How to Succeed in Business Without Really Succeeding

30Sep13

For people interested in technology (and tech bloggers like myself), the technology sector of the business world provides an unending drama to observe and comment on. It’s the ultimate high-stakes soap opera: once-mighty companies fall to obscurity, revolutionary start-ups create instant billionaires, and companies continually jockey to maintain and strengthen their positions to stay with the thundering herd.

The people who run these companies are also endlessly fascinating. Think Larry Ellison (Oracle) and his America’s Cup sailing team. Or Marissa Mayer (Yahoo) and her photo shoot for Vogue magazine. Or (of course) the late Steve Jobs, a man so eccentric and egotistic that he was said to generate his own “reality distortion field.

These factors converged recently when Microsoft purchased Nokia’s mobile phone business for 7.2 billion dollars. All the ingredients for a great story were there: Two mighty firms, both playing defense in the wake of recent technology trends, combining forces to compete in a new tech landscape. Rumors of conspiracy and intrigue. And of course, the reality distortion field that is the current state of executive compensation these days.

For perspective, it helps to remember the way things were 10 years ago. Microsoft’s dominant position in personal computing was overwhelming and the concept of “mobile computing” was nothing more than lugging a laptop around. Nokia was in a similar position with mobile phones, selling handsets by the millions.

These two worlds were brought together with the introduction of Apple’s iPhone in 2007. Two pivotal things happened—the phone became a full-fledged computer (not just an enhanced email, texting and paging device), and smartphones became mass-market devices rather than specialty items for business executives.

Apple’s competitors worked hard to meet the iPhone’s challenge, with Google producing the most successful rival. Its Android mobile operating system (OS) is number one worldwide in smartphones today, largely because it’s free software and multiple handset manufacturers have adopted it.

Nokia was making smartphones running its Symbian operating system at this time. This mobile OS, while never as popular in the U.S. as it was in Europe, was a credible contender and even outdid Apple on several fronts (video phone calling was happening on Nokia handsets before Apple’s Facetime came along).

Things changed in 2010, when Stephen Elop, then head of Microsoft’s Business Division, become Nokia’s president. One of the first things Elop did was pen the now-famous “burning platform memo”, outlining his opinion that Nokia’s dependence on Symbian was like being at sea on a burning oil platform and having to decide whether to stay and die or jump off into the unknown. It should be pointed out that at this time, Symbian was the world’s leading smartphone operating system.

Under Elop’s lead, Nokia changed course, adopting the then-new Windows Phone 7 mobile OS from Microsoft. Conspiracy theorists blogged that Elop was Microsoft’s secret agent, a trojan horse planted by Redmond to ensure that their new and relatively untested mobile OS would have at least one major handset maker dedicated to it.

Results were mixed. Nokia’s new smartphones were generally well-regarded, but Windows Phone was mostly competing with the fast-fading Blackberry for third place in a two-horse race. In the meantime, Nokia laid off thousands of employees and watched its stock value plummet.

And now the Microsoft buyout, and with it, Elop’s return to Microsoft with bonuses and compensation amounting to 25 million dollars. The conspiracy theorists are now howling that they were right all along, that the whole thing was a clever plot by Microsoft to get their man in, drive the stock price down, and scoop up the company on the cheap. Whatever the truth, the deal puts Microsoft in the same league as Apple and Google (with their purchase of Motorola Mobility). All have a mobile OS, all can manufacturer their own devices, and all have a portfolio of hardware patents to threaten each other with. Blackberry has all this too, but as the number four smartphone, their future looks pretty grim as they are about to be purchased by a private equity firm for even less money than Nokia.

Elop’s massive bonus (and the furor that followed) brings us back to the idea of a reality distortion field, along with some basic questions about what a (highly paid) chief executive officer of a company is actually supposed to be doing to earn that fat paycheck.

If you ask Nokia’s shareholders, they won’t call this a success. Their stock lost over 80% of its value during Elop’s tenure. If the primary duty of a CEO is to increase shareholder value, this has been a failure.

If you ask any of the thousands of Nokia employees who lost their jobs during this fiasco, they’d probably give Elop a failing grade too, adding that Nokia couldn’t have possible done worse had it adopted Android for its handsets.

So, in the reality distortion field that is the realm of the world’s top executives, one should ask, “who was Stephen Elop working for?” To me, it doesn’t seem like he was working for Nokia’s shareholders. Out-of-work Nokia employees certainly don’t think he was working for them. The conspiracy theorists think he was working for Microsoft all along.

I think he was working for himself.

And he seems to have done pretty well from that standpoint.

Now, there are smart people out there who have written that Nokia’s fate would have been the same even if Elop had never become its president and/or they would have switched to Android or some other successor to Symbian. True enough, but the situation certainly highlights the absurdity of executive compensation in the tech sector, where we’ve seen a string of failed CEOs leave their companies with sacks of cash. I guess it’s just a world where things stop making sense.

Now, much wealthier and back in Redmond, Elop is being considered as one of the front-runners to succeed Michael Ballmer as Microsoft’s next president. I think Microsoft’s board of directors and shareholders might want to carefully think about this before making any decisions. Pundits have already declared that Nokia has jumped from one burning platform to another, larger burning platform. And if Elop becomes president and does to Microsoft’s stock price what he did to Nokia’s, you might want to check your IRA or 401K, for you could be the one getting burned.

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