Nokia at the crossroads: Microsoft’s Elop takes the reins

Gone, and probably to be forgotten, Olli-Pekka Kallasvuo is to be replaced as Nokia CEO by a Microsoft divisional head.

The first reaction to the news–not to the long-anticipated going of Kallasvuo–was that the appointment of Microsoft’s head of its business division, Stephen Elop, was a make-or-break decision for the company’s future in the smartphone market.

What Elop must now do is rapidly identify or build a much needed "hero product" which can help to re-establish the Nokia brand with consumers. The forthcoming N8 might be the start of this, but, given the pace of change and innovation underway within its rivals Apple, RIM and Android, it certainly needs to be.

Early speculation has Elop going for a radical solution such as adopting Android or Microsoft’s Windows Phone 7 in an effort to at least gain parity with the competition. Of note was the email that Microsoft’s CEO Steve Ballmer sent around the company on Elop’s departure stating that he would "look forward to continuing to work with him in his new role at Nokia."

In the medium term, Elop seems set to call for a serious evaluation of Nokia’s strategy to deliver an end-to-end user experience–essential if it is to refresh its brand image and regain consumer appeal.

Speaking at the press conference last Friday, following his appointment, Elop outlined that this process must enable Nokia to respond to and capitalise on the changes in device form factors, social networking and cloud computing.

While Elop has proven skills in change management and notable success at Macromedia/Adobe before joining Microsoft in 2008, his knowledge of the cellphone industry would appear lightweight.

For the time Elop was with Microsoft he ran the division responsible for possibly the safest monopoly in the computer world: Microsoft’s Office suite. Last year its revenues were US$18.6 billion, with profits of US$11.8 billion.

Impressive results, but Nokia is a very different beast–in almost every sense.

The cellular world will watch what this first non-Finn CEO of Nokia does with huge and intense interest.