Why Microsoft and Nokia won’t live happily ever after

Why Microsoft and Nokia won’t live happily ever after

September 4, 2013 – 11:07AM

Stephen Hutcheon

Flashback: Microsoft CEO Steve Ballmer, right, and Stephen Elop share the stage in November 2012. Photo: Bloomberg

Two-and-a-half years ago, the then recently recruited Nokia chief executive Stephen Elop fired off an email to his staff which became known as the “burning platform” memo. The email spelt out the uncomfortable truth: Nokia, the one-time mobile phone industry leader, was on the ropes and faced some difficult decisions. Those choices, he explained using a metaphor, were not unlike those facing a man working on a North Sea oil rig that had just caught fire.“As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or he could plunge 30 metres into the freezing waters,” Elop wrote.

The man would not ordinarily have chosen to jump, but the approaching fire “caused a radical change in his behaviour”.

Nokia, Elop said, also found itself on a burning platform, and like the man on the oil rig, it had the choice of doing nothing and facing certain death or taking the plunge.

Nokia subsequently shed thousands of jobs and abandoned its legacy operating systems as it opted to partner with Microsoft, the company Elop had left to join Nokia.

On Tuesday, that relationship was fully consummated when Microsoft announced plans to shell out $8 billion to acquire Nokia’s mobile phone division.

But with that deal, Nokia is leaping from one burning platform to another, one that threatens to engulf Microsoft.

In buying Nokia’s core assets, Microsoft is trying to secure its future in a mobile world. It is circling the wagons around its also-ran Windows Mobile platform, which runs a distant third behind Apple’s iOS and Google’s Android systems – a pecking order that may never change.

Microsoft may not yet be in the same kind of financial mess that Nokia found itself in, but the warning signs are there. The cash cows of the Windows operating system and Office applications are slowing down in a post-PC era where cheaper alternatives abound.

Aside from its Xbox gaming platform, Microsoft’s attempts to expand its portfolio of products and services in recent years have come a cropper. Most recently, Microsoft’s belated attempts to compete in the tablet market with the Surface and against the iPod/iPhone-iTunes juggernaut with the Zune have proven to be monumental flops.

Writing in Vanity Fair last year, Kurt Eichenwald made this illuminating observation about Microsoft’s corporate culture:

“For what began as a lean competition machine led by young visionaries of unparalleled talent has mutated into something bloated and bureaucracy-laden, with an internal culture that unintentionally rewards managers who strangle innovative ideas that might threaten the established order of things.”

His assessment echoed those of Dick Brass, a former Microsoft vice president, who drew similar conclusions in an article he wrote for the New York Times in 2010.

Internal competition, he surmised, had “created a dysfunctional corporate culture in which the big established groups are allowed to prey upon emerging teams, belittle their efforts, compete unfairly against them for resources, and over time hector them out of existence”.

As a result, he said, Microsoft had become “a clumsy, uncompetitive innovator”.

The person blamed for Microsoft’s predicament is Steve Ballmer, the pugnacious soon to be ex-boss who has been chief executive since 2000 and paramount leader since 2006 when Bill Gates relinquished the last of his operational responsibilities.

Ballmer announced last month that he would retire within 12 months after a successor was found. And that successor is now looking more than likely to be Stephen Elop.

“I believe we have lacked accountability and leadership to align and direct the company through these disruptive times,” Elop wrote in his celebrated critique. “We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.”

He was writing about Nokia in 2011, but what he said could equally apply to Microsoft in 2013.

If Elop does ascend to the throne at Microsoft, he may well need to goad his new charges into making another, more perilous, leap into the icy void.

Because after years of internecine warfare and innovation atrophy, it may be the only way for Microsoft to save itself from becoming another Nokia.