Stephen Elop

Stephen Elop
Elop in 2008
Born	(1963-12-31) 31 December 1963 Ancaster, Ontario, Canada
Alma mater	McMaster University
Occupation	Group Executive Technology, Innovation and Strategy of Telstra Distinguished Engineering Executive in Residence of McMaster University's Faculty of Engineering
Spouse(s)	Nancy Elop (1987-)
Children	5
Awards	L.W. Shemilt Distinguished Engineering Alumni Award (from McMaster University) Honorary Doctor of Science Degree (from McMaster University)

Stephen Elop (born 31 December 1963) is a Canadian businessman who works at Australian telecom company Telstra since April 2016. He most recently served as the Executive Vice President of the Microsoft Devices Group business unit until 17 June 2015. In the past he had worked for Nokia as the first non-Finn CEO and later as Executive Vice President, Devices & Services, as well as the head of the Microsoft Business Division, as the COO of Juniper Networks, as the president of worldwide field operations at Adobe Systems, in several senior positions in Macromedia and as the CIO at Boston Chicken.

He is best known for his catastrophic tenure as Nokia CEO from 2010 to 2013, after which he was removed from the CEO post, which temporarily was taken over by Nokia Chairman Risto Siilasmaa, until Elop was moved to Microsoft as part of the sale of Nokia's failing handset business. Elop's brief tenure as Nokia CEO included the destructive "burning platform" memo, which collapsed Nokia's handset business, and the company's partnership with Microsoft, resulting in the move to the exclusive use of the Windows Phone operating system, which turned Nokia's profitable smartphone business into losses, and ended in Nokia being forced to sell the business to Microsoft. Microsoft later would terminate the remnants of that business as the final sign of its total failure. Elop was regularly criticised for his decisions, which resulted in the company making massive financial losses, losing its top 10 ranking in global branding, losing its high credit rating to junk status, seeing its share price collapse, and utterly failing in the market, dropping from number 1 in smartphones in 2010 to out of the Top 10 by the time Nokia sold the handset business to Microsoft. By every measure used in business – revenue growth, headcount, market capitalization, share price, profit, bond ratings, and brand value – Elop's tenure reflected massive failure. He was regularly listed in 'worst CEO' lists during his last two years.

As head of the Microsoft Devices Group, Elop was briefly in charge of Microsoft's varied product offerings, including Lumia phones, Surface Pro 3, and Xbox One. Elop left Microsoft in July 2015, as the business he was running was reporting huge losses and the whole Nokia handset unit acquisition failed so totally, it had to be written off. Since January 2016 he also has a role as Distinguished Engineering Executive in Residence within McMaster University's Faculty of Engineering, where he originally studied in the 1980s.

Early life and education

Elop was born in Ancaster, Ontario, Canada, as the second of three sons. His mother was a chemist, and his parents still live in suburban Ancaster.

From 1981, Elop studied computer engineering and management at McMaster University, Hamilton, Ontario, graduating second in his class with a bachelor's degree in 1986. After his first year at the University, Elop wrote the user operating manual, called the Orange Book, for the campus’s new computer system. During that time he helped lay 22 kilometres of Ethernet cable around campus to create one of the first Internet networks in Canada. In 2007, McMaster's Faculty of Engineering made Elop the second L.W. Shemilt Distinguished Engineering Alumni Award winner and in 2009, he was awarded an Honorary Doctor of Science Degree by McMaster.

Career

Early leadership positions

Elop was a director of consulting for Lotus Development Corporation before becoming CIO for Boston Chicken in 1992, which filed for Chapter 11 bankruptcy in 1998. In the same year, he joined Macromedia's Web/IT department and worked at the company for seven years, where he held several senior positions, including CEO from January 2005 for three months before their acquisition by Adobe Systems was announced in April 2005.

During Elop’s tenure, Macromedia continued to deliver widely used software suites like Studio 8. Based on the performance of the company during this time, Elop was able to guide the company through a successful acquisition that benefited shareholders. With an exchange of $3.4 billion in stock, the acquisition combined the companies’ document management, web publishing and online video delivery tools. It proved to be a profitable move for Macromedia shareholders. After the announcement of the agreement, Macromedia shares were valued at $41.86, notably above the then current market value of $33.45.

He was then president of worldwide field operations at Adobe, tendering his resignation in June 2006 and leaving in December, after which he was the COO of Juniper Networks for exactly one year from January 2007 – 2008.

From January 2008 to September 2010, Elop worked for Microsoft as the head of the Business Division, responsible for the Microsoft Office and Microsoft Dynamics line of products, and as a member of the company's senior leadership team. It was during this time that Microsoft's Business Division released Office 2010. He became known as an operator and a change agent because of successes at Microsoft. Businessweek credited Elop with pushing Microsoft to develop cloud-based versions of the company's programs, and asserted that this helped Microsoft maintain its dominance, while holding off startups looking to disrupt its traditional business model.

CEO of Nokia

In September 2010, it was announced that Elop would take Nokia's CEO position, replacing Olli-Pekka Kallasvuo, and becoming the first non-Finnish director in Nokia's history. On 11 March 2011 Nokia announced 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.

During Elop's tenure, Nokia's stock price dropped 62%, their mobile phone market share was halved, their smartphone market share fell from 33% to 3%, and the company suffered a cumulative €4.9 billion loss.

"Burning Platform" memo

After joining Nokia, Elop issued a damaging internal memo titled "Burning Platform", which was leaked to the press. The memo is now seen as a textbook case of how a chief executive can make a single massive blunder to destroy his own business, as explained in the book 'Operation Elop' by Nykanen & Salminen. At the Nokia Annual Shareholder Meeting the following year Elop admitted that his memo did damage Nokia smartphone handset sales. The memo stated that Nokia's position in the smartphone market in 2010 was similar to a person standing on a burning oil platform ("platform" being a reference to operating systems such as Symbian, Apple iOS and Google Android). When first released, the memo was seen by some in the media as a wake-up call for Nokia, while most immediately saw it as destructive and damaging to Nokia. Nokia's Board of Directors considered the memo to be an act of misjudgement and at a Nokia board meeting, Chairman Jorma Ollila reprimanded Elop for writing the memo. The end result of the memo was to replicate the infamous 'Ratner Effect' by when a CEO calls his own products bad, the customers will believe those statements and stop buying the products. This was immediately pointed out e.g. in British media, which remember the past British retail brand Ratner well.

The Windows Phone strategy

In February 2011, Elop officially announced the new strategy for Nokia, which failed completely in the next five years. The initial promise of the new strategy was to achieve a one-to-one transition of Nokia's smartphone business from two of Nokia's own operating systems to the Windows operating system by Microsoft. In the end only one in ten Nokia customers were successfully migrated to the new platform. During the two years that Elop attempted to execute his strategy, the Windows smartphones produced Nokia-record losses. More that two thirds of the staff employed in the Windows smartphone unit at Nokia were laid off. The Windows project was seen so much a failure at Nokia, that Nokia started the next migration to Android by the spring of 2014. After Microsoft bought the remnants of Nokia's smartphone business, Microsoft fired most of the staff, wrote off the remaining business, and sold what was left. The Windows legacy of Elop's legacy was ended in May 2016 when the new entities announced their intention to only produce Android based smartphones. The first Nokia Windows Phone smartphone shipped in November 2011, the Nokia Lumia 800, was made in the form of a device design identically similar (only an additional camera button was added) to the Nokia N9, the first MeeGo mobile.

The Nokia N9 on the rival MeeGo operating system, launched concurrently with the Lumia 800 on Windows, was a huge critical success, with some implying that it was the best device that the company created. However Elop sticked with the Microsoft deal, saying that MeeGo development will not continue even with the N9's success, a move that was widely criticised. The Windows Phone exclusivity was put onto further doubt when it was reported in February 2012 that the N9 was outselling the Nokia Lumia 800 by 3 to 1, despite the N9 only being marketed in select countries and being rarely advertised because of the Microsoft deal.

In an interview held late 2012, Elop stated the reason for switching to Windows instead of Android: "the single most important word is 'differentiation'. Entering the Android environment late, we knew we would have a hard time differentiating." However, at the time Nokia had already begun reweighing its options and at Mobile World Congress held in February 2014 Stephen Elop took stage to unveil Nokia's first Android Phone, Nokia X.

The premature timing of the announcement of the new Windows strategy, already in February 2011, when the first new smartphones to use that system would not be sold until close to Christmas, was likened to the classic management communication blunder 'Osborne Effect' [1]. The Osborne Effect is a communication error, where a company talks about an upcoming new version of its product, that makes its current products undesirable. It is a timing problem of premature announcement which bankrupted Osborne computer company. With Nokia, at the period before the Windows smartphone strategy was announced by Elop, Nokia had seen growing and profitable smartphone sales, at the level of 28.6 million units in the Q4 quarter of 2010. The same quarter when Windows based smartphones finally started to sell, Q4 of 2011 had Nokia's smartphone sales down at 19.6 million units, sold at a loss. The appropriate announcement timing for Windows would have been in the Autumn of 2011 if Christmas was when sales was to begin.

During his tenure, Elop faced vocal criticism from both industry specialists and employees. In 2011, Elop announced that some 11,000 employees would have to be laid off as part of a plan to "restructure" Nokia's business, and in June 2012 it was announced that further 10,000 layoffs were in order and that several facilities would have to be closed down due to budget cuts. Some critics, especially in Finland, started to speculate that Elop could be a trojan horse, whose mission was to prepare Nokia for a future acquisition by Microsoft. When confronted with the theory by an anonymous attendee of the 2011 Mobile World Congress, Elop denied the speculation stating, "The obvious answer is, no. But however, I am very sensitive to the perception and awkwardness of that situation. We made sure that the entire management team was involved in the process [...] everyone on the management team believed this was the right decision," referring to Nokia's adoption of Microsoft's Windows Phone operating system.

In the book The Decline and Fall of Nokia, author David J. Cord firmly rejects the idea that Elop was a Trojan Horse. He claims that all of Elop's decisions were logical when they were made, and he also cites the testimony of other Nokia executives who were part of those decision-making processes.

Acquisition by Microsoft

In May 2013, after the two years that he had been granted for the transition to the Windows Phone platform, Elop was pressed by Nokia's shareholders about the lack of results compared to the competitors and the insufficient sales figures to secure the company's survival. During the annual general meeting, several shareholders voiced that they were running out of patience with Elop's efforts in putting Nokia back to the smartphone race. Elop replied that there was no turning back on his decision of adopting Windows Phone, while some analysts criticized Elop for closing doors to alternative strategies and going all-in with Microsoft's operating system. Some analysts speculated that Nokia had already lost the smartphone race to Samsung and Apple, and that if they were to regain their position in the market, it would have to be by means of low-end devices such as the Asha.

In June 2013, it was reported that Microsoft had been to advanced talks for buying Nokia, but the negotiations had faltered over price and worries about Nokia's slumping market position. As of June 2013, Nokia's mobile phone market share had fallen from 23% to 15%, their smartphone market share gone from 32.6% to 3.3%, and their stock value dropped by 85% since Elop's takeover. On 3 September 2013, it was announced that Microsoft had agreed to buy Nokia's mobile phone and devices business for 5.4 billion euros (US$7.2bn; £4.6bn) and that Elop would stand down as Nokia's CEO to become Executive Vice President of the Microsoft Devices Group business unit. Elop was said to bring a unique set of skills back to Microsoft, given his varied leadership experience and proven ability to manage products and divisions at the company (i.e. Microsoft Office). Nokia's devices and services business would ultimately become Microsoft Mobile in April 2014.

Bonus controversy

Controversy arose around Elop receiving a €18.8 million (US$25 million) bonus after Nokia sold its mobile phone business to Microsoft and he stepped down as the CEO. The controversy was further fueled after it was revealed that his contract had been revised on the same day as the deal was announced. Moreover, the chairman of Nokia's Board of Directors gave initially incorrect information about the contract to the public, and had to correct his statements later. Shortly before his departure from Nokia, Elop had filed for divorce, which he also cited as a reason to reject a renegotiation of the controversial bonus. He claimed he couldn't afford a reduction of the payoff because his wife would demand half of it. Elop also enjoyed a preferential tax status in Finland, a 35% fixed-rate income tax irrespective of the size of income, while typical tax payers in Finland pay a progressive income tax. Approximately 70 percent of the bonus costs were absorbed by Microsoft during the acquisition, the majority of which came in the form of accelerated stock awards.

Criticism even spread through politics, with Prime Minister of Finland Jyrki Katainen telling Finnish television that the payoff was "quite outrageous", and that is cannot be justified given the country's difficult economic times. Jutta Urpilainen, the minister of finance, wrote on her blog "In addition to the general toxic atmosphere, it [the payoff] may be a threat to social harmony".

Microsoft Devices Group

In 2014, Elop returned to Microsoft as executive vice president of the Microsoft Devices Group. From that point, Elop focused on the team’s “mandate to help people do more” and their interest in "[putting] the entirety of the Microsoft experience in people's hands." Some major developments from the group included new Nokia, and later Microsoft-branded Lumia smartphones, the launch of new products including Microsoft HoloLens and the Microsoft Band, and the spin out of Nokia MixRadio to Japan's Line Corporation.

On 17 June 2015, Elop was laid off from his position at Microsoft as part of massive job cuts in the Microsoft Devices Group. According to Microsoft CEO Satya Nadella, "Stephen and I have agreed that now is the right time for him to retire from Microsoft. I regret the loss of leadership that this represents, and look forward to seeing where his next destination will be."

Telstra

On March 16, 2016, Australia's largest telecommuinications provider Telstra announced, controversially that Elop would be joining the company in a newly created position as Group Executive Technology, Innovation and Strategy.

Personal life

In his spare time, Elop is an avid recreational pilot.

In August 2013 he filed for divorce from his wife of 26 years, Nancy Elop from Wyoming, Ontario who he first met when studying at McMaster. They have five children: triplet girls, an adopted Chinese girl, and a boy. Shortly after the divorce, Elop listed his US$5 million mansion in Redmond, Washington which he purchased in 2008 and lived in with his family.

References

Business positions
Preceded by Olli-Pekka Kallasvuo	Nokia Corporation CEO 2010–2013	Succeeded by Risto Siilasmaa