Interview with Prof. Ravi Kalakota
The mobile business industry
might be in its relative infancy but many analysts think that eventually, its
impact on business will exceed that of the Internet itself. Please express your
I am very bullish on the future of the mobile Internet. Multiple trends --
networking, devices, telematics, enterprise applications and users-- are slowly
converging to make the mobile Internet the next big economic mega-trend.
The telecom industry is finally putting in the
necessary high-speed access infrastructure. The device makers have finally
figured out how to put a "true" first generation PC capabilities in a
handheld. Many global corporations have finally implemented the integrated
back-office (a combination of ERP,CRM) and are looking to increase the
return on investment (ROI) by enabling mobile employees to be more
productive. And, finally according recent estimates over 800 million
end-users worldwide are comfortable with using the World Wide Web. It is
important to realize that in a span of seven years (from 1997 onwards), we
have educated a sizable global population on a new way of doing things --
searching for information, communicating with each other, transacting
commerce. This is a major achievement, the likes of which have never been
The mobile Internet is simply the next step of the
computing journey - anywhere, anytime and anyplace connectivity. However while
the long-term trend is very clear, the timing and impact in the short-term is
murky due to volatile macro-economic conditions. So, mobile business models
that take a realistic and steady longer term perspective will do very well. The
business models that are build on exponential growth rates might not survive.
What are the consumer expectations from mobile business? Are companies in a
position to fulfill such expectations?
Consumers are pretty predictable. They are interested in new mobile experiences
that create value - save time, entertain, or make them more productive.
Figuring out what these experiences are and how to design and execute them is
the non-stop "product design" challenge. Also, consumers are expecting the
current easy-to-use cell-phone experience to carry over to the mobile business.
Unfortunately this is not going to be feasible in the short term. There are
enormous technical and integration challenges that have to be overcome to make
mobile business easy-to-use. However, part of the problem has been created by
telecom companies that over-hyped the vision and under delivered.
What will be "killer" applications for 3G?
On the consumer side, I see three distinct categories of killer apps. The first
one is, Edutainment - a mixture of entertainment, games and education. Quiz
shows are a great example of edutainment. They present knowledge in an
entertaining way. Similar formats are required to satisfy end-users who are
interested in killing time while in a train, standing in line or waiting for
someone. The second category of killer apps is multi-media messaging. I think
we have barely scratched the surface of multi-media messaging and
communication. The real-time war images from Iraq that had people glued to the
TV sets is an example of the power of this multi-media communication. Imagine
everyone being able to do this. It will unleash a new form of information
gathering that is both powerful and unsettling at the same time. Finally,
real-time personalized "impulsive" transactions on-the-go are finally feasible.
For instance, I am in a foreign city and want to buy a ticket to concert or a
basketball game at the last minute. It is quite hard to execute this type of
transaction. To be able to check the events, seat availability and actually
purchase when the impulse is strong is going to be feasible.
How will the players in the mobile industry extract value from 3G?
This is rather interesting question. Let me answer this by looking at the
competitive position of different players in the closed value chain. The
telecom companies like Vodaphone have paid billions for the 3G licences because
they were expecting monopoly rents from the "spectrum rights" asset. However,
these firms are in great danger because of the economics of substitution. There
is enormous incentive for other players in the marketplace to find alternatives
to 3G like Wi-Fi. This in turn destroys the very economic foundation of 3G as
the monopoly fails to extract the necessary rents and disintegrates. As long as
there is stable incremental innovation, the 3G infrastructure players are well
positioned. But if there is a disruptive technology like improved Satellite
Networking in the next five to seven years then they are in big trouble.
What do you think are the key challenges of the collaborative supply chain
models that are being developed for 3G?
The primary challenge is that these collaborative supply chains are being
developed on the basis of untested assumptions about consumer and market
behavior. Assumptions such as people want to listen to music on their mobile
device prompted significant merger and acquisition activity in 2000. Vivendi
Universal is a good example of assumption driven business model design. What
happens if these assumptions don't come true as the strategy experts predict?
Many of the collaborative supply chains will have to be disaggregated and
re-aggregated. It is really important that we rigorously test assumptions
before creating large-scale business models. Unfortunately most managers tend
to make quick decisions without enough data or facts to back it. This will
prove to be costly. The recent developments in Europe where most of these
collaborative supply chains were created are proving this point.
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