platform, and Symbian a “franchise platform”. Of build, catalyse or join, that is closest to join. The plans were not yet a binding agreement.SourceNokia, Form 6-K filed with the SECNokia and Microsoft announce plans for a broad strategic partnership to build a new global ecosystem11 Feb 2011

This is what I have been trying to understand. I believe at least some of it has been due to our attitude inside Nokia. We poured gasoline on our own burning platform.⁷ (Editorial note 7)Editorial · 7Known at the timeA rare line in a CEO’s memo: it puts part of the cause inside the company, not only with rivals. That makes the case for change about behaviour, which a new CEO can change, rather than market share, which he cannot change directly. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times.

Nokia, our platform is burning.

We are working on a path forward — a path to rebuild our market leadership. When we share the new strategy on February 11, it will be a huge effort to transform our company.⁸ (Editorial note 8)Editorial · 8With hindsightThe memo argues for jumping before the landing was public, and the press printed it two days before Nokia announced the plan. Whether that cost sales of the phones Nokia still had to sell is a fair question; this page does not claim that it did.SourceThe GuardianNokia’s chief executive to staff: ‘we are standing on a burning platform’9 Feb 2011

[ … ] Not shown: A return to the man on the platform.

Stephen.