Can Stephen Elop Fix Nokia?

September 10, 2010, 4:50 PM UTC

Incoming Nokia CEO Stephen Elop must help the Finnish cellphone maker take on Apple and Google on their own turf.

Stephen Elop pledged to make listening his first task when he becomes chief executive officer at Nokia on September 21. He’d better listen quickly. Nokia (NOK) has begun a marketshare death spiral, and Elop will need to make some swift decisions if he has any chance at keeping the world’s largest smartphone maker on top.

In many ways, Elop is an unlikely choice to head the Finnish telecommunications company. For one, he’s not Finnish. That’s a first for a company that takes great pride in its culture and a sign that Nokia understands it needs to get a foothold in North America, the market that leads innovation in the industry and is home to Apple and Google.

Elop doesn’t possess the Steve Jobsian reputation as a visionary able to leapfrog competitors either. Instead, he is an operator and a change agent. He joined Microsoft (MSFT) in 2008 to run one of its two biggest businesses: Microsoft Business Division is responsible for Office. Before that, he was chief operating officer at Juniper Networks (JNPR) and held senior positions at Adobe (ADBE) after the company bought Macromedia, where he was CEO.

Elop has been fingered as a possible candidate to eventually replace Steve Ballmer as CEO. For all of the resources that Microsoft pours into research and development, the company is often slow to catch on to disruptive technology trends and bring new products to market. This lethargy is the trait that has crippled Nokia.

To rescue the company, Elop will need to decide on an operating system and stick with it. Right now, the company’s flagship software, Symbian, is dated and losing ground. Gartner reports that Android may even catch up with Symbian by 2014, when both companies could have 30 percent of the global smartphone market. For perspective, in 2009 Symbian held 47 percent of the market. By contrast, the newly launched Android held four percent.

Nokia has long excelled at making beautiful phones—in many countries the word “Nokia” is a synonym for “phone”—but as Fortune wrote last October, it has never mastered its own software strategy.  The company’s Ovi online store is lagging behind Apple’s App Store in paid downloads. The interface is challenging to navigate. And its cluttered offering of services like Comes with Music is confusing.

Last year, Nokia and Microsoft announced a strategic partnership to put Office docs on Nokia phones. Elop was the lead on this partnership, and he is behind the Windows Phone 7 operating system that is getting positive early reviews. With this elegant new software, Microsoft has a fighting chance of making a comeback in the smartphone market and a deepened partnership between the companies could help both take on Android.

Another option would be for Elop to adopt a third-party operating system like Android. It’s a strategy that seems to be working for another iconic phonemaker, Motorola.

As Google (GOOG) and Apple continue their speedy ascent to world domination on the back of mobile, Elop has no time to lose.