Learn from The Elop Effect that sunk Nokia. The future arrives quickly. Be careful what you say as a leader! How a single leaders comment can sink a company

The Osborne Effect bankrupted Osborne Computers ( the worlds first laptop was an osborne) and refers to the unintended consequence of the announcement of a future product ahead of its availability and its impact upon the sales of the current product.

That means the current products will not sell, the sales collapse means prices have to be slashed which destroys otherwise healthy profitablity and plunges the company into massive losses instantly.

The Ratner Effect is named after Gerald Ratner who was CEO of British jewelry group Ratners (since renamed Signet Group). He made a famous speech in London to the Institute of Directors in 1991 in which he said his company products were sold for such low prices “because its total crap.” This remark was then published and caused his company to collapse and was only saved by his departure – and the rebranding of the company to Signet.

If The CEO of a company calls his own products crap, he will be believed. That will instantly devalue all their products and cause collapse of prices, sales, profits.

The Elop Effect combines the Osborne Effect with the Ratner Effect. Stephen Elop did not just announce that his company Nokia switches from the existing Symbian and MeeGo platform strategy to one bought in from Microsoft (thus causing instantly an Osborne Effect) – he further added to this damage, by calling the Nokia platform crap, with his Burning Platforms memo Elop also called the Nokia platforms, Symbian, Ovi, MeeGo and Qt – as uncompetitive, ie he called his own products crap. That instantly destroyed their long-standing trust and credibility in the market.

The Elop Effect is therefore when a CEO announces both that his current platform is not competitive AND he announces a new system to be replacing the current one, without any new products to sell (in Nokia’s case, for at least 9 months