Nokia Continues to Spin Its Wheels

Two months ago I (and many, many others) speculated or hoped that the changes in Nokia's top management augured well for a change in strategy. In particular, I wondered how they might now respond to the challenge from iPhone and Android. The choice is stark: Symbian is old and difficult to upgrade to compete on features in a timely fashion or switch to Android. Those aren't the only choices since even Windows is now showing some promise. However they haven't diverged too far from their previous trajectory by banking on MeeGo.

The question I have to ask is how exactly does this decision help them? They know they have to do something, and fast, but I suspect that pursuing MeeGo will only delay their ability to effectively compete. MeeGo remains feature poor in comparison to iOS and Android, and those platforms continue on a fast development pace. Yet their stated reason for sticking with a unique platform is to differentiate themselves from others.


There was an interesting article in the Wall Street Journal this week on Nokia's current direction that is well worth reading. I'll quote a few lines from that article in this post.

Though the go-it-alone strategy puts Nokia in competition with an increasingly powerful Google, the rise of smartphones has forced cellphone makers to differentiate their products and generate profits increasingly through the software they offer. Using Android or another platform would likely leave Nokia in the steadily lower margin business of hardware.

Alberto Torres, Nokia's executive vice president for MeeGo computers, argues it also would tie its hands in distinguishing its smartphones with new innovations, ultimately benefitting Google's search business at Nokia's expense.

Referring to other handset makers that have adopted Android, he said in an interview at the Dublin developers meeting this week: "Frankly, some of these alternatives in the market are not necessarily providing a lot of opportunity for innovation, and that is what we hear from people who are using those platforms at the moment."

Nokia has said this before and I still don't buy it since they are not at all clear at stating just what it is that will demonstrate their innovation. That is, what will MeeGo allow them to do that Android cannot? Innovation does not just mean different, it has to mean something unique or better. Instead we hear again about the Ovi store, their developer community and proprietary applications.

Nokia also has spent heavily to catch up to the iPhone and Android with its own platform and set of software services, under the brand Ovi. Those investments include its $8.1 billion acquisition of digital map maker Navteq in 2007, which competes directly with Google Maps.

Pairing with Google at this point would mean negating all of those investments, said Roberta Cozza, an analyst with Gartner. "Putting everything into Google's hands would mean all the work on Ovi would be gone, and I am not sure what that would change for them," she added.

This is misleading since it is certainly possible to put their maps applications onto Android and still keep their Ovi brand. They can even negotiate with carriers to choose their proprietary apps over Google's for the Android devices they market. I am left wondering if they are feeling uncertain about competing head-to-head with Google and prefer to use platform lock-in to promote their apps while also barring others.

The danger is that they could lose both the phone and software business if Nokia smart phone products continue to lag and the carriers simply go with the platforms, and device vendors, that give their customers what they want. As time goes on, that list is less likely to include Nokia, with or without MeeGo and Ovi. App developers will continue to make the same decision, leaving Ovi with a growing application gap.

Nokia's decision to push MeeGo over Android stems in part MeeGo's capability to support not only smartphones, but a variety of products consumers use including tablets, televisions and even automobiles, [Gartner] says.

This is obviously false, and I am astonished to hear it from anyone, especially an analyst that follows the industry. By next year the market will be awash in Android tablets and a growing list of other devices. In contrast, MeeGo is still in catch-up mode.

Nokia has to seriously -- and I do mean seriously -- determine how they can be different with a compelling platform and portfolio of products and services. One can only hope that they do know and are choosing to play it close in their public statements for the present. Nokia is a good company so when the new management team comes to a point where they are able to implement major changes, they may do so. To succeed they need good hardware, user interfaces and a few innovative apps and services, all of which are within their ability. However none of this requires Symbian or MeeGo.

NDA Should Come After the First Disclosure

Many Android application developers have recently been bombarded by emails from Amazon. Regrettably, the way they have gone about this guarantees that this development firm will not be responding. The critical passage in the email is this:

Once you agree to and return the nondisclosure agreement we can begin speaking with you in greater detail about the opportunity.

Requiring an NDA as a prerequisite to the recipient of a business proposal is a good way to kill the opportunity in the bud. It isn't so far removed from telemarketing scams that begin by telling you that you've just won a trip to some tropical resort, and then say: "please send us $500 to cover administrative expenses which we'll refund later." In both cases the unsuspecting recipient of a proposition is asked to ante down before being able to properly assess the merits and costs of the proposition. The correct response in such a case is typically to say nothing, do nothing and walk away.

In the case of any business proposition, the reasons to not sign an NDA are much the same as why a venture capital firm will not sign an NDA with the companies that pitch to it:

• You may be legally bound to not discuss with anyone else what you have learned in the disclosure even if it becomes public knowledge. In other words, you are being co-opted to protect the other party's pricing, features, business practices and other information. This can include not being able to tell, for example, another supplier or service provider what price they will have to beat to earn your business, even if you do not name the competing company or product.
• Regardless of the novelty or uniqueness of matters disclosed to you, you may find yourself in legal chains in your further use of these matters. For example, if you are shown an as yet not well known method for indexing a database, but is one that would not (or should not) meet the "not obvious" criterion to be patented, you may find yourself unable to use that method even if independently implemented by one of your own staff. Regrettably, the same can apply to business methods or other so-called trade secrets that are generally considered to be pretty ordinary.

There are of course valid reasons to sign an NDA in the above cases, but never as a matter of routine. There should always be a strong justification, known and discussed up front, before signing and before each disclosure. The proper way to make progress in these situations is to disclose the opportunity in broad terms before delving into details which expose trade secrets or sensitive intellectual property. Only after a further milestone is reached, and once mutual trust has been firmly established, should either party go further in what they disclose.

In the rare case where more must be disclosed up front, this requires more due diligence in establishing the good reputation (or not) of the party receiving proprietary information. Few companies or individuals are in a position to do well from recourse to the courts after the information is abused by the recipient. The objective is to avoid this if at all possible.

So then, what is Amazon going to disclose that makes the signing of an NDA so important, to them and to us? The rumour is that they plan to launch an Android app store in competition with Google, although I can't know for sure since we have not engaged Amazon on their proposal, even though it is being widely discussed.

I believe they will have eventually have to open up more publicly if they are to gain the volume of developers and apps that they would need on board if they are to be successful. Only then would we consider getting involved. However, their opening sally has put us on our guard because they feel a need to tie our hands or silence our mouths that is greater than their need to openly discuss terms, unlike Google's Android Market.

For us, an Android developer, the risks are greater than any opportunity we can see. That precludes the possibility of our signing an NDA with Amazon at this point, or at any time in the future.


Disclosure: Warning! I am not a lawyer, so please keep that in mind when reading this article.

Digging Nokia Out of a Hole

Can a company regain its dominant position by changing its CEO? This is a common theme in business, with new examples nearly every day, although we usually only notice those companies that are especially prominent (or if they are in our investment portfolios). Nokia is now trying the same trick.

I have to wonder if the frequent fixation we have on the person at the top of a hierarchy is deeply-rooted in the human psyche. Whether it be president, CEO, dictator, general or heroic action figure, the fixation of our attention on the archetypal alpha male (or female) figure distracts us from the many thousands or millions of individuals in the hierarchy that contribute to the organization success or failure. This does not mean that a CEO change is unimportant, in fact it can be crucial, but whether it can have a positive impact depends on many, many factors. We sometimes have an almost comic book view of power and power structures since the majority of people, as employees, have rarely wielded real power in an organization. Those that have done so know just how difficult it can truly be.

A CEO often has substantial power, but it is never unlimited. When anyone is give the responsibility and accountability to achieve a lofty goal it is incumbent on those assigning the objective to give the person the necessary tools to get it done. When that person is the CEO, the giver of the tools is the board of directors. The toolkit includes capital and authority. The CEO combines those tools with his or her own skills, connections and other assets to do the job.

One immediate challenge is that business operations cannot be changed quickly. That alone is responsible for the company's existence -- its customers and revenue -- and provides a base, and the time, for the CEO to redirect and invigorate the business. Nokia is blessed in this respect since it has a strong base business, although one that is losing share in the high-end, high-margin, high-growing smart phone market. More importantly, its product pipeline appears to be running on inertia with little coming to market that is likely to change the situation. Elop, the new CEO, has quite the challenge on his hands.

To give an example of how an ailing, large technology company can fail even with a new, capable CEO, we need look no further than Nortel. By all accounts Mike Zafirovski is a talented and capable CEO. Yet he failed utterly at the task of renewing Nortel. There were many reasons for this but to my mind there were a couple that stand out: the product and technology decline had gone on for so long that not only were customers abandoning the company, there was nothing substantial in the product pipeline; and, the culture in senior management was out of touch and internally-focused on its own difficulties, not those of customers. There is also some question as to whether the board gave Zafirovski the authority he needed to solve these monumental problems or if they impeded his attempts to change management and inject capital into the areas where it was needed. Big holes like the ones that Nortel and Nokia have dug themselves into took a lot of digging by many hands, not only that of the CEOs.

One thing that a company's investors can fixate on, especially those that come on board when the pain is most acute, is that if the new CEO achieves any measure of success the returns will be enormous. One extraordinary example is Apple: looks what Steve Jobs accomplished, and how far they've come from the $7 share price before iPod and iTunes began to conquer the world. Any investor in a sick but formerly great company can dream of such out-sized returns. However the reason that share prices go down to such depths is that it is uncommon for the turnaround to succeed; often the shares either go to $0 (like Nortel) or the company is liquidated.

Apart from its still-dominant global position in the mobile phone market, Nokia has some definite talents when it come to phone technology and design. Unfortunately their typically excellent radio performance is not recognized by customers, who will often not notice or overlook if the product draw is strong. The recent very public airing of Apple's difficulties in this regard demonstrate that very nicely. Assuming that Nokia's design talent hasn't all left the company, there is an opportunity for the new CEO to empower their designers to take some chances, to make a few mistakes in the hope that they can come up with phones and other mobile or portable devices that are unique, attractive and can inspire.

As many have noted, however, a deeper technology problem is their dependence on Symbian as the platform OS. It is old and difficult to modernize, with next generation versions coming too late and lagging in features. There are also the business structures and partnerships that are dependent on Symbian, where if they make drastic changes they stand to risk disrupting their ongoing business by alienating the carriers, users and app developers. However if they don't change all of them will abandon Symbian, and therefore Nokia as well, if they do not make a bold move.

This is another critical area where the new CEO can have a major and positive impact. I believe that they will have little choice in their corporate renewal in leaving Symbian behind since they stand to gain more than they will lose. In my opinion it is very likely that within several months Nokia will announce their shift to Android for their future high-end phones. They may delay publicizing the fact until the first phone is closer to release. I just don't see any other way they can move quickly to become a contender in the smart phone market. Symbian can continue to be used for the other, lower-end products for some time, so that the move is not too disruptive, but it is likely that a strategy shift of this magnitude will ultimately doom Symbian.

What I now want to see is whether Nokia board is ready for this degree of change and risk, and whether Elop can successfully steer this large company and its culture onto a new trajectory. Unlike Nortel, I think Nokia has an excellent chance of pulling this off, by exploiting their many strengths, if they make the necessary commitment. If they don't do it, I fear they will soon be relegated to selling low-margin $25 phones (but lots of them!) to new users in developing countries.

Update: An opposing viewpoint regarding Nokia switching to Android, but agreeing on other points.

Advising Google on Their Android Market

There is a veritable industry of unasked-for advice that is freely offered by trade insiders and media commentators to all of the major technology companies. Google is no exception. I am particularly attuned to the stream of articles on how Google should (or must!) improve the Android Market because of my own involvement with Android. This latest article fits the expected pattern, raising no new issues but providing a fresh outlet for app developers to vent their frustrations.

I won't bother to recap these Android Market issues since they are already so well known: you can search out the articles if you wish, and I have even addressed the topic more than once in this blog. What I want to talk about today is, why does anyone bother to rehash these same points and -- perhaps smugly -- give unasked-for advice to Google. Do people believe that Google, with all of its commercial might and talented workforce, is missing the obvious? This is not credible.

We must accept the fact that Google understands very well what it is doing with the Android Market, and that it is doing so intentionally. After 16 months they have had every opportunity to introduce incremental improvements and have chosen to only make a few minor tweaks. They could add more resources, use 3rd-party products, integrate with their search products, and do so much more. They have not because they choose not to. Of course with all the secrecy on their Android-related activities I could look like a fool tomorrow since they could turn around and announce Android Market 2.0 that addresses every concern raised and goes even further. It's unlikely, but I have to acknowledge the possibility.

For all the noise about alternative app stores -- which, unlike with Apple, is perfectly acceptable to Google -- they are not a solution. The only app stores that matters when it comes to addressing the mass market of Android device users are those that come pre-installed on the devices; the vast majority of users will not look further than what the device provides out of the box. This will continue to be true regardless of preaching by well-meaning and intelligent Android champions because the app developer community is fragmented, consisting of small or sole-proprietor shops that have neither the time nor the ability to overcome this massive obstacle. Like it or not, to the majority of the market -- both developers and consumers -- the Android Market is a force of nature that you can either accept or reject. Rejection almost inevitably means departing from the Android ecosystem.

That is my approach: I accept the Android Market for what it is and I do not hope for changes. Since hope is not an acceptable business strategy, we look elsewhere to pursue our business.

Silence of the App Users

Although I am involved in the Android app market, I haven't talked about Android apps in this blog for some time. I was recently compiling some statistics of one app that's been out in the market for over a year, and I suppose it is no surprise that what my stats show are not unlike what other app developers typically encounter: silent users.

You'll get an idea of what I mean if you look at the following numbers gleaned from this free app that has garnered downloads well into the six figures:

• Rated the app: 0.6%
• Emailed us: 0.01% (includes complaints, questions and compliments)
• Posted a review: 0.05% (or about 1 in 10 of those who rate the app)

To sustain my anonymity I have left the app unnamed and kept all the figures as percentages rather than actual numbers. I will only say that the app is useful but not terribly complex to use. Some use it only once or a few times, and whether they like it or not, for them it's enough and they then uninstall it. That's fine by me, and I even expect it. About 1 in 3 keep it for the long haul, which I consider quite good for this particular app. We only put it out there to gain experience with the mobile app market and its users, and especially to learn something about what works and what doesn't work in this slice of the market.

You also learn that people who use apps are a diverse lot who often judge apps in what I can only describe in a very subjective, egocentric manner. (This is meant as an observation, not an insult.) For example, if a user doesn't like what the app reports in response to info entered by the user, the user will often rate the app poorly. If they don't like the phone or network performance, they rate the app poorly as well: perhaps they do this in frustration since there is no way to rate the phone itself or the carrier.

Because the app does make what I can only describe as judgments about the user, they don't like this even if the information is correct. In retaliation some seem to see the app, phone or the developer (or perhaps all three) as things that are safe to lash out at, anonymously; I have seen user angst in both public and private feedback and, trust me, some of these comments are things I would rather not know! Perhaps app feedback works in the manner of ELIZA, the ancient software psychoanalyst that, despite its transparent primitiveness, still managed to get some people to empty their souls to the machine even when they fully understood that it was a mindless automaton.

Although I don't have complete analytical data, I will conclude by making the following general observations about many users:

• They do not read instructions or any of the help provided;
• They do not know they can use the Menu button to bring up additional features and options; and
• If it is at all possible to mess up the simplest operation, they will (and occasionally blame the app developer).

It's been a lot of fun and educational, and also useful to our future business plans.