Monday, March 9, 2009

Blue Ocean in mobile services

Please follow my blog now on
In my last post on the business models in the wireless industry, many readers commented that the consumer is the king and the most successful business model would be one that would keep consumer’s interests in mind. I fully endorse this view. There is not even an iota of doubt in my mind that the consumer adoption is the key to success of any service.
Currently, I am reading a book called – The Blue Ocean Strategy. The book is how to create uncontested market space and make competition irrelevant. In one of the chapters, the writers discuss that for any service or product to be successful, it needs to pass the consumer utility test. The book quoted the examples of Philips CD-i (video machine, music system, game player and teaching tool all wrapped into one) and Motorola’s Iridium which failed despite being the technology marvels. The reason for their failure was lack of consumer adoption. Consumers did not find the products simple enough to use. The authors give a simple framework that if applied can help identify the consumer pain points. In this framework, the key consumer attributes like ease of use, fun, image, risk, productivity etc. are plotted against the entire lifecycle of a product or service viz., Discovery, Purchase, Delivery, Use, Portability and Disposal. If we analyze each of the resultant cells, we will be able to remove most of the impediments to consumer adoption. I realized how appropriate this framework is for mobile value added services (I will call mobile VAS as “Mobile Services” in the rest of the article as I believe that many value added services are now as important as voice).
When I applied this framework for mobile services adoption, I realized that there are roadblocks in each and every cell. Let me elaborate the point with “Ease of Use” as one of the parameters and plot it across the service lifestage
Discovery – Try to find any mobile application and you would realize how difficult it is to find what you need. I would rate lack of good discovery mechanism as the biggest impediment to adoption of services. How can I buy something that either I do not know about or do not know how to find it
Purchase – Are there sufficient payment mechanisms available for me to make the payment? Consumers struggle to make payments for services they utilize outside the carrier walled garden as the carriers do not have sufficient revenue sharing agreements with the content and application owners. The carriers want a lion’s share of the revenue which has forced many content owners to directly reach the consumers through the web and credit card payment. This has resulted in a few good services providing end to end solution. Barring Apple’s iPhone/itune, RIM’s mail service and Ring Back Tones, I find it hard to think about end to end services
Delivery – The delivery of the service could be either through SMS, GPRS, USSD or IVR but rarely the experience is the same across all these delivery platforms. On top of this, the mobile internet experience is sub standard and erratic at best
Use – Is there sufficient help available to the consumers? Do they know who to get in touch with in case of difficulty? Are there sufficient physical locations where the consumer can go to get a demonstration? I have come across many applications on which even basic help is not available. Even the services provided by the big carriers and handset vendors assume that the consumers are technology savvy. If the consumer is not on flat fee, then he is afraid to use the services for fear of high bill. Carriers around the world need to do a lot more to make the internet charges more transparent and affordable
Portability – The application that one buys on one handset can rarely be ported on to the new handset when the consumer replaces it. This creates a big dissonance amongst consumers. As the applications would become more popular, the consumer would face the dilemma of either spending again to buy the new licenses of the applications or postpone replacement of the handset. The handset vendors would be badly hurt if the consumers start to postpone replacement
Disposal – So many times, I come across consumers who do not know how to unsubscribe a particular service. There are sometimes different codes for activation and deactivation of service and if the consumer does not remember the short code, it could be a difficult proposition for him to deactivate the service
As evident from the above simple exercise, there are impediments to adoption in each and every step. Simplicity is the key and in our endeavor to beat the competition, we keep making the service more complex by adding features to it. Have the consumers adopted even the basic service without enhanced features? Nobody is ready to answer this question and what is the point in making the service more technologically advanced it the basic features themselves are beyond the understanding of the consumers. This simple framework can help address a lot of woes in the industry. We can similarly map the consumer pain points across other parameters like risk (especially impotant in case of mobile payments), productivity, fun and image and other key attributes. Once we ensure that the above consumer utility/acceptance framework is in shape, we can move to other issue of price. We need to think of the price of service/application in a strategic manner. The cost plus pricing would not work as the consumers would be ready to pay only for what they value. In their mind, the service should either be fantastic that they feel the need to pay for it or it should be free. Looking at cost to price the service would mean that we would kill the service even before it is launched. Hence we should decide the strategic price first and then work backwards to decide what should be cost to get the desired profitability. The service providers would do well to provide differential pricing for different markets depending on purchasing power of the market.
Once the cost of service is arrived at, the service provider should look for ways to reduce the cost to the desired level. They have the option of bundling the service with bandwidth or they can become service MVNOs or they can look at alternate business models. If it fails to get the costing at the strategic level, it would be forced to look at alternate business models and hence even more innovation is likely to set in the industry. To illustrate, in the gaming industry, if the cost of the game could not be brought down to the pricing levels demanded by consumers, then the vendors should look at in-game advertising as alternate revenue stream or pay per use mechanism or even micro transactions (basic game is for a nominal fee and with every level of advancement, the consumer would need to pay additional money).
If the service providers are not able to address the consumer utility framework or are not able to bring the cost down to the desired level, they would be well advised to abandon the initiative and launch it only when they are able to do so. Half baked measures would not help – take a hard decision!!!

No comments: