Nokia’s ‘Ratner Moment’?

This morning Nokia and Microsoft have confirmed their well-flagged strategic partnership, with Windows Phone 7 to become Nokia’s primary smartphone platform in place of the company’s own technology. The partnership has already been derided as ‘two drunks trying to prop themselves up’ and initial market reaction saw a big fall in Nokia shares. Nokia has of course fallen way behind Apple and Google’s Android in the fast-growing market for smartphones, which are now what almost everybody seems to want, from teenagers to serious business types.  A lot of the real damage to Nokia, however, has come from recent media coverage – especially the leaking this week of a hugely critical internal memo from CEO Stephen Elop by the tech blog engadget. Mr Elop admitted to staff that ‘the first iPhone shipped in 2007, and we still don’t have a product that comes close to their experience’. He said the company is ‘standing on a burning platform’.

He should have realised that a document like this would be hugely damaging when the inevitable media leak came. This was his ‘Ratner moment’, effectively admitting the product was ‘crap’. (For those outside the UK, Gerald Ratner once ran Britain’s leading cut-price jewellery chain, until he made disparaging comments about his own products at a national business conference. His customers felt insulted, business plummeted and he soon departed). So has this really done damage, or is it simply Nokia’s own inability to keep up with the market? The answer is yes. Many loyal Nokia customers who don’t read the business pages would have been unaware of the company’s problems, and perfectly happy to keep on buying Nokia phones. Now, with much wider news coverage, they will think twice, being aware even the company itself has little faith in them. Nobody wants to be seen buying a dud or backing a loser. In today’s world, where even the private is so often public, there are better ways of motivating a company to change its behaviour. Other bosses of troubled companies will have to learn the lesson.

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