Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
Attitudes in mobile shift quickly – even among the most staunch protectors of the past. Barely a year ago, AT&T CEO Randall Stephenson, speaking at the annual mobile world conference, acknowledged the need for a more open approach to competing in the mobile sector. Today, the call for change has accelerated significantly. This is because volatility continues to erupt around the three agents of change that define the open mobile era: rapid development of mobile Web technology, insatiable consumer demand for mobile Web and data services and an evolving policy debate that may finally introduce a more equitable competitive environment.
As a result, many believe the advent of open mobile has introduced a period of hypercompetition throughout the sector. New entrants wielding disruptive technologies are slashing away at incumbent advantages and profits. Traditional standards and established market “rules” remain in-flux, forcing incumbents to abandon their dependence on bygone revenue business models.
Insights from Deloitte’s 2012 Open Mobile survey seem to concur. Against the backdrop of the 4G rollout, executive respondents from all corners of the industry point to a shifting mobile power structure way beyond the confines of the carrier walled garden. Almost 50% of respondents believe Web companies, rather than carriers or device makers, will dominate mobile in five years, and 89% believe the role of carriers in the short-medium term will be limited to delivering data access anywhere, anytime. Meanwhile, 87% have relegated the carrier walled gardens of the past to strategic relic status, believing that new organizational models built around open development ecosystems are the gateway to sustained competitiveness.
These data points may provide only a snapshot of current opinions, but the profound challenges that hypercompetition will introduce for incumbents should not be underestimated, especially in the face of the mounting challenge from mobile software-driven Silicon Valley firms. But, despite the rising threat of diminishing returns from traditional network assets and basic connectivity, many network carriers still seem wary of the need to secure future revenue streams outside their traditional comfort zones. The question often asked is where will the most robust opportunities emerge and what to do about them?
The rise of the machines
Deloitte’s data suggests that vertical industries adjacent to mobile are more likely to experience the biggest mobile business model growth over the short term. According to 80% of respondents, mobile health is considered most ripe for revenue generation as rapid adoption of mobile technology occurs at the core of new healthcare business models. That is, of course, if mobile incumbents can become savvy enough to assert leadership in this still-nascent sector.
Spurring the growth in m-health is the one-two punch of technology and increasingly urgent need. Given escalating healthcare costs, machine-to-machine technology and the national healthcare sector seem like an ideal match – at least on paper. According to ABI Reseach, the worldwide market for M2M is expected to add 365 million connections and grow by a compound annual growth rate of 27% by 2016, making M2M a potentially significant growth platform.
Similarly, the emergence of smart grid networks across the United States makes it a leading value proposition for exploiting M2M technology in the energy sector. Growth opportunities are significant; a 2009 report from ZPryme Research suggest the U.S. smart grid market will grow from $21.4 billion in 2009 to $42.8 billion in 2014, when device manufacturers, software developers, and communications equipment providers will constitute 88% of the market. Within these sub-sectors, double-digit growth forecasts are not uncommon. Clearly, wireless incumbents have a compelling argument for trying to lead in this space.
The case for smarter health
Mobile health is a profoundly high-profile opportunity. Analysts estimate the potential value of the m-health market will reach approximately $4.6 billion by 2014. The U.S. government-mandated objective of cutting healthcare costs, especially preventable readmissions, is a driving force behind this expected uptick. In addition, the sector faces stiff demographic headwinds. Americans aged 60-plus are expected to make up 27% of the population by 2050, and mobile healthcare solutions are being rapidly developed to improve chronic disease management, which accounts for more than four-fifths of the total healthcare expenditure, according to reports from Bloomberg and Standard & Poor’s. In this area, remote patient monitoring is expected to have a big impact across targeted disease areas where chronic conditions are a leading cause of the readmissions problem. Wearable body sensors and remote monitoring can keep chronic patients out of hospitals and improve patients’ quality of life, thereby cutting resource pressures for healthcare providers.
Putting skin in the game
The challenge for mobile incumbents looking to make a play in m-health and other M2M growth verticals is often organizational and capability-based. Deloitte’s findings suggest that platform development, ecosystem building, and alliance management are the core capabilities for boosting competitiveness in the open mobile era. Most respondents believe future growth rests on the proliferation of open platforms across multiple facets of the mobile value chain, but capability development remains inconsistent in key incumbent functional areas. Transitioning away from closed, proprietary business models is not easy. Winners in this era will have to learn to astutely mobilize new ecosystems, build trust with new partners in the innovation process, and develop differentiated mobile technology platforms to generate value.
This is already happening in m-health. For those who were quick out-the-gate collaborating and forming networks, resources have been combined in key knowledge areas, spurring the growth of wireless technology across the sector. Industry groups such as the Open mHealth consortium are establishing ecosystems of diverse partners across the mobile, software, and healthcare industries to implement a roadmap for technology development. Other familiar protagonists are joining the ranks of early movers. For example Qualcomm – no stranger to the benefits of platform and ecosystem development to stimulate growth – is orchestrating a platform-based strategy across the most promising growth areas in non-traditional mobile markets. In m-health, this means a new mobile cloud-based platform “2net” that enables the wireless transfer, storage, and display of medical device data, providing a new way of connecting devices and utilizing biometric data.
Success with this approach often relies on incentives to attract partners to build or participate in networks that support a core technology platform. For many, the allure of participating in knowledge networks tied to future revenue generation is all too tempting. Incumbents throughout mobile should take heed if M2M becomes their next pathway to growth.
Phil Asmundson is vice chairman and U.S. Media and Telecommunications sector leader at Deloitte LLP. Scott Wilson is the U.S. lead for Technology, Media and Telecommunications research within Deloitte Research. Deloitte’s 2012 Open Mobile survey can be accessed at: www.Deloitte.com/us/openmobile.