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The Mobile Revolution: The World In The Palm Of Your HandsTRANSCRIPT
C O N F I D E N T I A L: © Copyright 2001–2011 Milestone Group Inc. All Rights Reserved.
AMSTERDAM
BANGALORE
BOSTON
HONG KONG
SILICON VALLEY
The Mobile Revolution: The World In The Palm Of Your Hands
June 6–10, 2011Sydney
C O N F I D E N T I A L 2© Copyright 2001–2011 Milestone Group Inc. All Rights Reserved.
Strategy consultant, investor, speaker, deal junkie, board advisor, pundit, business voyeur, corporate
shrink and all-around accelerant/catalyst
2001–Present Milestone Group (Silicon Valley based, global reach) Strategy/operations consulting across tech, media and telco (TMT) Obsessive focus on everything related to revenue growth Small investment fund, M&A advisory
1998–2000 Protégé Group (Silicon Valley & London) VC investment model with services component Made 20+ tech investments during Bubble 1.0; got out unscathed
1991–1997 CSC Index (London, Amsterdam, Sydney) Pioneers of business reengineering, F500 companies, various verticals,
CEO and executive level strategy consulting Clients included Volvo, Union Bank of Switzerland, Bhs,
AstraZeneca, Shell, Novartis, Norsk Hydro, SITA, NRMA, CBA, Mastercard/EuroPay, Telenor, Scottish Power, IRS, Occidental Petroleum
1987–1990 Symantec (Silicon Valley, Amsterdam) Business development, M&A and international roles
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SMH today : 197 students in one room
''Everyone thinks we've got a barn with 200 ferals running around and teachers screaming,'' Mr Whitby said. But what the Herald saw - and heard - last week at St Monica's Primary at North Parramatta was a mega classroom in which 197 students worked in different-sized groups at a range of tasks at the same time, seemingly without disturbing each other.
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5 Billion Worldwide 4.2 Billion Worldwide
Globally, there are now more mobile phones in use than toothbrushes …
C O N F I D E N T I A L 5© Copyright 2001–2011 Milestone Group Inc. All Rights Reserved.
Personal Computing
1980s
Note: Winners from 1950s to 1980s based on Fortune 500 rankings (revenue based), desktop Internet winners based on wealth created from 1995 to respective peak market capitalizations. Source: Factset, Fortune, Morgan Stanley research.
WinnersIBMNCRControl DataSperryHoneywellBurroughs
WinnersDECData GeneralHPHoneywellPrimeComputervisionWang Labs
WinnersMicrosoftCiscoIntelAppleIBMOracleEMCDellHPCompaq
WinnersGoogleAmazoneBayYahoo!AOLTencentAlibabaBaiduRakuten
?
Technology cycles – wealth creation/destruction New companies often win big in new cycles
Winners
MiniComputing
1960s
MainframeComputing
1960s
Desktop Internet Computing
1990s
Mobile Internet Computing
2010s
6© Copyright 2001–2011 Milestone Group Inc. All Rights Reserved. C O N F I D E N T I A L
Silicon Valley is rapidly disrupting the mobile ecosystem globally – five assertions
Five Assertions:1. The mobile device is the next compute platform
2. In technology, ‘value’ historically migrates from hardware to software
3. Silicon Valley is very good at scaling software based businesses and has a superior support ecosystem of talent, ideas, risk taking, ambition, agility and money to scale new technology based businesses fast
4. Companies in any industry compete as much with traditional industry participants as they do with software-based disruptors
5. All industries globally thus need to have a thoughtful ‘650 Strategy’
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Apple iPhone + iTouch + iPad Ramp –The likes of which we haven’t seen before
iPhone + iTouch vs. NTT docomo i-mode vs. AOL vs. Netscape Users
First 20 Quarters Since Launch
Note: *AOL subscribers data not available before CQ3:94; Netwcape users limited to US only. Morgan Stanley Research estimates65MM+ netbooks have shipped in first 11 quarters since launch (10/07). Source: Company Reports, Morgan Stanley Research. Data as of CQ3.10.
C O N F I D E N T I A L 8© Copyright 2001–2011 Milestone Group Inc. All Rights Reserved.
Silicon Valley: home to 72 years of technology innovation
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SmartPhones
Mobile ICTechnology
MobilePayments
MobileAdvertising
SocialNetworking
MobileBackend
MobileOperators
Network/Customer Management
NetworkInfrastructure
WirelessTest Equipment
Silicon Valley is now undeniably the center of the mobile ecosystem globally
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Mobile operating systems – attackers (Apple and Google) driving market excitement and momentum
Global Unit Shipment Share of Smartphones by Operating System,Symbian (Nokia)/Blackberry (RIM)/iOS (Apple)/Android (Google)/Others, 1Q06–3Q10
Note: *iOS excludes iPod Touch and iPad shipments as they are not smartphones. Others include Windows Mobile, Palm OS & WebOS, Linux and other proprietary smartphone OSes. Call outs on the left side represent market shares in CQ1:06; call outs on the right side represent
market shares in CQ3:10. Source: Gartner.
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Apple is the most extraordinarily different company ever created
1. Go Into Your Cave – “tech industry is an echo chamber”
2. OK To Be King – the story of the iDVD
3. Transcend Orthodoxy – results, not dogmatic
4. Just Say No – hold back features
5. Serve Your Customer, No Really – a personal story
6. Everything Is Marketing – brand trumps, think religion
7. Kill The Past – not fanboy hallucinations
8. Turn Feedback Into Inspiration – inspiration, not feedback
9. Don’t Invent, Reinvent – Kings of the remix
10. Play By Our Own Clock – long range focus
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Mobile devices are the new thin client
Services in Cloud
4G Networks
The NEW THIN CLIENT
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Vic Gundotra, VP Google Engineering:The web has won and users of mobile phones will get their information and entertainment from browsers in future.
The Cloud is becoming more and more intelligent, and mobile devices will be the remote control
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What is the future of app(lets)?
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Japan social networking trends show how quickly mobile can overtake desktop internet access
Mixi mobile page views = 84% vs. 17% four years ago
Mixi’s (Japan’s Leading Social Network) Monthly Page Views, Mobile vs. PC, CQ2:06–CQ3:10
Note: Mixi is one of Japan’s leading social networking sites on PC and mobile with 22MM registered users as of 10/31/10. It monetizes mobile usage via sales of avatars, customized homepages and other premium services.
Source: Company reports. Morgan Stanley Research.
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Facebook/Apple/Google = platforms of different types … each with rapid innovation
Source: PC World, comScore (global user data for Facebook and Google as of 9/10), Facebook, Apple, Google (as of CQ3).
620MM users+51% Y/Y
550K+ Apps500MM+ Downloads
120MM users+111% Y/Y
300K+ Apps6.5B+ Downloads
940MM users+11% Y/Y
cQ3: CPCs +2% Q/QPaid Clicks +16% Y/Y
SocialNetworking Mobile
SearchGoogle
Apple iPhone/iTouch/iPad
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Mobile revolutionizing commerce – with constant product improvements
Location-Based ServicesEnable real-time physical retail/service opportunitiesTransparent PricingInstant local + online price comparison could disrupt retailersDiscountsInvitation-only time-based selective sales gaining tractionImmediate GratificationOTA (over-the-air) instant digital product + content delivery
Source: Company Reports, Morgan Stanley Research.
Location-Based ServicesPriceline.com iPhone App
Finds hotel dealsin your area
Transparent PricingShopSavvy Android App
Comparison shoppingamong online + local stores
DiscountsGilt iPhone App
Designer handbagsup to 70% off
Immediate GratificationiTunes Store on iPhone
Music/video/appsdelivered wirelessly
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Cellular bandwidth scarcity is likely to exacerbate in the medium to long term
Global mobile data usage
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Mobile connections
4,000
Mobile connections in Asia (million)
100
3,333 83
2,667 67
2,000 50
1,333 33
667 17
0 0
Market Penetration (%)
2007 2008 2009 2010 2011 2012 2013 2014 2015
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Devices will improve upon multiple axes
Screen resolution
Screen visibility
Battery longevity
Battery power Resilience
User interface
Weight
Storage Processor
speed
Multiple processes
Interconnectivity
Security
Improvements will enable new device form factors.
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Falling ASPs will enable device accumulation
2009A 2014E
Units(million)
Average Selling Price
MarketSize
Units(million)
Average Selling Price
MarketSize
Smartphones 170 $200 $34B 700 $150 $105B
Tablets 1 $600 $2B 70 $300 $28B
Netbooks 30 $350 $11B 40 $250 $10B
Notebooks 162 $750 $122B 150 $600 $90B
Desktops 137 $620 $85B 125 $500 $63B
TOTAL 500 $504 $254B 1085 $306 $296B
Sources: actuals: IDC, Gartner; forecast: Deloitte Touche Tohmatsu Limited, 2010
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Large emails
Rich browsing
Hi res photos
High bandwidth audio
Video
The type of network used will vary by medium, with video only being used occasionally
on cellular mobile
Cellular Mobile
Wi-Fi
Short range
Device Synchronization
Video
Photos
Text browsing
Voice
Short low-res video
Low-res photos
Low bandwidth audio
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Networks: summary
1. Mobile network capacity is likely to become increasingly congested
2. 4G, 5G will enable networks to offer ever faster network download and upload speeds
3. The ability to expand network capacity will be constrained by cost, spectrum, planning permission
4. Consumers will acquire an increasing number of devices whose utility is a function of their ability to be connected
5. Cellular networks are likely to be increasingly blended with Wi-Fi networks and short range communications technologies
6. Multiple network standards are likely to co-exist. An operator will offer a blend of 10+ network technologies
7. 20% of individuals will represent 80% of network usage.
8. Peak download speeds of 1 Gbit/s will be available to 20% of homes.
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Content: perspectives
Consumers are likely to be interested in the same types of content as they consume today.
Consumers are always going to want to: communicate, be entertained, be noticed, work, transact, be educated, discover, be guided. Mobile will address this as far as the technology is economically able to do so.
The fidelity of the mobile media experience (sound quality, screen resolution, refresh rate, # of dimensions, range of content available) will steadily increase.
The portable video experience will never equate to the television experience, as screen size (and hence visual impact) can never be miniaturised.
Mobile media consumption is likely to mirror that on other media devices, from car radios to television sets.
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Embedded Mobile & IoT
A WORLD OF CONNECTIONS …
Healthcare UtilitiesGovernmentConsumer Electronics Automotive
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Mobile connectivity drives new ways to do lots of things faster/better/cheaper from the palm of your hand
More Connected – Real-time connectivity/24x7/in palm of hand
More Affordable – Wi-Fi nearly ubiquitous in many developed markets … for many/3G tiered pricing lowers adoption barrier …
Faster – Near-zero latency for boot-up/search/connect/pay …
Easier to Use – User interface revolution + location awareness provide something for nearly everyone …
Fun to Use – Social/casual gaming/reward-driven marketing …
Access Nearly Everything – Music/video/documents/’stuff’ in cloud …
Longer Battery Life – Hours of continuous usage …
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‘Disruptive innovation’ – Clayton Christensen
Source: “Untangling Skill and Luck: How to Think About Outcomes – Past, Present and Future” (7/15/2010).Michael Mauboussin, Legg Mason Capital Management
Christensen studied why great companies with smart management and substantial resources consistently lost to ‘disruptors,’ companies with simpler, cheaper, and inferior products.
Two Ways Disruptive Innovation Can HappenTwo Ways Disruptive Innovation Can Happen
Low-End Segment Strategy
Disruptors introduce a product that is at the low end of the market and that is neither profitable for the incumbents nor in demand from the incumbents’ customers …
This becomes a problem as the disruptors improve their offering and move up market, eventually encroaching on the core business of the incumbent, and doing so with a lower cost structure.
Non-Consumption Strategy
Disruptors introduce a product that was unavailable to consumers before, effectively competing with non-consumption.
Amazon.com/Netflix/PayPal … iPhone/iPad/Facebook …
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Unusually high level of innovation – from new attackers
Facebook – Real-Time Communication/Social Graph/Credits
Zynga – Social Gaming/Virtual Goods/Offers (Reward-Driven Marketing)
Twitter – One-to-Many Real-Time Broadcast
Open Table/Yelp/Foursquare/Shopkick – Location-Aware Mobile Services
Gilt/One Kings Lane/Rue La La – Time-Based ‘Flash’ Sales
Groupon – Social Group Buying
Tapulous/Digital Chocolate/Booyah/Ngmoco :) – Social/Mobile Gaming
Pandora/Spotify – Personalized Music
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Unusually high level of innovation – from incumbents
Apple – iPad/iPhone/iTouch/iTunes/Multi-Touch Input/
Google – Android/Chrome/YouTube/Display Advertising/Web Apps/Instant + Voice Search
Amazon.com – Kindle/EGM (Electronics & General Merchandise) Sales/Mobile Apps/AWS (Amazon Web Services
Tencent – Virtual Goods
Nintendo/Sony/Microsoft – Motion Sensors (natural gaming input)
PayPal – Mobile + Digital Goods payments
Netflix – Streaming Content
Salesforce.com – Chatter (real-time enterprise collaboration platform)
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Category Type Description of Type Business Example
FINANCE 1. Business Model How you make money Openwave provided secure internet gateways for mobile operators through a managed service instead of by selling network infrastructure.
2. Networks and Alliances
How you join forces with other companies for mutual benefit
Salesforce.com has created AppExchange, a partner development ecosystem where hundreds of third-party developers further extent Salesforce.com functionality and have a new channel to market.
PROCESS 3. Enabling process How you support the company’s core processes and workers
Google can deliver it’s innovative search and ad-related technologies to it’s customers because it has extremely stringent hiring policies and very enlightened employment benefits
4. Core processes How you create and add value to your offerings
iPASS began as a billing platform for Enterprise customers and evolved into a Roaming clearinghouse and Wi-Fi aggregator for its Operator’s.
OFFERINGS 5. Product performance
How you design your core offerings Apple products (in both it’s original and newest form) took the market by storm, combining multiple dimensions of product performance.
6. Product system How you link and/or provide a platform for multiple products
Microsoft Office “bundles a variety of specific products (Word, Excel, PowerPoint, etc) into a system designed to deliver productivity in the workplace.
7. Service How you provide value to customers and consumers beyond and around your product
Facebook continues to lead all major social networking sites in customer satisfaction ratings due to its hyper-accurate understanding of its customers, and its open platform for new apps that address their desires.
DELIVERY 8. Channel How you get your offerings to market
Virgin Mobile revolutionized Pre-Paid Cellular by negotiating end-cap display space with big-box retail (like Target), 2 mos. before Christmas.
9. Brand How you communicate your offerings
Intel organized the largest coup in the history of brand building with Intel Inside, making their CPU a mandatory a component in the PC ecosystem, one that spans 94% of the market, from consumers to corporations.
10. Customer experience
How your customers feel when they interact with our company and it’s offerings
Electronic Arts is the No. 1 Mobile Game Publisher globally as a result of the positive Customer Experience of both the end-users and the clarity and quality of delivery they established with the Mobile Operator community.
New Innovation Comes in Many Forms
Source: Doblin
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Think Mobile Augmented Reality Is Somewhere Far Off in The Future?
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Think People Will Always Carry Two Phones, One For Work and One For Personal?
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Think the Keyboard Is Here to Stay?
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Think Mobile Payments Won’t Happen For Awhile?
C O N F I D E N T I A L 37© Copyright 2001–2011 Milestone Group Inc. All Rights Reserved.
The Discipline of Market Leaders, Michael Treacy and Fred Wiersema, copyright 1995
Value Disciplines Framework There are three generic
business strategies for any business, regardless of size or industry – Product Leadership, Operational Excellence or Customer Intimacy
Pick one discipline and be world-class at it; develop your entire business model and business process around it; that is how world-class value is delivered and sustained
You cannot be world-class in two
Value
Compete on Focus – We Provide the Best Total Solution to Meet Your Unique NeedsWe help you define your problem, identify the best solution and take charge of implementing it
Compete on Differentiation - We Provide the Best ProductsOur products have the greatest performance impact or experiential impact for our customers
PRO
DU
CT
LEAD
ERSH
IP
CUSTOMER
INTIMACYOPERATIONAL
EXCELLENCE
Compete on Cost – Nobody Provides Customers With Lower Total CostThe combination of our prices, product reliability and hassle-free service is unbeatable
There are only three fundamental business strategies for any company to pursue
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Structure follows strategy
Definition of Valuee.g., ‘Deciding which race to run …’
PRO
DU
CT
LEAD
ERSH
IP
CUSTOMER
INTIMACYOPERATIONAL
EXCELLENCE
Value
BestProduct
BestPrice
BestExperience
Delivery of Valuee.g., ‘Deciding how best to run the race …’
ManagementSystems
InformationTechnology
Core Business Processes
Values, Beliefs& Behaviors
Organization,Roles & SkillsREQUIRES
ENABLES
FOSTERS DEMANDS
ENABLES SUPPORTS
REINFORCES
SUPPORTS
The key is to know how customers perceive valueand to translate this into the design of the business system
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Product Leadership Operational Excellence Customer IntimacyOrganization Structure and Skills
Ad hoc, organic and cellular High skills abound in loose-
knit structures
Limited empowerment on front line
High skills at the core of the organization
Empowerment close to point of customer contact
High skills at boundary of the organization
Core Process Performance
Product development time-to-market, and market communications
Emphasize product breakthroughs
End-to-end supply chain optimization
Emphasize efficiency and reliability
Customer knowledge and service, marketplace management
Emphasize flexibility and responsiveness
Performance Measures and Systems
Individuals’ innovative capacities are rewarded
Risk and exposure management
Compensation tied to cost and quality
Command and control, SOPs Quality management
Customer equity measures are rewarded (e.g., lifetime value)
Customer satisfaction and share measured and rewarded
Company Culture
Concept, future-driven Experimentation and
‘out-of-the-box’ mindset
Process, product-driven Conformance, ‘one size fits
all’ mindset
Customer-driven Variation and ‘have it your way’
mindset
Information Technology Platform
Person-to-person communication systems
Technologies enabling cooperation
Integrated, low-cost transaction systems
The system is the process
Granular customer databases linking internal and external information
Strong analytical tools
Different business strategies result in very different ‘operating models’
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10 big mobile disruptors / opportunities for any company to think through
1. Mobile Payments
2. Augmented (Everything)
3. Time shifting, Place Shifting
4. Internet of Things & Embedded
5. Generation C
6. Socialization
7. Gamification
8. Video
9. Cloud/Virtualization
10. Big Data and Analytics
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Keep connected….
Mark A. ZawackiManaging Partner & FounderMilestone Group
Mobile: + 1 (650) 391 8484