Breakthrough Ideas (continued)
Strategic Business Design for Today’s and Tomorrow’s Profit Zone
In The Profit Zone: How strategic business design will lead you to tomorrow’s profits, Slywotzky and Morrison (1997, p. vii) contended, “The profit zone is where sustained, superior profitability creates enormous value for a company.” To enter and then to migrate with a shifting profit zone requires a customer-centric and profit-centric business design that is adaptively open to re-invention.
Customer-centric thinking requires that a supplier decipher the secret code, the silent, unexpressed, hard-to-articulate, and, thus, often unseen, but still implicit, needs of customers. Deciphering the secret code requires understanding the customer’s underlying system economics and the priorities this currently creates. To understand the system economics of customers, you must understand all of the variables and drivers that affect their profitability, and specifically what is problematic now, creating an urgent priority.
Understanding how to enable a customer’s drivers of profitability is the key to meeting your customers’ pressing priorities, and thereby, to driving your own company’s profitability. By analogy, think of the term, system economics, as referring to an expanded concept of total cost of ownership in which includes “dollars, hours, and hassles.” You meet pressing priorities by resolving issues related to money, time, and the frustrations involved in completing your less than whole product.
This implies that Qualcomm must understand the system economics not only of wireless end users or operators but also of the entire value web comprising an open mobile wireless telecommunications system. Because it controls the advance of the crucial spread spectrum air-link interface, which is embodied in its ASSPs as the basic platform, Qualcomm must drive the worldwide expansion of its value web’s and industry’s market. After gaining strategic architectural control, the skillful use of that power demands friendly leadership from the star-node that not only advances the architectural platform and expands its scale and scope, but also completes and refines the seamless integration of the open mobile wireless system as a network-of-networks whole product.
Thus, the star-node’s task is to discover not only how to advance solutions, but also specifically where Qualcomm’s present solutions are inadequate or incomplete because only then can Qualcomm know exactly how to add value that fits into the customer’s total economic equation and satisfies the customer’s most pressing priorities.
Some Fundamental Assumptions:
Creating seamlessness is how you make technology disappear.
Each new technology becomes a building block for further innovations. This wealth-creating process fashions ever more specialized and differentiated uses for technology that generate new social and economic niches. Less appreciated is the idea that ascending progress in technology introduces learned means for need satisfaction. This includes the latent silent needs that were here-to-fore unidentified by society or unrecognized by the individual. Humans incessantly seek new means to satisfy unrelenting fundamental needs. Mobile data connectivity introduces novel opportunities to satisfy anew, given our greater freedom of choice, exactly how we learn, earn, play, and hang out, adding the spice of exciting freshness to how we satisfy a familiar need.
In our own lives we have seen how technology diffuses until it becomes commonplace. For example, television began as a novelty vaudeville-style entertainer, but TV became a required service even in the poorest American family. As it became a more useful and reliable source for breaking news, live sports, and dramatic entertainment, TV’s value expanded. Today, TV’s penetration into the home has increased until, no longer a novelty, and no longer merely needed, it has become a necessity, a readily available baby-sitter, educator, or entertainer of young children, who now must have their own TV set. Technology advances the inexorable movement from novelty to necessity. In the same way that the telephone moved from connecting a few people in a small space yesterday toward connecting many people across large spaces today, tomorrow it moves toward necessary mobile connections, always on, always with you.
Just as the telephone, TV, and Internet changed our inner experience of what we want or need, and our social and economic priorities for what we must have, so too do mobile connections, always on, always with you, serve as a source of newly recognized needs that gradually adjust and transform from “nice to have” to “top priorities.” Advancing technology transforms latent needs into manifest needs by creating new learned possibilities for satisfying elemental human needs, expanding our freedom of movement to select what we want now.
As applications and services become richer, they provide satisfying experiences that boost the excitement or enjoyment of interpersonal interactions and enable new means to pursue rewarding economic opportunities. As seamless applications and services become a way of life, they become a necessary source of excitement and enjoyment. There loss becomes feared; their absence stimulates deprivation affect that is distressing. This amalgam of rewarding positive affects and punitive negative affects centered on a single source is the driver of addiction.
Qualcomm must anticipate how the customer’s priorities are changing so that the company can sustain the added value its brings to customers, whose needs and priorities continually shift, migrating value away from what is necessary today to a new profit zone representing tomorrow’s requirements.
Yesterday’s 2G Chasm Crossing Elevator Message was: For new carriers who are dissatisfied with analog or time-division solutions that produce unnecessary dropped calls, fading signals, excessive interference, and so-so voice quality, Qualcomm’s CDMA offers a new uniquely coded spread spectrum mobile wireless solution that, unlike AMPS, GSM, or TDMA, provides universal frequency reuse, increased capacity and coverage, soft handoffs, reduced interference, enhanced voice clarity, the most efficient use of spectrum, and the lowest cost per bit, and simple and flexible additions of new cells or sectors that organically expand as the network grows.
With the new millennium, the profit zone began its transition from 2G’s circuit-voice toward 3G’s mobile packet-data services. As voice services increasingly become a commodity, the priority of operators necessarily changes. Operators must differentiate their services to attract new subscribers and reduce churn. Operators differentiate their services in two way: (a) by introducing innovative business models, including experimenting with various incentives to attract new users or with pricing for packages that include various combinations of voice and data services; or by introducing new features and services, like position location or smart cards that permit pay-by-phone for tolls or small purchases; and (b) by technology’s continuing advance that enables them to offer new services because the plunge off the cliff of cost-per-performance creates additional or supplementary functionality at the same or a lower price to meet formerly latent needs that become manifest as prices fall or as leading edge technology permits.
The advancing combination of faster/cheaper data speeds, data-capable devices (today with color LCD screens and cameras), and engaging applications spurs data usage, and it will continue to do so tomorrow with better technology in each of these three complementary system components. These complementors synergistically ignite positive feedback. When integrated to form a system, each independent advance also advances the system collectively. When combined together, the summative mass of the individual advances creates non-linear beneficial effects.
The human need to communicate creates chronic and unremitting demand. Even when latent, our need to communicate is not often a silent need. Feeling the need to speak, we bite our tongue only when we must. All a communication market requires is a supply of means to satisfy human desires, needs, and priorities. If you make a better mousetrap, the world may or may not flock to your door. That depends upon the supply of mice and the subsequent demand for mousetraps. If you make a better mobile communication system, the world will flock to your door because there is never an end to the human being’s desires, needs, and priorities to be connected, always on, always with you.
The 1X Chasm Crossing Elevator Message is: For operators who are dissatisfied with their rate of growth, excess churn, or the declining prices of voice services, Qualcomm’s cdma2000 1X doubles voice capacity and its medium speed data throughputs of 50 to 70 kbps, unlike GPRS, which EMC Market Data estimates to be 17-27 [10]kbps, can introduce differentiating 3G services like position location, the Internet, sending photo or video e-mail, or playing interactive graphic-rich games, and, best of all, unlike UMTS, which requires a lengthy, troubled, and expensive migration that is to be followed by a swap-out to become UMTS-enabled, 1X leverages you investment by using existing spectrum, the same RF interface, and channel-card-upgraded base stations, making it the only advanced, mature, reliable, and low cost solution that is available now.
As the profit zone migrates from voice to data, operators’ priorities will change. Today, differentiated data services attract new customers, reduce churn, drive handset replacement sales, and contribute to ARPUs. Although most current data services do not require high speed, to be profitable they do require low costs that are best enabled by data-optimized high speed, like DO’s 2.4 MHz that reduces the cost of data delivery to 2.3 cents per MB. In a future of advanced data applications that fully use the power in a local handset and the BREW API for downloading, delivering, and billing, the richness of new and useful data applications delivered at a low cost will differentiate successful from unsuccessful operators.
That developers will create new advanced applications seems inevitable, given the hype about the mobile data market’s potential. For instance, by 2006, In-Stat/MDR estimated the global mobile game industry alone will reach US$2.8 billion; whereas, Ovum has estimated US$4.4 billion. Frost & Sullivan stated that the global mobile game industry, which generated US$436.4 million in 2001, would balloon to US$9.34 billion by 2008.
Imagine this Assassin’s Game. Assembled by using QChat, a group of 12 young people, six men and six women, who are single strangers, agree to play the game in a designated area like the vicinity of Washington Square on Saturday night beginning at 9:00 p.m. Each sends a digital photo to the other players to begin the game, and each player’s location is continuously plotted on a downloaded map. When a player spies another player and is within Bluetooth range, he assassinates them with a Bluetooth ping to their handset. The assassinated player now owes the assassin a prize, say, a response to a truth or dare challenge, a drink, or a kiss. After two hours, the players congregate at a specified location, using QChat to decide when and where. The overall winner gets a prize, say, first dance with his or her partner of choice; top man and top woman get lesser prizes, say, a number of truth or dare challenges, dances, karaoke performances, or the like. Debts are paid; games are played; friendships are formed. Then, leave the rest to your imagination and human nature.
Imagination, interactivity, and BREW’s facilitating technology can bring exciting games into being. Phone-sex takes on a whole new dimension with a camera phone, which is sure to become the hooker’s greatest resource for personalized advertising.
Dr. Paul Jacobs asks us to imagine BREW as a mobile global content distribution platform. If you have a bug in a console game, you have to write off a lot of expensive inventory. With BREW, you just send out an update notice and download a patch. There is no cost of goods sold (COGS) because nothing physical is generated. If you are an operator, you can try out an application from the virtual marketplace that proved to be popular in another country to see how it works locally. BREW is designed in a way that makes it relatively easy to locate the text in an application to translate it and transform it into a localized version. [Because Qualcomm operates the servers for BREW, it has a unique window to see which applications are proving to be popular. Hence, it can spread popular applications by recommending them to carriers in new markets around the world.]
From the success experience of KT Freetel in Korea, Jacobs specified three lessons that other carriers can learn. First, the BREW business model works and drives up ARPUs. Second, by cultivating developers to bring out applications rapidly and to refresh and upgrade their older apps that are available on the download server, you create a customer willing to return to the store to see, try, and buy what’s new. This drives the stream of downloads, accelerating it past the ramp-up in additional subscribers because old subscribers are downloading new apps as new subscribers download both old and new apps. Third, offering an end-to-end solution makes the whole process easy and convenient for everyone. For instance, instead of typing in a URL to pull up a stock quote, a customer, using a GUI, can touch a couple of buttons that don’t just download the quotes, but instead generate a moving graph comparing a set of stocks, because BREW makes applications easier to develop, deploy, use, bill, and sell. The built-in billing and payment system is a clear-cut competitive advantage in BREW that generates experimentation, including pricing variations and free trial periods for games. Stand-alone games for the local handset are selling as downloads, while networked games are free, with charges applied against on-line playtime.
When, searching for customer relevance in an enterprise, Jacobs wants to know not only what applications they need, but also what supportive infrastructure is required to mobilize the enterprise’s use of mobile applications. Jacobs is excited by the need for the user interface to become a personalized portal that differs for, say, field-sales and field-service engineers. Through BREW, not only can you have different interfaces within an organization that are matched to each unit functions, but also you can provide access to these multiple functions on a single screen to increase productivity.
Over time, radio, telephone, TV, computers, and the Internet are converging as interoperable elements within a mobile communication system for accessing and linking digital voice, multimedia text, graphics, animation, and streaming radio/TV, and the Internet as connections, always on, always with you.
Clusters of converged and integrated technologies are developing. For instance, SnapTrack’s position location solution represents a convergence among satellite and wireless radio, telephones, computers, server and handset software, and perhaps the Internet for securing applications or services. And, position location itself is becoming a new niche among the growing cluster of related telecommunication technologies and services.
Today’s 1xEV-DO Chasm Crossing Elevator Message is: For operators who are dissatisfied with the limitations of traditional low data rate services, Qualcomm offers a new high data rate solution that, unlike GPRS, which robs lucrative voice minutes by restricting voice capacity to send data at low rates over voice channels, not only meets the 3G standard of 2 MHz speed for sending data but also significantly increases average data throughput, lowers cost per bit, and drives up ARPUs, while simultaneously offering a complete solution for application development, deployment, management, and billing that, taken together, reduce your risks, costs, hassles, and time-to-market as it assures the high quality of your advanced, but ever-new and ever-improving, high-data-rate services.
Although it was stated first, I have been saving the deepest-seated fundamental assumption till last: “Creating seamlessness is how you make technology disappear.”
The master goal of technologists is to make technology disappear into the fabric of everyday human lives. What begins as extraordinary becomes ordinary. Although technology begins as a new tool, a new means to satisfy old human ends, it ends simply as “how we do things now.” Technology disappears when it becomes a seamless part of everyday life, a practiced habitual use, not worthy of special attention or mention.
Given this goal of creating seamless technology, a seamless mobile communication technology disappears when it becomes a seamless part of everyday life, simply how we do things now.
One of the most successful problem solving strategies of humankind requires imagining a solution initially and then reasoning backwards to find the path to reaching your imagined, desirable outcome. I imagine that Irwin Jacobs and his Qualcomm team reasoned backward from this key insight into human nature, “In our mobile society, people must communicate with other people regardless of where they are now, and they want access to information they can use now even when they are on the move, and most of all, they want to do it as quickly, simply, easily as they do now when they have access to a telephone or PC.” They may have had this Eureka Experience: “Wow! This requires a seamless worldwide mobile communication worldwide network that provides desirable, useful, and valuable services using Qualcomm’s multimode and BREW-enabled connections, always on, always with you.”
The human need for communication is fundamental, as elemental, essential, indispensable, and unrelenting as any primary need. Humankind has moved a long way from smoke signals to spread spectrum to satisfy the same basic desires, needs, and ever-emerging priorities. Seamlessness while roaming across network environments is the ultimate customer priority because it enables a uniform, reliable, universal, quality experience that the mobile customer understands how to use worldwide to make connections, always on, always with you.
In Part I, I wrote, “Because Qualcomm seeks standardizing solutions, which can become increasingly complete, inclusive, and ubiquitous, the second [leveraging] principle is: develop globally standardized solutions.”
I claim that this leveraging principle was transformed into a master strategy that unified Qualcomm’s strategic goals: (1) achieve and expand strategic architectural control of their platform, and (2) grow the size of the overall mobile telecommunications market, including voice, high data rate, and wireless Internet markets. It’s as if Qualcomm intentionally generalized and expanded Davidow’s strategic principle of marketing: Marketing must invent complete products and drive them to commanding positions in defensible market segments.
Qualcomm’s Master Strategy became: Innovate complete standardized solutions, incorporate them within the architectural platform, and drive the platform to a commanding position within a single, worldwide, harmonized, third-generation global mobile communications market.
Only a seamless global communication network will make the technology disappear into the fabric of human life, as the way we now stay connected with whomever is important to us and to whatever we want and value. Just as it has been the dream and desire of humankind in the past and continues to be so today, this is the future of humankind.
Tomorrow’s Chasm Crossing World Phone Elevator Message is: For people everywhere who are dissatisfied with confining cell phones that restrict where you can be, who you can connect with, and what you can do, our seamless universal world phone frees you to roam anywhere, to talk to anyone you choose or to many people at the same time, and to do almost anything you can do with a PC, unlike European 3G UMTS, which barely functions at all, Qualcomm has created a multimode, multimedia, application-rich communication device that lets you do what your heart desires with whomever, whenever and wherever you choose to learn, earn, work, or play.
If Qualcomm is not quite there yet, then anything it can imagine, it can master. And, the future needs and priorities of customers and end-users seem clear enough to make steady progress toward approaching seamlessness. Operators require an air interface that delivers always on megabytes at low cost. End-users want a high quality experience that derives from: (a) low cost delivery of bits even when the network is fully used; (b) vivid color-screen phones with a complete gpsOne, multimedia, and BREW capabilities; (c) Killer applications for work or play that combine features from position location, multimedia, interactivity, and rich streaming media technology, which are continually introduced or upgraded by C++ and Java entrepreneurs or ISVs using BREW for delivery, management, and billing; and (4) user-friendliness that includes multiple sources of connectivity to Wi-Fi, Bluetooth, and the Internet, with easy input devices from mobile terminals, like the use of PureVoice commands, GUIs, a virtual mouse, and a virtual keyboard.
By continuing to seek complete standardized end-to-end solutions, a complete mobile wireless spread spectrum solution can become a seamless part of a larger integrated communication network of networks. |
