Stephen Elop | Indian market is at forefront of transition

Stephen Elop | Indian market is at forefront of transition

Nokia Corp.’s CEO Stephen Elop was in India this week, his second visit since taking over as chief executive of the beleaguered Finnish mobile phone maker on 21 September 2010. Once the market leader and the pioneer in the business, globally and in India, Nokia has, in recent years, seen competitors such as Apple Inc., Samsung Electronics Co. Ltd and Research in Motion Ltd overtake it in the lucrative smartphone business. Meanwhile, it faces competition in markets such as India from local companies selling inexpensive Chinese imports.

Elop, whose first major decision as CEO was to agree to jettison the company’s in-house Symbian operating software for Microsoft’s Windows phone software, met a group of journalists on Tuesday and discussed a range of issues, including recent launches in the dual-SIM category in India that he says will definitely help the company score over its mass-market rivals. Edited excerpts:

On the strategic direction while the deal with Microsoft kicks in:

We are using the time to be as bold, as aggressive as you possibly can be. The first signs of the implementation of the new strategy are either now happening or coming into focus. Part of our strategy in the transition phase is to take advantage of the Windows phone (operating system) over time, but we have committed a significant investment in Symbian for some years to come (till 2015) and what we have seen very recently is the second major release in the Symbian operating system since February 2011. I have been travelling around the world to see the impact of that. That helps and makes a big difference.

In India, especially, we have made some significant progress around some technologies; dual-SIM (one phone with two SIM cards and, therefore, two numbers) is the principal example of that. The impact is immediate; you see it in various ways in people’s excitement about what is happening in Nokia, in the financial results.

As we go ahead, we have a tremendous amount of work to do; transition like this requires us to launch new products, services in many different countries of the world. That takes time, so we have to be very careful about how we do that. Nonetheless, we have the power of a very powerful machine, which can really make a difference.

There is no question, when the conversations are about laying off some people, or having to do some difficult things or repositioning, those are all difficult conversations. But internally, the mood at Nokia has shifted quite dramatically. As I travel around, there is nothing better than to have a bunch of engineers telling me, “let us show you this".

Finally, I say this publicly—I say this a lot internally—that important as it is to have a new ecosystem strategy to define the future of mobile phones, changing the way we work is also important—a higher sense of urgency, moving decision making more aggressively, holding ourselves accountable to the highest levels of quality and on and on. This is a major focus of our conversations in Nokia.

Having said all that, the word continues to be disruption in our industry. Take the last few weeks—be it Google’s acquisition, HP’s announcement (regarding its computer business and tablets), or Steve Jobs’ (resignation), or the Nortel patents deal. It’s just an amazing time in our industry.

On whether Nokia has too many phones and no best-sellers:

I think there is a risk that if you have too many devices within price points and segments, then there could be dilution. People could say that in the recent times, Nokia has had too many products. But at the same time, it is the case that people are able to acquire (phones) in different price bands. So we find there is a balance.

Clearly, as part of the change that we are going through, we are shifting the balance to fewer distinct designs and form factors that will allow us to innovate rapidly within those without having to flood the market with a lot of different products. The dual-SIM market here in India is a specific example. If you study the market closely, you can clearly identity there is a requirement for different price bands. If you have only one device, you can get some substantial share or maybe a lead, but you will be leaving a lot on the table. This is precisely what we are doing with dual-SIM here in India. We are introducing a series of devices, not a huge number but still...which will be the right combination.

On managing the perception that Nokia isn’t doing anything right:

Management of perception is hard and we made a very tough decision (to go with Microsoft). We are really stepping it up, but we also know that in the meantime, it’s going to be difficult, there will be all sorts of negative activity and people are going to write all sorts of bad stuff.

What that does that in the short term (is that) you have a negative halo and people are (like) “I don’t know if I want to touch those devices". But see what India demonstrated to us right; we get those dual-SIM devices and what do we see? Not only dual-SIM (sales) rocketing up, but also other parts taking off as well. So you get the halo back into the positive direction.

That’s why I describe India as being at the forefront of this transition. It is hard in the short term, but the alternative would have taken more time. The market is more excited about the the things to come. They want to know when the first (Nokia) Windows phone will be launched.

On whether recent positive response to Symbian smartphone launches caused some second thoughts:

I don’t have regrets, to answer the question directly.

When we made the decision (to partner with Microsoft), part of the assessment was how do we deal with entertainment and gaming and so forth.

Our assessment was that we need to partner and team up in a way to deliver the holistic experience over time.

About the anticipation surrounding launches by other phone makers and when Nokia will manage to get the buzz back:

The big move is the introduction of new devices that are based on Windows phone (expected in the fourth quarter), that’s where we expect to see the incremental investment in terms of overall positioning, in terms of quality of launch, engagement of operators.

On whether Nokia will be able to span the price spectrum successfully:

I think what one at first has to look at is the diversity that exists in the world and the range of opportunities that are available. We have been very successful in having assets in places to take advantage where we have multiple devices across many price points.

On the smartphone side, our aspiration is to introduce a next generation of devices on a new platform—to drive much better margins there than we have had historically.

You will see this now in our reporting for mobile phones and smart devices (that) are separately broken out.

You can see that we are seeing more profit from mobile phones than from smart devices. It is clearly an area where we expect to drive margins and we can see what we are launching as a margin-expansion opportunity.

One of the reasons we are so successful driving those margins here and in China is because we have the single largest factory in the world located here in India, serving half the Indian market and some of the other markets. That is a huge competitive advantage for us.

On whether the new dual-SIM phone launches in India (where Nokia was a latecomer) has helped the cause of its market share:

I can’t share that information right now. I can’t give specific information, but in our Q3 results we will do that. But it is absolutely the case that we are very excited about the shifts that we are seeing where we are absolutely coming in strong.

Here’s the reason why. Many people said Nokia is late to market. There are two things that happened. The first—what Nokia brought to market as a dual-SIM (phone) is not the same as everybody else. We brought something called easy swap. The device remembers up to five different SIM cards and you don’t need to pull the battery out or put the device off to change the SIMs or anything.

The other is the strength of the brand, wide retailer reach and ability to execute. The dual-SIM devices are in over 200,000 stores right now.

So what I am saying is that there are things that are going on which clearly indicate that we are getting some great results.

On the company’s prospects in the smartphone market in India:

I would say we were coming later into dual SIM than we are to the smartphone market in India.

In India, the smartphone market is in the nascent stage and just really beginning. So, to the extent that we can apply the same pattern in terms of the strength of the brand, our distribution, and reach of the team, with great products, I would say we are coming in very strong.

India is at the tip of that transition, part of the reason being conditions are different from the other markets where we are coming from (a position of) significant disadvantage.

We are all part of this group that is interested and all willing to spend a lot of money, but frankly from an economic perspective, part of the race that we will see in the Indian phone market is the extent to which you can get broader coverage of price points—to the extent that if you can get that lower-cost smartphone that meets the aspirations of an individual while at the same time keeping the price well down.

That is part of the challenge that we also face because all the smartphones start relatively high (in terms of price). Another reason that the Indian market is so different is that it’s an open-market environment. It’s an environment driven by retail, brand and consumer preference at the point of sale. In some other markets, the operators make far more of the decisions of what devices to present to the consumers.

On taking dual-SIM phones to other markets:

Fourteen operators in different circles, among other things, create the conditions necessary for a dual-SIM market. That being said, our dual-SIM products are in the process of being launched in other markets like China. I got some emails today from Australia asking “when is the dual SIM coming to our market?" But unquestionably, India is the starting point.

Our expectations are, and we anticipate, that in time it is something we will see more broadly around the world.

On a tablet from Nokia:

We have not announced any plans as of now, but in general, we do believe that peoples’ expectations are that they have a digital experience that crosses different environments— smartphone, tablets, in some markets a PC is very important, televisions, set-top-boxes, gaming platforms...

We have not announced our plans in that area, but we do see it as an opportunity in consumer demand.