A New Approach to Market Analysis for the Evolving Mobile Communications Industry
An argument in favour of multi-disciplinary analysts
By: Saverio Romeo, Frost
The mobile communications industry has been infrastructure-centric for a long time. The core has been the network. The value added has been the services offered on this network. For many years, voice communications was the only service available. Then the launch of SMS brought enormous success to the mobile industry. But it also spread the fever for a “killer application”: When the success of SMS started to diminish and voice and messaging began to be transformed into commodities, the industry made parabolic journeys in order to find the next “killer application”. But the new Holy Grail was far from arriving.
Throughout this journey, the role of consumers had been mainly passive. The mobile industry was infrastructure-centric and supply driven. The potential role of demand as a source of innovation and as a path to the next “killer application” was largely ignored. Lessons from the emerging world of the Internet and the advice of visionaries like Negroponte and Miller remained unheard for a long time. In that old world of telecoms, the work of the industry analyst revolved around the assessment of mobile communications markets through key performance indicators designed to measure the growth of an infrastructure-centric world. The analysis of markets was largely engineered around statistical models and exploration of applications that could move the mobile industry to the next stage.
The next stage was defined as the next big source of revenues rather than the next scenario of business opportunities for the industry. And that revenue-based approach to the analysis of mobile communications markets became embedded in the industry analyst environment.
Probably, things could not have happened differently. The mobile industry was booming, its revenues were growing rapidly and the space of growth seemed practically unlimited for some time – at least, until the “killer application” fever started to return.
Initially, the “killer application” fever affected only a small part of the mobile industry, analysts included. The industry was strongly involved in making the most of increasing the mobile penetration of markets by offering voice and messaging services. However, some markets were already sending messages of saturation to mobile network operators. New revenue sources were needed in order to maintain the strong growth rate experienced up until then. The “killer application” fever was back and burning up. The mobile industry in its entirety launched an almost innumerable number of new services, but not one of them was able to change the rules of the game and move the industry to a new level. And again, the approach was largely infrastructure-centric and strongly supply driven.
Consumers were out there waiting for their next fix- a new service invented by someone else. Meanwhile, the Internet was moving in the opposite direction, giving more and more space both to the needs of consumers and the creativity of various players working to meet these needs. The idea that consumers create and use the Internet was taking shape. In many interviews, Tim Berners-Lee claimed that, while the Internet was indeed designed with this approach in mind, it was not until the launch of Web 2.0 that the idea finally began to become reality. Consumer-driven innovation was becoming tangible. The channel for that innovation was the Internet and software was the tool.
A large part of the mobile industry showed inertia and slowness in understanding the revolution the Internet was bringing to digital markets and its impact on mobile communications.
The infrastructure-centric industry was evolving its networks with the aim of offering Internet-like services, but without strongly questioning how next generation mobile networks could meet the evolution of the Internet and how this encounter could bring new opportunities.
For some time, mobile communications and the Internet moved separately on two different paths. And this was also the approach from industry analyst firms.
There was an industry analyst for mobile communications; an industry analyst for fixed telecommunications; and an industry analyst for the Internet. The industry analyst remained a specialized and vertical professional. They were very good in their areas of interest, but they found it uncomfortable, almost unnatural, to venture into other areas. This structure continued to characterize many analyst firms for a long time.
Having a strong specialization was valid. But gradually the ability to enter adjacent areas with a certain degree of knowledge began to seem important, especially in an industry such as telecommunications where the borders between technology and market segments were becoming increasingly fuzzy.
The fixed-mobile convergence was a first clear step towards a view of telecommunications as a melting pot of different but interrelated technology segments. This fuzzy vision of telecommunications has become much more tangible in the last three years with the emergence of two phenomena. The first is the astonishing success of applications stores. The second is the increasing need for digital and connected services in vertical markets such as healthcare, transport systems, public administration, just to mention a few.
The first phenomenon, the applications store, has been brought in by Internet players. The Internet is the channel; the software is the tool used to develop applications for mobile devices using mobile communications networks. With applications stores, the Internet has aggressively entered the mobile communications world, forcing the mobile industry towards a software-centric and demand driven environment. If English linguists allow, it would be possible to say that mobile communications are being “Internetized”!
The second phenomenon is the increasing role of mobile communications in vertical markets. Mobile and wireless technologies are playing a key role in optimizing costs and performance of service delivery in healthcare, transports, logistics, governments and many others. This should lead to connected environments where humans, objects and spaces communicate and exchange data. This is the vision of the Internet of Things.
The world of apps and the Internet of Things are making infrastructures almost invisible to consumers. Consumers will use services and applications. Software will drive the incremental innovation perceived by consumers.
Customer data will increasingly become the key asset for competition; the ability to analyse that data and spot new business opportunities will be the key skill for competition.
In this scenario, the need for specialized research and analysis remains important, but the analysts’ ability to be multi-disciplinary and to contextualize their specific research area within the scenario envisaged will become more and more important.
Strategic decisions in future mobile communications require a combination of specialism and multi-disciplinary analysis.
The multi-disciplinary aspects will be extremely relevant for large players like mobile network operators, Internet companies and mobile device makers that want to be protagonists in the future of mobile communications.
Our thanks to Saverio Romeo, Research Analyst at Frost & Sullivan (@frost_sullivan) for this post.
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I’d certainly concur with this – indeed, the concept of multi-discplinary and cross-layer analysis has been at the core of my own work for many years.
Too often, I have seen network innovations touted by vendors (and trumpeted by certain of my analyst peers), when there are clear and obvious external “gotchas” from the real-world of users, devices or Internet/cloud.
This belief in cross-layer analysis goes back to a series of discussions I had about 10 years ago, when I was an equity analyst for a bank, rather than an industry analyst. This was at the time of the original 3G auctions, with billions being spent on spectrum licences. All the big network vendors were predicting huge growth in new “multimedia” services, the market forecasts reflected this, and the huge sums spent in the bidding process was based on similar over-optimism.
But I remember having had a bit of an epiphany, when I then spoke to a small provider of deeply-techy bits of software and IPR for mobile phones – they commented that nothing much could happen for 5+ years, because the science wasn’t there to make decent-sized, power-efficient chips & radios for the devices. The whole thing was a glaringly obvious house of cards – but only if you stepped out of the silo.
I still see similar things today – arguably even more so, now we have rival ecosystems and the power of the cloud.
There are always going to be depth/breadth trade-offs, but I fundamentally believe that the direction of the mobile industry is determined by the interactions and disruption *along* the value chain, rather than competition and cooperation between peers within a given layer of it.
Analysts needs to be able to reflect that.
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