Introduction
‘We’re moving away from the business of ears to the business of eyes.’
Move over Bill Gates, stand aside Steve Jobs, said the industry pundits after CeBIT 1998, the famous trade conference. They’d just seen Nokia’s Communicator 9110, a mobile phone with dazzling capabilities, but what really intrigued them was the unforgettable line by Anssi Vanjoki, Nokia’s legendary brand chief.
Two to three years later, we met and talked about the coming revolution in mobile services. I was intrigued by the vision, but even more by the way.How
are we moving from ears to eyes?
That’s how The Mobile Revolutionbegan.
FROM TECHNOLOGY INNOVATION…
In the past, mobility was driven by technology change. With increasing pene-tration, the momentum is now on usage. Tomorrow, it will be on mobile content. Yet the frameworks we deploy to understand industry change orig-inate from technologists, not from marketers.
According to conventional industry wisdom, technology-based innovations are part of a continuum of change. Each wave of innovation is typically illus-trated with the S-curve, a graph of the relationship between time (the effort put into improving a product or process) and performance (the return on the investment). Each wave of innovation is characterized by a continuous curve. Successive waves are characterized by discontinuities between these curves (see Figure 0.1).
Take the mobile business, for instance. In addition to the costly 3G licence auctions and public efforts to tax operators to the point of bankruptcy,
conven-tional wisdom tends to emphasize the role of technologies and performance capabilities. Yet the evolution of mobile communications has been the function of technology andmarketing innovation. Successive waves of innovation are not autonomous and independent, but cumulative and dependent, building on the previous waves.
In this scenario, the rate of innovation is also defined in terms of S-curves depicting increasing performance capabilities, but these curves are shaped by
markets, as much as they are shaped by product, process and service compe-tition. Technology-based S-curves can be depicted individually and separately, in terms of time and performance capabilities. However, markets and services must be understood in terms of penetration and usage. While the techno-logical preconditions of this curve may comprise successive waves of tech-nology innovation, the overall market-based (penetration) curve has evolved over decades, up to the explosion of the mass markets and globalization in the 1990s (see Figure 0.2).
Technologies make markets possible; product and service competition makes or breaks markets. As trivial as it sounds, this is still downplayed in technology-intensive industries, often with costly consequences.
… TO MARKETING INNOVATION
According to the conventional view, successive waves of innovation are triggered by emerging technologies. In this scenario, markets are only an afterthought, and services are identified with products, as if the two were identical (which they certainly are not). Instead of technologies and products only, it is time also to spotlight markets and services, and to give credit where it is due. If we truly want
Rate of innovation 1890s 1910s 1920s 1980s Time/effort Wireless telegraphy Pre-cellular mobile services Analog cellular Digital cellular Multimedia cellular 1990s 2001
to understand the transition from the ears to the eyes, we must understand better the shift from technology innovation to marketing innovation.
From the late 19th century to the present, mobile leaders have not been companies that have excelled in technology innovation alone. Rather, the winners have excelled in technology innovation and marketing innovation. The history of mobility, like the evolutionary trajectories of so many other industries, is littered by failures when companies have got right only one side of the equation.
When companies have been successful in technology development but failed in market pioneering, new technologies have led to new products, processes and services, but these have failed to create new markets. The WAP debacle is a textbook example. At the end of the 1990s, the leading European mobile vendors and operators developed Wireless Application Protocol as an open international standard for applications using wireless communication. Despite great R&D and investment, it was essentially branded technology rather than branded services. In saturated markets driven by sophisticated consumers, such creations are doomed.
Conversely, when companies have been successful in market development but failed in technology development, old offerings have been provided for new and changing markets. Unwilling to cannibalize its successful products and services, Motorola in the early 1990s delayed digital transition so long that it fell behind rivals and had to spend years in a futile catch-up game.
Technology innovation 1890s 1910s 1920s 1980s Market evolution Wireless telegraphy Pre-cellular mobile services Analog cellular Digital cellular Multimedia cellular 1990s 2001 Maritime markets Emergency services Industrial services Business services Consumer services Global mass markets
Figure 0.2 Innovation waves defined by markets
Where technologists see disruptive technologies, marketers often see incrementally evolving market penetration and usage. Disruptive technology innovation does not automatically translate to disruptive market innovation.
During the past century, the mobile industry has gone through successive waves of innovation. Technology has not made markets. It is the interplay of technology and marketing that has resulted in new products, processes and services. However, the last ones – services – are a relatively recent phenomenon.
MOBILE SERVICES WORLDWIDE
Pioneered by Guglielmo Marconi, wireless telegraphy created the first customers and business models in the mobile industry, particularly in the maritime sector. Over time, it led to AM communications, which was pioneered by police departments in the United States, and FM communica-tions, which provided a substantial military advantage to US defence forces during the Second World War.
After the war years, these technologies led to the pioneering of mobile industrial services and the development of the first consumer test markets. However, there was only one (and very primitive) service, really: voice – and this defined the mobile services for the next half a century.
The cellular concept was discovered as early as 1947 at the Bell Labs, but commercialization followed only in the 1980s with analog cellular networks. These services appealed primarily to automobile drivers and corporate markets. Starting in the early 1990s, digital transition made possible consumer mass markets, which have been rapidly specializing and globalizing ever since.
As voice services were coupled with short message services (SMS), subscribers got a rudimentary idea of new mobile services. Since 2001, worldwide mobile markets have witnessed the first transition to the multi-media cellular, known as UMTS (Universal Mobile Telecommunications System) in Europe and 3G in the United States. These, however, were preceded by NTT DoCoMo’s service innovation in Japan.
As software applications began to drive mobile communications, the world’s leading IT enablers, from Microsoft to Intel, entered the business, with aggressive efforts to ‘mobilize’ broadband technologies. The transition from voice communications to data communications enables advanced mobile services, which have already triggered the entry of the world’s largest content providers, including Hollywood studios.
In the past, voice drove mobility. Yesterday, software was the key driver, but as mobile subscribers, we couldn’t care less about data; we’re attracted by new services and compelling content.
THE STRUCTURE OF THE BOOK
In this book, the perspective of marketing innovation is applied to the mobile business, particularly the changing mobile markets, service pioneers, mobile consumer services and business services, as well as strategy. Unlike existing
works on the subject, this book is not only based on extensive review of theo-retical frameworks and empirical industry competition, but also supported by in-depth interviews with some 80 senior executives from among the world’s leading mobile vendors, operators, IT enablers, media and entertainment conglomerates, consumer electronics concerns, mobile developers and brand marketers. The inside stories illustrate pioneer successes (and in some cases failures) in the massive transition from voice to data – that is, in mobile service innovation.
The first part provides context on the changing markets. In Chapter 1, market innovation is explored in worldwide context, by lead markets, and the world’s leading mobile vendors and operators. Until the late 1980s, the market lead-ership belonged to the United States. After the mid-1990s, Nordic countries captured leadership, while industry momentum has shifted to the Asia-Pacific, in relation to both service innovation (Japan, Korea) and massive growth markets (China, India). Mobile globalization is exemplified by the pioneer experiences of SK Telecom, Ericsson, Ogilvy Interactive Worldwide, and pioneering mobile marketing service providers such as 21 Communications in China.
Chapter 2 focuses on mobile innovation, which parallels four historical marketing approaches (product, selling, marketing and customer concept). Particular attention is dedicated to the transition from voice to data, and the adoption of new broadband technologies, before the 3G implementation. This chapter develops the notion of the dominant design from products and processes to services, while focusing on the unique characteristics of the mobile service experience. Interviews with the senior executives of Motorola, Nokia, Orange, Intel and Qualcomm illustrate these developments.
Chapter 3 focuses on mobile service pioneers. It tells the inside story of NTT DoCoMo’s service innovation, which, along with SK Telecom’s success in Korea, has captured imagination worldwide. It also examines the inside story of Vodafone’s service innovation in Europe (Vodafone Live!), the rise of rivals, and the story of the leading US operator, Verizon Wireless and its service inno-vation (Get It Now). These events are narrated by key insiders at NTT DoCoMo, Vodafone and Verizon Wireless.
Part II explores the rapid expansion of mobile consumer services worldwide. Chapter 4 illustrates the basic service categories that the pioneers created, from rich voice and messaging to personalized content and mobile portals. It also provides an overview of significant shifts in content evolution, and an in-depth look at the experiences of content providers, such as Wall Street Journal Interactive, New York Times, and Yahoo Asia.
Chapter 5 examines the evolution of the service portfolios that these pioneers have created and currently manage, while assessing the future prospects. Starting with the pioneering of NTT DoCoMo, it focuses on dynamic mobile content, from multimedia messaging services to mobile phone television. It also explores the genesis of ringtones and mobile music. These trendsetting industry experiences are coupled with inside stories of the groundbreaking Nokia–EMI deal, licensing revolution in the United States
(BMI), mobile streaming (RealNetworks), integration of mobile music (Warner Music, BMG), and the rise of mobile sports (Fox).
Chapter 6 examines the efforts at mobile media and entertainment. It illustrates the emerging value chain, including the nascent business models, and digital rights management. These pioneering efforts are explored in greater detail with three in-depth cases: the rise of mobile news worldwide (CNN and Turner Broadcasting), the evolution of mobile games (and the creation of Nokia’s N-Gage), and the expansion of mobile entertainment (Disney Mobile). The interviews with senior executives are coupled with the experiences of Universal (mobile media licensing), Sony and Warner Bros (mobile entertainment and games), and ABC (mobility and interactive broadcasting).
Chapter 7 focuses on the design and transformation of mobile devices (or ‘the devices formerly known as cellphones’, as Motorola’s marketing chief Geoffrey Frost likes to call them). Starting with the dual role of the handset (physical form factor, emotional expression), it explores the evolution of the mobile design, from Motorola’s ‘brick’ to Nokia’s segmentation. It pays particular attention to the pressures of commodification and differentiation, and the evolution of segmentation (by technology, lifestyle, functionality, and experience). It also includes a section on the rise of wearable phones (including mobile devices that operate via bone conduction!). This chapter is illustrated with in-depth interviews with key senior executives at Nokia, Motorola and Microsoft.
Part III focuses on mobile business services and the role of mobility in strategy. Chapter 8 focuses on the nascent field of mobile marketing. It provides an overview of the emerging industry, mobile marketing campaigns, and the adoption of mobile innovations. It includes the inside story on the success of SMS and American Idol, and the rise of mobile Nickelodeon and MTV. It features in-depth interviews with several trendsetting marketing service providers and industry observers, including 12 Snap, Mobliss, Flytxt, as well as McCann-Ericsson, Carat Interactive and Hasan & Partners.
Chapter 9 focuses on mobile business services, solutions and markets. It examines the evolution of mobile business services, the shift from the internet to mobilization, and the service categories in the business sector. It also provides a view of the enterprise solution providers in the mobile space, the role of the large customers particularly in the United States, and the rise of employee usage profiles. It is augmented by the experiences of trendsetting industry leaders: Microsoft, Nokia, Ericsson, Vodafone, Verizon Wireless, Intel, IBM and many others.
Chapter 10 examines the challenge of mobility in competitive strategy. Starting with an analysis of distorted market signals, it explores mobility in relation to competitive advantage (firm value chains) and competitive strategy (industry attractiveness). Focusing on the role of business models and compe-tition, as well as mobile opportunities, it provides numerous examples of the adoption of mobility in value chains and industry forces.
