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Nokia Sacrifices the CEO Scapegoat, but Its Old Problems Remain

Given how wretchedly Nokia (NOK) has done in maintaining its position in smartphones, no surprise the company dumped former CEO Olli-Pekka Kallasvuo. The calculation seems to have been to push the career Nokia guy out of the way and bring in Stephen Elop, who ran a successful division of Microsoft (MSFT). But you have to wonder what's in Finland's water, because this move will do nothing.

My BNET colleague Ben Popper argues that Elop is the wrong guy because he was in charge of Office, not mobile, and because Microsoft has had no recent success in the mobile space. In short, it's like asking the person who just totaled a car to be your chauffeur. I'm not sure whether direct experience in mobile is absolutely necessary, and Nokia thinks that the software experience will be key, given how handsets have become handheld computers.

But that's almost secondary. What Nokia needs is a fresh take on business, and that's where its trouble lies. The company has been comfortably settled for decades: relying on its historic sales bulk and market dominance. It allowed years to pass before creating an even plausible attempt to answer iPhone and Android handsets.

Nokia's press release shows that, in theory, at least, the company understands that it badly needs to change:

The Nokia Board believes that Stephen has the right industry experience and leadership skills to realize the full potential of Nokia. His strong software background and proven record in change management will be valuable assets as we press harder to complete the transformation of the company. We believe that Stephen will be able to drive both innovation and efficient execution of the company strategy in order to deliver increased value to our shareholders," said Jorma Ollila, Chairman of the Nokia Board of Directors.
But given how hidebound Nokia has been, with all the flexibility you'd expect from a massive hundred-year-old corporation, new fortunes will require much more a new CEO (particularly one who comes from a company that's been stuck in the mire itself).

The entire culture needs to shift and allow engineers and designers to challenge what's always been done and be unshackled from the feverish design to stay with such approved operating system solutions as Symbian 4 and MeeGo. Why not try something based on Android? Or even Windows Phone 7, for that matter?

That kind of change must start with the board, not the CEO. Just because Nokia directors hired Elop doesn't mean they will let him do the job, even if he is capable. And there are signs that they won't, as the WSJ points out:

"The house is burning and things are going to be even more difficult in the short term," said Pierre Ferragu, analyst with Sanford C. Bernstein & Co, adding that there was little in Mr. Elop's record to suggest he could lead the turnaround of such a large company.

Mr. Ferragu believes Mr. Elop will have problems justifying his position inside the Finnish giant in the face of a very hands-on chairman, Mr. Ollila -- who was CEO between 1992 and 2006 -- and a management team that has been around for 20 years.

That means a group of people in charge who are sure they've been right for two decades, or else the company would already have moved in other directions. Doesn't sound like a flexible bunch to me, but perhaps desperation will be a bracing tonic.


Image: Flickr user Jon Stammers, CC 2.0.