Archive for Europe
Dehydrating Innovation in Europe: EFSA and Beverage Innovation
Posted by: | CommentsOne of the hottest areas for innovation globally is in improved foods and beverages that benefit human health. Unfortunately, bureaucrats are among the biggest barriers that innovators face in this field. In the United States, something as uncontroversial as the well-known relationship between citrus fruit and scurvy (that is, citrus fruit can prevent or help cure scurvy) becomes a dangerous proposition in the hands of a bureaucrat. One VP with a major global food company explained to me that selling an orange with the claim that it “may help prevent scurvy” could get you thrown in jail in the U.S. under the strict rules of the FDA, rules which make it exceedingly difficult to pursue innovation in food, no matter how strong the science is. But the innovation barriers from regulations in the U.S. may be dwarfed by those that are metastasizing in Europe, especially under the heavy hand of the EFSA (European Food Standards Authority). The fantasy land of bureaucrat anti-imagination in Europe is so other-worldly that you can become a criminal for claiming that “water may help prevent dehydration.” Incredible? Impossible? Here’s what Victoria Ward and Nick Collins report in The Telegraph, Nov. 18, 2011 (excerpt):
EU bans claim that water can prevent dehydration
Brussels bureaucrats were ridiculed yesterday after banning drink manufacturers from claiming that water can prevent dehydration.EU officials concluded that, following a three-year investigation, there was no evidence to prove the previously undisputed fact.
Producers of bottled water are now forbidden by law from making the claim and will face a two-year jail sentence if they defy the edict, which comes into force in the UK next month.
Last night, critics claimed the EU was at odds with both science and common sense. Conservative MEP Roger Helmer said: “This is stupidity writ large.
“The euro is burning, the EU is falling apart and yet here they are: highly-paid, highly-pensioned officials worrying about the obvious qualities of water and trying to deny us the right to say what is patently true.
“If ever there were an episode which demonstrates the folly of the great European project then this is it.”
NHS health guidelines state clearly that drinking water helps avoid dehydration, and that Britons should drink at least 1.2 litres per day….
German professors Dr Andreas Hahn and Dr Moritz Hagenmeyer, who advise food manufacturers on how to advertise their products, asked the European Commission if the claim could be made on labels.
They compiled what they assumed was an uncontroversial statement in order to test new laws which allow products to claim they can reduce the risk of disease, subject to EU approval.
They applied for the right to state that “regular consumption of significant amounts of water can reduce the risk of development of dehydration” as well as preventing a decrease in performance.
However, last February, the European Food Standards Authority (EFSA) refused to approve the statement.
A meeting of 21 scientists in Parma, Italy, concluded that reduced water content in the body was a symptom of dehydration and not something that drinking water could subsequently control.
Now the EFSA verdict has been turned into an EU directive which was issued on Wednesday.
Ukip MEP Paul Nuttall said the ruling made the “bendy banana law” look “positively sane”.
He said: “I had to read this four or five times before I believed it. It is a perfect example of what Brussels does best. Spend three years, with 20 separate pieces of correspondence before summoning 21 professors to Parma where they decide with great solemnity that drinking water cannot be sold as a way to combat dehydration.
“Then they make this judgment law and make it clear that if anybody dares sell water claiming that it is effective against dehydration they could get into serious legal bother.
EU regulations, which aim to uphold food standards across member states, are frequently criticised.
Rules banning bent bananas and curved cucumbers were scrapped in 2008 after causing international ridicule.
The ruling is more than merely laughable. For those on the cutting edge of advanced foods and beverages, it is an ominous sign of the innovation fatigue from government that is increasingly strangling Europe and much of the Western world. The inability to make reasonable, scientifically-supported claims about the benefits of healthy foods and beverages is one that will stifle innovation and entrepreneurship in Europe. I’d rather have to do my own homework to understand the validity of health claims than to have bureaucrats completely stifle innovation in health-promoting goods. Give me the Wild West of unrestrained innovation, with all the risks and bad claims that might follow, rather than a sterile 1984 society in Oceania which hordes of bureaucrats protect me from myself and everything new. But between those two extremes are many healthy, democratic alternatives in which sound legislation reduces the most egregious crimes while allowing innovators for the most part to move forward.
Here in China, where some of the best beverages in the world are to be found, I’m happy to say that soft-drink entrepreneurs appear to still have the freedom to declare that aqueous beverages reduce thirst and help prevent dehydration. Watch for the world’s epicenter of food and beverage innovation to increasingly shift toward China, if it’s not already firmly rooted here.
A Burning Platform: Nokia Faces Its Own Innovation Fatigue
Posted by: | CommentsA painful message from the CEO of Nokia, shared below, reminds us that the pain of disruptive innovation often catches major incumbents unaware. As they listen to their existing customers and improve existing products and services, often incrementally, they may not sense the tsunami of change that is coming from afar. The innovations that will disrupt them often seem not good enough to threaten their core business. By ignoring the threats and opportunities around them, they continue to focus on core competencies and core markets and feel little pain until the new competition, ignore too long, has developed the skills and competencies to strike at the core itself. When the pain is felt, it is often too late. When the heat of a raging fire is finally felt and awakens you from your dreams, it is often too late. You may escape if you are lucky, but the building is likely to be lost. How will Nokia cope? Read the speech below, then we’ll discuss their newly announced plans.
Nokia’s CEO, Stephen Elop, gave this speech to employees last week and the transcript has been posted on several sites such as Casey’s Daily Dispatch, the Wall Street Journal’s TechEurope Blog, Ongo.com, MSDN.com. It is brutal and painful. A few years ago tech stock experts recommended Nokia as one of the leaders in the business and best investment opportunities. But by focusing on their existing markets and competencies, they missed the changes that would envelope the market and misallocated their innovation resources. They are now on a “burning platform.”
There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire. In mere moments, he was surrounded by flames. Through the smoke and heat, he barely made his way out of the chaos to the platform’s edge. When he looked down over the edge, all he could see were the dark, cold, foreboding Atlantic waters.
As the fire approached him, the man had mere seconds to react. He could stand on the platform and inevitably be consumed by the burning flames. Or he could plunge 30 meters into the freezing waters. The man was standing upon a “burning platform,” and he needed to make a choice.
He decided to jump. It was unexpected. In ordinary circumstances, the man would never consider plunging into icy waters. But these were not ordinary times – his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a “burning platform” caused a radical change in his behaviour.
We too, are standing on a “burning platform,” and we must decide how we are going to change our behaviour.
Over the past few months, I’ve shared with you what I’ve heard from our shareholders, operators, developers, suppliers and from you. Today, I’m going to share what I’ve learned and what I have come to believe.
I have learned that we are standing on a burning platform.
And we have more than one explosion – we have multiple points of scorching heat that are fuelling a blazing fire around us.
For example, there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed but very powerful ecosystem.
In 2008, Apple’s market share in the $300+ price range was 25 percent; by 2010 it escalated to 61 percent. They are enjoying a tremendous growth trajectory with a 78 percent earnings growth year over year in Q4 2010. Apple demonstrated that if designed well, consumers would buy a high-priced phone with a great experience and developers would build applications. They changed the game, and today, Apple owns the high-end range.
And then there is Android. In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers. Android came in at the high end, they are now winning the midrange, and quickly they are going downstream to phones under €100. Google has become a gravitational force, drawing much of the industry’s innovation to its core.
Let’s not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one-third of the phones sold globally – taking share from us in emerging markets.
While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.
The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.
We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.
At the midrange, we have Symbian. It has proven to be non-competitive in leading markets like North America. Additionally, Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements, leading to slowness in product development and also creating a disadvantage when we seek to take advantage of new hardware platforms. As a result, if we continue like before, we will get further and further behind, while our competitors advance further and further ahead.
At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us.
And the truly perplexing aspect is that we’re not even fighting with the right weapons. We are still too often trying to approach each price range on a device-to-device basis.
The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.
This is one of the decisions we need to make. In the meantime, we’ve lost market share, we’ve lost mind share and we’ve lost time.
On Tuesday, Standard & Poor’s informed that they will put our A long term and A-1 short term ratings on negative credit watch. This is a similar rating action to the one that Moody’s took last week. Basically it means that during the next few weeks they will make an analysis of Nokia, and decide on a possible credit rating downgrade. Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness.
Consumer preference for Nokia declined worldwide. In the UK, our brand preference has slipped to 20 percent, which is 8 percent lower than last year. That means only 1 out of 5 people in the UK prefer Nokia to other brands. It’s also down in the other markets, which are traditionally our strongholds: Russia, Germany, Indonesia, UAE, and on and on and on.
How did we get to this point? Why did we fall behind when the world around us evolved?
This is what I have been trying to understand. I believe at least some of it has been due to our attitude inside Nokia. We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.
Nokia, our platform is burning.
We are working on a path forward — a path to rebuild our market leadership. When we share the new strategy on February 11, it will be a huge effort to transform our company. But I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future.
The burning platform, upon which the man found himself, caused the man to shift his behaviour and take a bold and brave step into an uncertain future. He was able to tell his story. Now we have a great opportunity to do the same.
Stephen.
Alex Daley’s commentary at Casey’s Daily Dispatch on this memo is among the best. A few excerpt from Alex follow:
But one of the mobile world’s most celebrated early stars is fading, and fast – Nokia. The Finnish mega-company traces its roots all the way back to the rubber industry in 1865. But it evolved over nearly a century and a half into the largest mobile phone supplier in the world. At its peak, the company accounted for the majority of all phones in the world. However, lately things have begun to unwind. Market share for the company has slipped from 39% in 2008 to 35% in 2009, and again to 30% in 2010.
Not only is their global market share decreasing, they’re being assaulted from every side and find themselves with shrinking influence, shrinking margins and shrinking options. Apple, RIM, and the contingent of Android phone manufacturers around the world have gulped up the overwhelming majority of the high-end smartphone market, where profit margins are high. On the other end of the spectrum, Chinese technology outfits have begun to lock up the massive lower end of the market, turning out designs and equipment at a breakneck pace.
Desperate to find relevance in a market moving on without the company, last year they appointed former Microsoft executive Stephen Elop to the position of CEO. He has been pretty quiet since he joined the company, taking his time to learn the business and get to the root of the issues that cause the market to value this technology giant at less than the $43 billion in revenue it generated last year. Quiet until now….
And [Elop's] use of the term “platform,” while symbolic, seems like a calculated choice for a company that staked its future on a failing developer platform known as Symbian, and a long delayed smartphone platform called MeeGo yet to even launch nearly four years after the iPhone was originally released….
The question of the hour is not just whether or not that will happen, but whose platform it will be. Apple doesn’t license. HP has locked up WebOS with its Palm buy. That really only leaves Google, whom Elop cites as a competitor, and Microsoft, his Alma Mater, which goes completely unmentioned in the damning note….
Elop’s failure to mention Microsoft was certainly deliberate, for a few days later he announced a major partnership with Microsoft aimed at saving the company. See “Microsoft, Nokia Agreement Signals New Smartphone Game,” a Feb. 14, 2011 story from EWeek.com.
Microsoft and Nokia announced a wide-ranging partnership Feb. 11, which will include running Windows Phone 7 on Nokia smartphones, in a combined bid to blunt the competitive momentum of Google Android and the Apple iPhone.
“We have a formidable plan to ensure our collective leadership in the smartphone market and in the ecosystem that surrounds it,” Nokia CEO Stephen Elop told a London press conference. “Our long-term strategic alliance will build a global ecosystem that creates opportunities beyond anything that currently exists.”
Now comes the hard part: actually building that ecosystem.
A formidable plan? I’m sorry, but part of me cringes when anyone declares that the plan they created is “formidable.” Too close to “fool-proof.” And we went from desperation on the brink of ruin on a burning platform one day to a formidable plan the next? Eweek mentions some reasons to restrain enthusiasm:
“Microsoft wins big in this arrangement, having gained a partner for an OS that is struggling in the market and losing share even among its current device suppliers (e.g., HTC),” Jack Gold, principal analyst of J. Gold Associates, wrote in a Feb. 14 research note. “Nokia brings huge scale and can dramatically increase WP7 market share beyond its traditional reliance on vendors with much lower market share. And this precludes Microsoft from having to enter the device market directly (as it did with its Kin disaster).”
However, some analysts see the deal as a decidedly negative one for Nokia, particularly in the longer term.
“We think Nokia has created a new set of issues—a lack of ecosystem control, margin decline and a raft of new royalty payouts—in return for a ‘unique relationship,’” Lee Simpson and Andrej Krneta, analysts with Jeffries & Co., wrote in a Feb. 14 research note. “With WP7 as Nokia’s new primary smartphone OS, why would any operator take an end-of-life product (Symbian)? This can only cap the top line for Nokia going through 2011 and much of 2012.”
The analysts believe that Nokia’s first Windows Phone 7 devices will be “hollowed out ‘N8s’ or the like,” referring to one of the manufacturer’s higher-end smartphones. “Despite longer-term assertions of speedy time to market designs, the overhauling of road maps (and cancellations near-term) will likely dent near-term progress and leaving Nokia dangerously exposed to further market-share erosion.”
I wish Nokia success, but feel that it will take more than Microsoft to bring them success. Innovation fatigue needs to be addressed at multiple levels in the company and the culture radically strengthened to reach their destination. Otherwise, further fatigue may stand in the way.