It has taken less than 20 years for the human race to use mobile technologies to pretty much re-launch our species’ communication abilities. During those 20 years, we went from 12 to 90 mobile phone subscriptions every 100 people, everywhere (source).
Fuelling this breakneck growth was the rapid expansion of a succession of brands that were caught in cycles of ‘creative destruction’ — they would rapidly rise to dominate the market, then quickly fall into oblivion. Each new brand replacing the old by capturing the zeigeist, redefining what mobile communication means by enabling new forms of communication and driving the emergence of new ‘value networks’.
The Motorola era
In early 1996, Motorola became the first brand to ‘own the mobile space’ with the StarTac, the most wearable phone of the time.
Motorola’s raison d’être was using technology to empower productivity; and the StarTac a jewel of miniaturization for voice communication. Motorola sold over 60 million StarTac (source of sales figures) and three years after its launch, in 1999, was valued over $90 billion (source of market capitilisation figures). From that peak, Motorola kept on sliding — it sank to a $10 billion valuation in 2008, before being split in two and finally selling its mobile business to Google in 2011 (see, What happened to Motorola).
The Nokia era
Nokia took over from Motorola as the dominant mobile phone brand. Between 1999 and 2007, Nokia launched ten phones each selling in the hundreds of millions: from the record-selling 250-million Nokia 1110 and 1100 to the 100-million Nokia 1208.
Nokia embodied democratisation, self-expression, entertainment and text communication alongside voice. It had the best user-experience of the time. Nokia phones stood out for their astonishingly human design: rounded, anthropomorphic, colourful, with plenty of options to personalise (like covers and ring tones) — and clever ways to create and play media.
Around Nokia, new roles emerged that expanded Motorola’s value network of suppliers, manufacturers, operators and retailers. A lively and dynamic content and service ecosystem formed with game developers, ring-tones producers, text service operators, accessories manufacturers, repair outfits and second-hand retailers. In 2000, Nokia market capitalization surged to $222 billion, then stabilized at about $75 billion only to start a long decline to a low of $16 billion in 2013.
Like Motorola earlier, Nokia was split in two and the mobile business sold to Microsoft in 2014.
The Blackberry era
Nokia’s dominant position was briefly challenged by Blackberry, the first brand to sell new services integrated to handsets. Blackberry reframed the mobile phone as the ‘ultimate texting machine’, bringing secure email and instant messaging to the very heart of the mobile experience.
One of the iconic designs of the mid-2000, Blackberry QWERTY phones were the first embodiment of the pocket PC for 24/7 connected productivity. Thanks to Blackberry, the mobile industry value network expanded further, via services to corporations delivered by IT suppliers and professional app developers. In 2008, Blackberry surged to a $74 billion valuation, but equally quickly saw its market capitalisation dwindle to a low of $6 billion in 2012.
The Apple (and Android) era
At the time, none of the incumbents seemed to fully realise how the web had fundamentally transformed people’s lives and democratised innovation. Both Nokia and Blackberry phones didn’t support a decent web browsing experience, nor connect seamlessly media such as photos and music to the corresponding web services that people used daily on their computers. Also, the development environment they offered to the growing community of innovators was clunky.
And the launch of the Apple iPhone in 2007 — followed a year late by the first Android phone, the G1 — initiated a new cycle of creative destruction.
Since 2007, the full touch-screen form factor and its surrounding apps ecosystem has dominated the global market, and these phones have become the hub of the digital life of billions of people.
They were around 237 million smartphone users in 2008, but grew to 1.5 billion five years later, with Millennials forming the lion’s share. The latest projections suggest there will be 2.9 billion users by 2017 (source). Smartphones are now the principal device for enjoying media, creating content, communicating on social media and do countless practical tasks. Being the platforms of choice for apps, iOS and Android have massively extended the mobile value network. Now it includes a wealth of start-ups, corporations, agencies, physical-products manufacturers, developer communities and media outlets.
Is this the apex of mobile evolution?
Does this mean that the full-screen touch smartphone will dominate for years to come? Has the mobile industry finally reached a state of equilibrium after nearly 20 years of development at a breakneck-speed? Or is this period of relative stability the calm before a new storm?
There are weak signals in the mobile market that hint to a coming storm:
- Smartphones have begun to look and work the same, creating the perception that innovation is slowing down.
- Network operators’ margins are being squeezed, which in turn means that their phone subsidies are being reduced.
- There’s now a thriving market for refurbished smartphones, and customers are holding on to their smartphones much longer.
As replacement cycle slows down (source), we’re seeing data become the main support for communication and WiFi the primary means of accessing the mobile internet (source). Consumers are switching away from the fixed contracts offered by traditional operators, and moving towards niche operators who offer free services or flexible plans with no contracts.
These signals are another expression of a wider trend, driven by Millennials, to challenge the status quo, establish new institutions and seek meaningful relationships with brands. Brands that disrupt markets do so by disintermediating and by blurring the boundaries between the traditional roles of expert/layman; producer/consumer; service provider/user; and by creating new forms of engagement and participation. Think, for instance, of Uber and the new role of car owner/professional driver. Or AirBnB and the new role of home owner/hotelier.
In that respect, today’s dominant smartphone brands, while being incredibly successful, operate like traditional institutions. Their R&D departments work in great secrecy; co-development is strictly regimented; new products are planned years in advance and launched every six to 12 months; only a fraction of the distribution is direct.
The xiaomi era?
There is however a new-comer, Xiaomi, a start-up created in 2010, that plays by a different set of rules.
Xiaomi sold over 61 million devices, primarily in China. Not only that, it has done so by introducing a series of radical business model innovations. By launching devices every 24 months, it leverages components’ depreciation to sell premium products at mid-range prices.
Like any new start-up, it has a clearly defined target — the nascent young middle class in Asia who are willing to pay a bit more for state-of-the-art devices and are also keen to buy locally designed products. Xiaomi sells online only, foregoing the cost of brick and mortar stores and taking full advantage of digital marketing channels.
More importantly, Xiaomi boasts one of the most dedicated fan bases. It even rivals Apple’s. Now they have successfully engaged their most loyal customers to provide feedback on their weekly OS releases. Millions of fans test the new releases in search of bugs and possible tweaks, and are involved in defining the improvements that will be delivered in the following release.
In this way, owning a Xiaomi smartphone makes you part of an open innovation community in which consumers are also designers and the product experience keeps getting better. That makes Xiaomi the first in the market to offer crowdsourced product innovation, taking the apps developer ecosystem to a new and interesting place.
Customer-centered value networks
The rapid evolution of mobile is not only fuelled by people’s boundless desire to communicate and interact as much as possible. It’s also driven by the ability of brands to involve and engage communities of innovators and form broad, diverse and vibrant value networks.
In less than 20 years, the mobile ecosystem has opened its value networks to suppliers, network operators, distributors, accessory manufacturers, media outlets, app developers, service providers and finally, consumers/designers.
But this story of participation and open innovation is not confined to the mobile industry. Similar transformations, albeit less dramatic, are happening everywhere. So keep your eyes peeled…
(researched and written with my colleague and friend Daniel Gonzalez)