Research Notes

Strand Consult has identified 10 taboos in the mobile industry

These Taboos are hampering business and preventing a dynamic development in a sector that needs drive and innovation!
Many believe that the mobile industry is one of the most dynamic businesses in the world, but is that really the case? In reality, isn’t the mobile industry’s largest competitor all the taboos that lurk just behind the shining medals people often talk about? One thing is to talk about the many possibilities in the mobile industry, but if you do not also talk about the challenges the industry is facing, the lack of debate will become a very efficient brake that will prevent the dynamic development of the mobile industry. At Strand Consult we have spent a number of years identifying and analysing the 10 largest taboos in the mobile industry, in order to be able to help our customers increase their future success. We know the industry’s possibilities very well – but we also believe it is very important to focus on the industry’s taboos.
A wise man once said that there are three ways to lose money: The fun way, which is women. The fast way, which is cars. And the certain way which is to invest in the mobile industry. While we do not entirely agree with his view, we can see that many people that have experienced the largest losses in this business had not spent enough energy on analysing the challenges they were facing on the mobile market. Put simply, the mobile taboos resulted in them not acquiring the vital knowledge necessary to successfully navigate the mobile industry.
This newsletter is the first in a series of newsletters, workshops and reports where we will describe and analyse 10 of the largest taboos in the mobile industry, with the sole purpose of putting forward a number of constructive suggestions on how market players in the mobile industry can identify and solve the challenges that each of these 10 taboos represent. We believe that it is very important to identify these challenges, analyse the issues and find these solutions that will allow the mobile industry to develop in an exciting, innovative and profitable direction – in our opinion, success is the ability to make this happen.
One week ago we described the mobile broadband challenges that operators are facing, challenges that very few dare speak about and that are being ignored while the mobile broadband market is growing. In this research note we will describe 10 of the largest mobile industry taboos and the background of the challenges that the industry is facing. They 10 mobile taboos are:
1. Revenue sharing models for mobile services – we need to move forward from premium SMS. It is a problem that the premium mobile services market is no longer particularly dynamic and the industry really needs this area to develop more in the future. It is fine to give service providers the possibility to share revenue from customers purchases of various mobile services. But in many countries this revenue is either stagnating or decreasing – many people already know this but very few are talking about how new business models, bonus models, new technology and new strategies could stimulate the market. We need the people who are developing, marketing and selling mobile services to be more creative. We need new services that can move forward from just simple ring tones, logos and mobile Java games. We have analysed the existing business models and have already a number of exciting suggestions as to how new and innovative business models could be implemented in the future – models that can stimulate the market and thereby benefit both operators and content providers.
2. Mobile services – how do we get consumers to change habits and purchase more advanced services? Everybody is talking about the mobile services market, but what market are they actually talking about? Are they talking about the Internet on the mobile phone and therefore free services, or are they talking about premium services like on the ring tone market, or is it something completely third or fourth? Why are people in the industry so afraid of being critical about what is being said about the mobile services market? What we need is new services that will make an increasing number of customers that are still only using voice and SMS start using their mobile phone for more things. One thing is the business models, but another is the services and what is most important is that there are many services in the future that target all the different customer segments. One of the biggest problems today is that too many services are being created by young men for young men, thereby already in the development phase forgetting a great number of potential customer segments. The issue is not about mobile TV, but which TV channels are needed for which segments and what types of programs and news are needed. We have analysed this market in a series of reports and have various suggestions on how serious players can move forward in this market.

3. Distribution – how should distribution channels be rewarded in the future, who is responsible for which areas – and why? When customers purchase a mobile telephone, a SIM card or a service, a cash flow is created. Questions like who owns the customer relationship, how should revenue be divided and which channels should service which customer segments are all important and should all be questions that the mobile industry ought to be focusing on. Despite the changes in the mobile market during the past 15 years and penetration passing 100% on many markets, there have not been any major changes in the way the operators and handset manufacturers distribute their products, a fact that many people are reluctant to admit is hurting the market. While many people would like to own the customer relationship, only a few have a licence to operate a mobile network and issue SIM cards, so the challenge is how to benefit in a situation like that. With their iPhone, Apple has introduced some new mobile models that we already described in a report in 2003/2004. On the other hand, how would it influence the market if Nokia wanted 8% of all the cash flow generated on all the Nokia mobile handsets on the market? We have analysed this market and believe that we have many excellent suggestions on how to implement new mobile business models in the future.
4. The mobile broadband – business models. There are many questions that arise in relation to mobile broadband. Will mobile operators develop towards being mobile ISPs, with falling prices and increasing demand resulting in the mobile broadband business case evolving into a nightmare? Or will operators invents a number of new services that will compensate for the decrease in the price of data traffic that is already happening on a number of markets like Sweden and Finland, where mobile broadband access is selling for between 10 and 15 euro a month? We believe there are many ways to move forward, but on the other hand this requires that the operators understand the problems they are facing and that they will seriously focus on solving these problems in the future – they are currently talking about their future growth, but not about the problems and challenges that lie just ahead. We have already lined up a number of suggestions on how to make mobile broadband a long-term success and we have described new business models that can reduce the risk of mobile operators developing in the same way as many ISPs.
5. The MVNO market – is it small operators or segmented distribution channels? Many people are talking about the MVNOs and just as many are attempting to do business on this market. But what is a MVNO? Is it a mini mobile operator, or is it a new distribution channel using a different business model? Are the MVNOs a threat to the existing MNOs, or are they a business model that can positively influence a MNO? Much of what is being said about the MVNO market is not based on facts and very few people are actually willing to talk about the challenges that are facing the players doing business on this market. Over the past many years we have published many reports about this subject and we believe many market players are not aware of the many smaller different aspects of the MVNO market and are therefore far from taking advantage of the full potential of this exciting part of the mobile market.
6. Outsourcingwhat are the operators’ core competencies? Around the globe, an increasing number of operators are choosing to outsource smaller or larger parts of their business to different players like NokiaSiemens, AlcatelLucent, Ericsson, IBM, Accenture etc. How far should they go and what are an operator’s core competencies? Many people do not realise that the future mobile operator may only be a mobile licence, a billing system and a bank account with a cash flow. There are many ways to view this area and many operators are currently redefining what they believe their core competencies will be in the short, medium and long-term. Is outsourcing a religion, or is there sound reasoning behind an aggressive outsourcing strategy and how can one best optimise an operators business case today when keeping in mind the level of competition on the future mobile market?
7. Mobile payments – the future is simple, but many are trying to make it complicated. Many in the business keep on forgetting the mobile value chain and how it will develop in the future. Many mobile operators and smaller technology companies are talking about mobile payments and they all have a dream of owning that business area. But if they hope to make huge profits on customers using their mobile phone to pay for their purchases – they are naive. What is the real status of this market, what players are there and who will control this market in the future? How will the regulative authorities view this market? Will they allow mobile operators to unconditionally compete with banks, letting them define and invoice their own processing fees, or will the political system regulate this market in the same way as it has regulated many other markets? We have spent a great deal of time analysing this market and we believe we have an excellent overview of the future of this market and how to become successful on it – this part of the mobile market will be an area where the winner takes it all.
8. Mobile marketing – is the market that big and will it evolve as many optimists are predicting? There is no doubt that there will be a market for mobile marketing, but what will the mobile marketing value chain look like and how will this market develop in the future? Many people have opinions about mobile marketing, but are forgetting to relate their figures to the advertising industry and consider how large a share of this market will be used on the mobile phone. Will operators have a central role, or will other players control this market? Which technologies will be used, will it be SMS, MMS, WAP Push, Streaming or something totally different? And will the message be transmitted via a mobile network or via Bluetooth channels? One thing is certain and that is that the huge distance from the optimists’ world to the reality of the advertising market must be taken into account. We have analysed this market and have made some very qualified guesses regarding the future development of this market.
9. Network technologies – we all know GSM and UMTS, but what about all the competing technologies? How will the mobile market develop in relation to CDMA, Wi-Fi, WIMAX or completely different access technologies? One thing is the technology, but there is also the spectrum and what frequencies are available. In the USA they are focusing heavily on 700 MHz for the mobile market, while the Europeans are using this frequency for television. Past experience has shown that whoever has access to the largest handset market and therefore the cheapest mobile handsets will be the winner. GSM has beaten CDMA on many markets and correspondingly, WCDMA has gained a unique position due to its global standard that is being supported by many operators. We have some serious suggestions on who will win and who will lose. There are already many that forgot to focus on their market analysis before making large investments – and are now having to realise that they have lost their money – who will be the future winners and losers?

10. Mobile market regulation – in many countries the regulative authorities and politicians want to regulate the mobile market. In the EU, the public servant Viviane Reding has large ambitions for her politicians and there is little doubt that we are dealing with a public servant with political ambitions herself. But let us stick to the realities and discuss whether the mobile market really needs more regulation, or whether the ordinary market forces can create the same dynamics in the future that have so far greatly increased mobile penetration, increased the number of mobile services available and decreased mobile prices and tariffs to such an extent that a mobile phone can – in almost all cases – now compete with traditional fixed line telephony. Are we it in a situation where we are simply regulating for the sake of regulation – and what is the competitive situation on the mobile market compared to many other industries? We have examined what is happening and have a very clear position regarding the regulative challenges that the mobile industry is facing.
A couple of years ago we published the first edition of our report “Mega-Trends in the Mobile Industry – a question of life and death“. We have updated that report many times since it originally launched and the report today not only describes the industry, but also suggests a number of mobile strategies that have since turned out to be very successful strategies. Through our newsletters, workshops and a series of new reports, we will over the course of the coming months describe 10 of the largest mobile taboos that we believe are the single largest challenges currently facing the future development of this industry.
Please feel free to call or write to us to learn more about how we can help you acquire the necessary knowledge to be successful on the future mobile market. We do not have any taboos – our business is helping our customers navigate the complicated mobile world – a business we have been very successful with for the past 14 years.
Mega trends in the mobile industry – a question of life and death

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