OPK, that is Olli-Pekka Kallasvuo, Nokia’s CEO calls his new head of mobile devices, Anssi Vanjoki in his office, hidden inside the company’s research center at 995 Page Mill Road, in Palo Alto, California. On his desk, three devices: a Nokia N900, a Motorola Droid and an iPhone.

‘Anssi, we’re hosed.
I assumed the dumb customer position and bought these three devices all by myself.
For our N900, I had to order on-line, the locals don’t carry our Maemo device. See what happened…’
He turns to his iMac, [this is science fiction, remember], types Nokia in the search window and gets this:

Now, a click on the “sponsored link” gets this:

.

A blank window. [This is not science fiction].
Anssi protests: ‘This must be a problem with Apple’s browser!’ But, no, the bug repeats itself with Chrome, Firefox, even with the Nordic Opera.
OPK continues:
‘We pay for this sponsored link and it gets us to a blank page.
Either Google is after us, or we’re incompetent, or both.

Anyway, I found our on-line store, a bit too complicated for a user like me. So, I saved time and a few dollars buying my own N900 from Amazon, one click, much simpler. By the way, Anssi, what are we doing selling, or trying to sell, or trying to give away a Windows 7 netbook? Don’t answer.
Then I needed to get a SIM for my $459 unlocked N900. I went  to the big AT&T store down the road. Boy, these guys make it too complicated and they don’t fully support the N900. Fortunately, things get better on University Avenue, I’ve done all my shopping there. First, the friendly people at T-Mobile got me a SIM, installed it, checked everything, even the micro-SD card I bought.
Next block: Verizon, a little less friendly, a little slower but they got me a Droid under 30 mins. Three blocks down, the Apple store. They were a little surprised I wanted an iPhone as their new device was coming out “Real Soon Now”. The manager came out, a Turkish engineer who recognized my name on the driver’s license, smiled and set me up in less than 15 minutes. You should see their portable sales terminal, all the sales people carry one on their hip, an iPhone with a scanner and a credit card reader.
How come we don’t make one? Don’t answer.

I’ve been using these three devices for two weeks now and I can tell you, Anssi, we’re in big, big trouble. We can’t win against these guys.
We say our Finnish sisu we’ll carry us through difficult times, but I’m afraid we’re harnessing our energies to the wrong strategy. We’re rowing on the sand instead of going with the tide.
Remember Kai Oistamo’s embarrassed explanations for our software strategy: “Symbian is the chosen platform for us for smart phones, MeeGo, combining Intel’s Moblin with our Maemo, is about the next wave, where wireless devices will go next.”
Between us here, how do you get applications developers to believe in such statements?

I used the N900 and I’m embarrassed, the touch screen uses this inferior resistive technology while Moto and Apple use a much nicer capacitive touch screen. As for Maemo, our treasured mobile Linux, it didn’t work for me. When I tried to go to our Ovi store on the N900, I was told to upgrade the OS to Maemo 5. I did, the process was mercifully executive-proof. But, after that, the Ovi link kept telling me to upgrade the OS. I see our marketeers position the N900 as being for the “Technology Enthusiast”; this is a euphemism for “Not For Normal Users”. I know, I know, we always have the next product, I’ve seen the internal demos of the N8, but the opposition is too strong. The new iPhone, the hordes of Android devices will kill us, to say nothing of these tough Canadians at RIM.

Listen to our shareholders, they don’t believe in us any more. We just had to tell them our numbers will disappoint them again. Have you seen our stock price since April?

And since late 2007?

This happened during my watch. I’ve been thinking about this, especially since I’ve also been secretly using an iPad at home. This is no longer a phone game, this is the emergence of a new computing genre. Smartphone is a misleading word, we’re dealing with a new kind of really personal computing. Why do you thing our neighbors up Page Mill, HP, bought Palm’s WebOS instead of sticking to Windows Mobile or Windows Phone 7?

You know how much we hate carriers, especially the US ones, they are the reason why we’re so unsuccessful here. The great news is Google wants to disintermediate the carriers. How do they do that? By working with the Android army of manufacturers and targeting the $89 price point. Once there, carrier subsidies are no longer needed, consumers are free to move from one carrier to another as they get a better deal, or as they buy a new gadget without having to beg for an ETF (Early Termination Fee) exemption.

Apple will keep playing their usual game: profits above market share. We’ll see how successful they’ll continue to be. They keep building the whole user experience stack, from processor to OS to applications to media distribution to retail. It’s not a game we can play.
This leaves us with one choice: Android. I have made the decision and I want you to implement it.’

Anssi Vanjoki is pensive. He knows OPK isn’t reacting in anger and he knows the boss doesn’t brook dissent. Still, he needs to understand:

‘But, Chief, we’ll lose control of our destiny. With Android, we no longer own a key component of our product strategy, we’ll be reduced to competing on price.’

OPK’s sharp reply:
‘Are you telling me you’re the wrong man for the job?’
‘We have to stop kidding ourselves. Doing what we do, more of it, more efficiently, more energetically won’t work. As the Americans like to say: If you can’t beat them, join them. We’ll have a price war anyway as we find ourselves in an inferior position against more attractive devices, this is what we just told Wall Street.
Anssi, take the lead. We know how to make and move huge quantities of devices, 50 million per quarter.
Now, do you remember our 8810?

We once were the kings of sleek design. Now, look at the N900 next and cry. We’re the land Marimekko and Iittala, of Finnish design. All over the world, people pay a premium for elegance, for exclusivity. We’re not doomed to a race to the bottom, we’re destined to a race for quality, for elegance.
And look at the numbers. We spend 13.5% of revenue for R&D while Apple, doing “everything”, spends 3%. If we stop spending this doomed to failure R&D money, we can lower our percentage below Apple’s.
Next, we only do three models: good, better and best. Three price points and we’re done. Simple message, less product managers and other corporate busybodies showing PowerPoint slides to one another over endless meetings across ten time zones.
Anssi, look at me: are you ready for the bloodbath?’

Three days later, in a joint conference with Google’s Eric Schmidt, Nokia makes the following announcement: ‘The world’s largest smartphone maker will base all future models on the Android software platform.’

In spite of substantial restructuring one-time charges associated with the move, Nokia’s shares jump 20% in one day. And Apple shares lose 10%, which brings smiles to Microsoft execs as their company recovers its number one market cap ranking.

End of science fiction.

In a more plodding reality, Nokia is likely to continue on its current course, believing their problem is one of execution, of putting more faith in their sisu.
The king will be deposed, Google and Apple will divide the spoils.

JLG@mondaynote.com

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