7 Jul 2010

Mobile Phone Manufacturers Need to Forget About the Software

Raj Singh has a guest post on MobileBeat on how can mobile manufacturers differentiate in this new mobile world. Raj poses a number of strategic choices or options for the manufacturers. My impression is that many of these take a look at the major technology opportunities for the mobile industry as a whole. When I set out to write this article I expected to dispute some of Raj's ideas, but as I developed my own I found myself building on them.

Mobile phone manufacturers are in a difficult place. As Rich Wong noted their industry has shifted from one where the operators had the power to one where a new industry participants, the operating system developers, have captured the power (although the operators still exert a lot of power). As Raj highlights in his post much of the revenue potential of this industry will be controlled by the one who owns the customer billing relationship suggesting maintaining brand by finding a unique OS or developing an effective customer billing model.

I wouldn't suggest building their own OS, but leveraging what is out there. While they may have developed OS's in the past, they were never good at it. I doubt they have the capabilities to compete in this arena. While this will be the most lucrative part of the ecosystem pie, it would be a tough win. Apple and Google have huge leads. Microsoft is in the background willing to spend obscene amounts of money to become relevant in mobile. I recommend staying within their competencies and trying to win their piece of the pie (and possibly some of that control).

That means building the best hardware (like many of Raj's points) and thinking about process innovation on the supply and customer sides. The model to follow may be Dell and how they dominated the computer hardware market through supply chain innovation and direct to consumer sales. I am not a technology expert, nor do I have a detailed understanding of their supply chain, but I can add some pie in the sky ideas to the conversation. Some questions to ask:

  • How can we build a direct to consumer relationship that the operators will respect?
  • How can we build quality phones that can work on a CDMA and/or GSM network for a reasonable price?
  • How can we get some revenue share from the carriers like Best Buy for every subscriber we provide?
  • How can we go MVNO and control the full relationship?
  • How can we set up manufacturing to allow customers to order custom-build phones?
  • How can we develop direct sales relationships with corporate IT departments as more and more of their employees are using mobile technology?

Mobile manufacturers are quickly becoming the commodity in this ecosystem. They need to make some move capture some of the industry power. This will not be accomplished by iteration. It will take innovation - I suspect it will be more process or business model innovation and less product innovation (leave that in the hands of the OS makers for now). How do you think the manufacturers become relevant again?