Saturday, April 30, 2011

Nokia Layoff 2011 - They are simply irrational

Competition is healthy, but then when one competitor is down and shows lack of character or courage and looses faith in its own men (like laying them off) competition can take an ugly or stupid turn. Nokia has been loosing market share to many of its competitors and most prominently Apple. The brand cult around Apple has shown the world that "the power of people" can overthrow regimes, big businesses and big money.
Unfortunately, Nokia seems to have given up. Despite seemingly clear strategy of Apple of "Unique" stuff with "premium" prices and a visionary leader, Nokia is looking to "cut costs". I'd simply call it irrational and here is why.
Cutting costs is a good move, but the manner of cutting costs is what determines its success or failure. I recently read a report that Nokia was helping the employees affected by layoffs find a better job. Unless this is a gimmick to avoid mass resistance, its again "irrational". So you layoff your employees, get rid of their valuable services (which you no longer value), then you spend some money to help them find a job, which is most likely to be with your competitor. You are giving away talent on which you spent money for training, gave them resources and now they are you competitor's human resource asset. Sensing your irrational behavior, your competitor will get this talent at a much price lower than what they deserve and make them work "against" you in the market. This again does not help your market share. Market share is not always a zero sum game. So for you to gain market share there won't be a person loosing market share. If Micromax gave Nokia a "KO" in the low priced market and brands like Apple and Blackberry fisted you in the upper segment, darling its because you  forgot to explore these segments. They created segments for themselves to survive and now they are the kings of their segment. You've gotta create a segment rather than competing in segments "they created". Another major problem is that every one wants a piece of Apple. Why not join hands with what consumer wants. Rather you've chosen to join hands with "Microsoft". 
Nokia simply lacks focus. Stephen Elop, the CEO at Nokia needs to rethink and innovate rather than following a text-book rule like layoff. The crisis at Nokia is similar to the one that haunted Apple before Steve Jobs came in. Stephen Elop can be compared to Gil Amelio, its just they don't have a person like jobs as a founder who can come in later. Nokia announced on March 11, 2011 that it had paid Elop a $6 million signing bonus, “compensation for lost income from his prior employer," on top of his $1.4 million annual salary.Isn't that similar to what Amelio got when he joined Apple.
In the short run the Layoffs will help Nokia since cutting costs is a good sign for investors. In this short span I can see Nokia's share price rising as the reports of next quarter arrive. But in the long run this behemoth will have to change and mend its ways or else I have serious doubts on their success and survival.