Vulnerabilities in the mobile phone industry

Moore’s Law states that computing power will reliably double at a decreased cost every two years. This aligns with a growing trend in markets, whereby increases in technological prowess and capabilities, has decreased the time it takes to move products from conceptualization to commercialization. This means that technological advances that might give companies an upper hand on their competitors do not translate into sustainable competitive advantages because they are easy to copy and quickly rendered obsolete.

Take the mobile industry, which until recently had such high barriers to entry, that only a few service providers shared the pie. Mobile applications were initially not regarded as an essential part of the sale process. The focus was on what capabilities your phone had, what functions it was able to perform and how powerful it was. You had a few apps, but it had an insignificant effect on the actual sales of your handset.

This all changed with the arrival of Apple’s Iphone and the resulting success of its thriving App store. No longer did companies compete based on what functions they had built into their devices, be it the size of the screen, camera megapixels, battery life, and handy carrier-selected applications. The commercialization process shifted its focus, away from the consumers, to approaching hardware companies to attempt to convince them to make devices based on a platform, then getting a network operator to sell the device, and finally getting software developers to develop applications for the devices. It was then up to the consumer to decide which devices succeeded and which ones failed.

As companies continued to churn out an increasing variety of mobile applications, consumers ceased to pick their network carrier first and their phones second. Instead, they chose a device not for the network or its functions, but for what apps where available on it. Granted the apps still depend on your operating system (OS), however, it is now not a matter of creating an OS users will like, but one developers will like and make apps for, and this has left mobile industry leaders struggling to compete.

The introduction of apps to the mobile platform has revolutionized the way firms compete in the mobile space. This is no more apparent then from the current events taking place at the 2010 GSMA Mobile World Congress being held in Barcelona. The craze this year has been mobile applications: mobile operators are realizing that in order to be able to compete with the likes of Apple and Google’s Android, they will have to enter this market. This has led to a number of them joining forces-something we would not have seen in the past.

On the first day of the conference, twenty-four of the world’s leading network providers announced that they had formed an alliance to build an open global platform, application store to unite the numerous fragmented app stores in order to make the apps available in a centralized position for people to download. This also allows them to deliver applications across different mobile platforms and was supported by device makers Samsung and Sony Ericsson. Orange, O2 and Vodafone, mobile providers in the UK, also joined forces, in an attempt to take on Apple’s app store.

A company that has been able to take advantage of this change in what consumers look for, is Google. Google is becoming a big competitor in the mobile landscape: first releasing their open source operating system Android, and then releasing their specked out Nexus One in Q1, 2010. At this years Mobile World Congress (MWC), Google was present, however mobile giant Nokia wasn’t. Google revolutionized the platform game, by making its own Android platform open source. It used to be that you had a platform and kept it closed, and anyone who wanted to use it had to license it from you and pay a fee. Google has changed this model and made open source the way to go, as we can see from the slew of android phones coming out.

This trend is catching on, as Symbian at this years MWC introduced its Symbian 3 platform, which is its first fully functional, open source version of its platform. The draw of open source, is that it is open to individual contributors, device creators, third-party developers and more, which allows them to create compelling products and services based on your platform, essentially adding added value to your product.

Google has become such a threat that Vittorio Colao, CEO of Vodafone – considered the worlds second largest cell phone provider, (based on the number of subscribers) – suggested during its presentation at MWC, that regulators should intervene to prevent Google from capitalizing on its dominance in Web search and advertising to become a monopoly.

The constant innovation of technology has made it such that even industries outside of the Mobile space have to compete with the mobile industry. Mobile phones are now starting to compete with devices that access the Internet, computers, and even tablets. Mobile phones have transformed into smartphones, and are on their way to becoming superphones. People today use a slew of devices to access the Internet, and although the PC is still the chief method for most, various portable devices are usurping its dominance with smartphones at the head of the charge. With this vulnerability to the new, and the growing pace at which, technologies reach obsolution, the introduction of the internet and digital platforms, made it possible for new players like Google to enter the market and garner a slice of the market share.

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