Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
Mobile network operators place a high premium on control – of their network, services, brand and most importantly, their customers. This is not surprising, as operators that invested heavily in the development of compelling mobile communications offerings now face challenges arguably more complex than at any point in history. One of these enduring challenges is presented by over-the-top providers that are starting to add differentiated value and offerings to MNO customers. As these providers further distinguish value, MNO’s may start to lose position as the “trusted adviser” in the relationship.
Industry data reinforce the very real threat OTT providers pose to mobile operator voice, messaging and unified communications revenues. In a February 2013 “Ovum View,” the research firm forecasts that messaging revenues (a bedrock source of mobile operator data revenues) will continue to decline in many markets due to price declines and the impact of OTT social messaging services. Ovum also estimates that OTT messaging is costing mobile operators billions of dollars in revenue every year.
The Telco 2.0 Initiative, in a November 2013 report, further underscores the challenge by estimating that telecom providers could lose up to $172 billion from core revenues in five years as a result of OTT competition, vulnerable pricing structures, economic pressures and societal changes. The forecasts were taken across the United States and eight other developed nations, including Canada, France, Germany, Spain, the United Kingdom, Italy, Singapore and Taiwan.
A natural reaction to threats of this nature is for the operator to dig in deeper and tighten its grip, under the assumption that exerting greater control prevents the OTT players from gaining a stronger foothold. But these actions speak more to surviving rather than thriving, and mobile operators should use this critical juncture as an opportunity to recognize the strong assets at their disposal to attract and retain business and residential customers.
Seizing on this opportunity requires that mobile operators focus on several key strategies:
Start to focus on your why, not your what
Organizations today want to connect with a mobile operator based on why you do the things you do, not what you do. To put in plainly – if customers believe you have tunnel vision around the latest phones, speed of network, coverage, etc. – then someone can beat you just based on those elements and in the end margins will continue to erode. If you are taking a step back and building a strategy around the fact that mobile is the next wave of massive productivity for businesses, mobile operators must convert that statement from lip service to reality.
Open, rather than close, the network
Despite a desire to maintain control of their networks and customers, mobile operators have pursued strategies with partners that unlock new customers and revenue opportunities – while enhancing the user experience. For example, operators have extended beyond voice and data services, to mobile applications that enterprises and consumers demand. However, this foray has tended to focus on mobile operators developing and branding their own apps.
Over time, mobile operators recognized the value of tapping a global ecosystem of developers and other best-of-breed application providers that could complement and accelerate organic innovation. The new paradigm means that while network ownership remains valuable, operators must resist the urge to constrict network access in the face of the OTT threat and embrace the benefits that come along with opening the network to third party application developers.
Opening the network to innovative, best-of-breed solutions that offer differentiation and market appeal is a must for today’s mobile operator. For example, rather than ceding the market for emerging services such as mobile payments to OTT providers, recognize the opportunity to offer device-level open application programming interfaces that can bring tighter capabilities between credit card authorization and data collection, or image capture and data collection.
Open APIs enable mobile operators to tap into a pool of innovation that can be difficult and costly to produce organically, and unlock new revenue and business opportunities for mobile operators. At the same time, changing the perception among the developer community of which platforms are truly open and can serve as a springboard for third-party applications to massively and rapidly scale.
In 2013, Manfred Bortenschlager, who directs mobile API strategy at GSMA, conducted a compelling developer study that included more than 700 respondents, in order to find out what (if any) assets MNOs can provide of value to developers. The results point to an opportunity for mobile operators to close the gap between the percentage of respondents who use MNO assets exposed through APIs today (33%), and the percentage of developers who see a relevant value for them (81%). Not only do developers eye appeal in single operator APIs, but 93% view cross-operator API collaboration as the most valuable aspect of open APIs.
Don’t underestimate value of ‘killer business apps’
SMS-replacement messaging service WhatsApp (acquired by Facebook in February 2014 for $16 billion) sees more than 50 billion messages per day. WhatsApp is just the latest example of the value killer apps can deliver – not only to the app developer but to savvy mobile operators that tightly integrate with these apps and provide business customers and consumers with ready access to them. WhatsApp is an SMS Goliath but far from an isolated case, as other services such as Snapchat gain a foothold in markets that used to be killer “add-ons” for mobile operators.
Mobile operators should continue to devote resources to internal application development, but the opportunity to identify and deliver killer apps expand greatly when the operator provides a platform inclusive of third party developers. In an era where mobile offerings grow closer in features, functionality and price, killer apps can prove, in some cases, an even more compelling draw than the operator brand itself.
Today, an enterprise customer or consumer can take an application with them as they churn from one service provider to another. By providing a platform for third-party applications specific to a service provider’s billing system, or taking a bundled value approach – particularly “killer apps” – these customers become stickier and less likely to shift to a competitor.
While killer consumer apps tend to garner the headlines, killer business apps can an equally potent revenue and customer driver for mobile operators. Small businesses represent an especially fertile ground for innovative applications that can allow their businesses and workforces to enhance productivity and improve collaboration – whether it is an app as simple as mobile data collection for field workforces or easy-to-use mobile payment authorization solutions.
Consider all of the above – but do it faster. There is an oft-used phrase, “too big to fail,” but in this case, an operator should never be “too big to innovate” – because when your customers move faster then you and you stop leading, innovation will overcome you from other directions.
Adapt to evolving needs of the mobile ‘prosumer’ and small business
Over the past several years, mobile operators have been able to laser focus on meeting the increasingly demanding needs of two distinct customer markets: business and consumer. For businesses, mobile operators developed offerings centered on the desire for reliable communications capabilities that are device agnostic, the ability to access office communications services on mobile devices, and a seamless user experience that cuts across an individual’s employer-provided and personal (bring-your-own-device) smartphones and tablets.
The bleeding of the business professional and consumer worlds might create a singular target, but a target that can be far more challenging to satisfy. But within the challenge lies an opportunity for mobile operators to capture the prosumer market in a few different ways. First, developing mobile solutions that encourage enterprise end-users to use their smartphones more frequently, for applications beyond voice, text, e-mail and Web, improve engagement and customer stickiness.
Mobile operators must think creatively about how to bundle solutions for prosumers and SMBs that will energize them and spur device/service engagement. For example, bundling solutions with air-time plans, incorporating services on the phone bill and thinking creatively about what each customer segment within the SMB category wants and needs is critical. For a small business owner, retail can be an option for promotion.
Small businesses with highly mobile workforces also have evolved expectations of how they want to pay for their service. Much as the Web and alternative content sources are pushing cable and satellite television services to re-think rigid programming packages, mobile operator customers expect to find plans tailored to their specific needs – and those of their businesses.
Mobile operators can apply the same type of innovation to pricing and service that they do to products and technology. This flexibility can take the form of “pick your own bundle” or “best-of-breed” bundles that allow customers to rapidly assemble voice, data and applications as they see fit, all on a single invoice or bill for full customer convenience.
Bundle collective power of best-of-breed partner solutions with own strengths
Mobile operators are becoming better and better at turning to best-of-breed partners – such as mobile application providers – to strengthen their offerings. This approach harnesses the power of the operator network, devices and a powerful sales channel that knows how to sell third party solutions effectively to target customers.
Rather than trying to replicate OTT success with me-too services, focus on “differentiation through integration.” Creating differentiation in the marketplace is absolute, and with the commoditization of phones, coverage, prices and speeds, a mobile operator’s ability to differentiate – particularly for enterprise services – will come down to creating compelling bundles that can be delivered through a common mechanism. Today, we are seeing a small handful of application categories demonstrating the ability to attract users en masse: payment authorization/credit card processing, data collaboration/data storage and data collection. Mobile operators can differentiate through integration with best-of-breed third-party providers with innovative, proven solutions in these three categories.
James Quigley is co-founder and CEO of Canvas, the leading global provider of mobile business apps.
