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Providing products or services that are commodities, meaning things that used to be premium but are no more, is a tricky thing. There once was a company that spent a lot of time thinking about how to stay away from “commodity hell” as they put it. This company offered the same service as many others did. They had no obvious competitive benefits in delivery, sometimes delivering both at a lower standard and at a higher fee than direct competitors. That’s a very challenging spot to be in and certain to put you out of business eventually.

Looking at the mobile operator industry in mature markets today one finds a similarity: they in fact offer a commodity too. A mobile operator’s service is something that people use every day but do not care much about it except when it stops working and when the bill arrives. Telecom operators have become utility companies and offer a service that most people find essential but uninteresting, just like a water or electricity company. There are two reasons this is bad news for operators.

First, offering a commodity means that you’ll have a hard time making people pay premium fees – because there is no premium in the service itself when there are others offering the same thing. Like electricity or consumer banking services. That’s exactly why someone invented the notion of “commodity hell”: once something has become a commodity there is no going back.

Second, offering a commodity also means that customers do not care much who delivers it – because the product or service looks just the same. Electricity isn’t differentiated between suppliers; as long as the bulb lights up when you flicker the switch you’re good. Most mobile operator customers reason the same way: if you can make a call from where you are and browse the web at reasonably high speeds you’re good. Today all operators can make that happen. That means there are few reasons for a customer to stick to their current operator if someone else offers the same thing but at a lower price. The perceived value comes from the device or from services, content and applications not provided by the operators. Customers are therefore not very loyal or engaged which means that they are easily lost to competitors.

Most operators are nevertheless doing financially well because of their oligopoly-like situation (which we covered in the November 2011 blog post “It’s not all in the network”) and because voice and SMS still contributes so much to the overall profit. In their frantic search for new service pricing models, operators should also consider the customer experience. Customer experience is all the things surrounding the service delivery before, during and after sales. That includes things like personalized offers, excellent online self-service, friendly staff and other aspects that make people feel “wow, great service”. Think Starbucks, where people pay more and queue longer to be able to say “wow, great coffee”.

Being “customer centric”, as many claim to be, isn’t the same thing as providing great overall customer experience. Nor is it equal to the quality of the network itself. Customer experience is the sum of the interactions that a customer has with the company and requires a multi-level, cross-functional approach to be fulfilled. In addition to a good network it involves IT, sales, customer service, product development and essentially anyone that ever provides the end-customer with anything.

The beginning to the solution for operators is to acknowledge the importance of customer experience and dedicate resources to it. Like airline Virgin Atlantic – also in a commodity industry – where CEO Steve Ridgway announced that £100 millions will be invested to “retain and enhance […] leadership in customer service and experience”. I’m intrigued to see who the first telecom operator to announce a similar program in 2012 will be.

/ Erik

Erik E. Byström is a Manager at Northstream

Feedback to blog@northstream.se

31 Jan 2012 | Northstream

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Coming soon to a mall near you…

With Christmas and New Year celebrations fresh in mind, I take this opportunity to explore how future location-based services can help with the rather busy and tedious task of ‘Christmas Shopping’ (or any shopping for that matter). In this blog, I will use this as an example to illustrate how mobile location services could be greatly improved to exploit the obvious commercial potential that location-based services can offer to both the mobile user as a consumer and the retailing industry in general.

Like most people living in Western Europe, my Christmas shopping involved a combination of ‘On-line’, ‘High Street’ and ‘Shopping Mall’ purchases; I also had the opportunity to spread the shopping between London and Stockholm. During this period, I experimented with some of the popular mobile phone apps with location services such as Facebook Places, Foursquare and O2 Moments with the hope that these apps would improve my shopping experience in terms of cheap deal offers, item recommendations, assistance etc. As much as the apps helped in keeping me informed of my friends’ locations and of many promotional offers around my location, I found that the apps were too focussed on the social networking experience. What I, as a consumer, really needed from these apps was however not readily available. As a consumer, I needed my digital footprint (mobile and desktop computer generated data such as location, browsing, social networking etc.) to be harnessed and fused to offer intelligent and personalised services that can be used when I embark on my shopping ventures.

So what/how should future location-based services look like to fulfil expectations and exploit mass-market potentials?

Before I proceed with the description, it is important to note the implicit assumption that the user gives the permission for his/her data to be used. A detailed Privacy discussion is beyond the scope of this blog but in general, I find that most people are happy to have their data used provided that the following basic contract is agreed between the user and the service provider:

• That true value is offered in exchange (and agreed upon prior to data collection).
• That the data is collected for a purpose, used for that purpose and then destroyed once it no longer serves the purpose.
• That the user is constantly informed about the data kept about them and the processes applied to it.

It may sound plain and obvious, from both sides of the ‘contract’, but in reality neither implementations nor user perceptions satisfy all the criteria.

Future location-based services must rely on a combination of innovative concepts with far greater flexibility and capabilities than those of a single phone app. The reflections below are not intended to give a full specification but rather touch on some of the key aspects that I think will make a difference. It’s also worth noting that most of the core technologies involved already exist in some form, they just need to be reapplied from a different perspective.

Indoor Location
Using my Christmas shopping example, my mobile should be able to log every store (indoors or outdoors) I walk into (and if it’s a large store such as IKEA, the various sections or aisles that I visit should also be logged). The stores that I visited should have the means to know that I visited them and possibly log the items that I purchased from them at that time (not difficult to achieve if mobile payments are in use).

Digital Activity Tracking
In my example, I browsed various items from different outlets such as Amazon, eBay, Facebook Marketplace etc. I also booked flights to travel to London. For an enhanced service, future location-based services should be able to tap into my digital activity and build a picture of what I could need or where I could be, in a similar way to a top-end personal assistant. The purpose of tracking my digital activity and utilising it in location-based services would be to match my behaviour and movements with relevant retailers in such a way that I don’t feel spammed or intruded upon but instead feel assisted and guided.

Data Fusion
For the entire system to work there needs to be some means of aggregating the data, adapting it and constructing a personalised service. As an example, let’s say that the day before I travelled to London, I visited Stockholm Kravatt (a tie store) but didn’t buy any ties. Future location-based services should be intelligent enough to check for attractive deals (or even broker a deal) at Tie Rack at Heathrow airport and suggest it to me upon arrival.

We will get there!
The system that would enable location-based services will rely on innovative concepts that will make it more than just a social network-based app. Some of the technology heavyweights such as Google and Apple have, in the past, demonstrated their ability to design and market large software ecosystems. To nurture this with enabling technologies and service ideas, there is a countless amount of smaller innovative companies (and we’ve seen many of them) just waiting to get their 15 minutes; So there is no shortage of brains to seize the opportunity. I therefore hope that in the next couple of Christmases, I will be able to rely on my phone to help me find the gifts I want from the most convenient location and at the right price. Industry, please help me out!

/ Landry

Landry Ndikumasabo is a Consultant at Northstream

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10 Jan 2012 | Northstream

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It’s not all in the network

I recently attended a seminar where the research agency Swedish Quality Index (EPSI Rating) presented their customer satisfaction results from the telecom industry. The Quality Index is based on surveys with some 10,000 people rating individual and business consumer expectations and outcomes for Swedish operators, fixed and mobile. Results presented pointed to a major gap between expectations on service and experience of delivery for individual and business customers alike. Here comes the interesting part: both the Quality Index and operators attending think customers are to blame for this gap.

The reasoning was that customers – i.e. you and me – expect too much and operators cannot live up to our high expectations. Agreed, humans are unsatisfied by nature and raise the expectation bar whenever satisfaction actually happens. That’s how we moved from caves to create the Internet. We remained eager for more. In a well-functioning market this satisfaction gap would be an excellent opportunity for a new company to enter the stage and provide people with proper service. Unfortunately for consumers, the mobile operator market is not a very well-functioning one and a brief history lesson on telecommunication markets tells us why.

Most countries have three to four Mobile Network Operators, MNOs, with their own mobile network, antennas and all. Now, history has shown that the order of establishment in time of these MNOs play a major role for their present market share. The biggest player on most national markets is usually the so-called incumbent, the old state-owned telephone and telegraph company who back in the days was the first to provide these services. The second, third and fourth biggest operator usually entered the market in that order after it was deregulated. Being the fifth MNO, or even the fourth, can be very tough because of the high investments needed to build a fully covering mobile network. This entry barrier of investment and years lost to competitors means that telecom markets world-wide has moved from national monopolies to national oligopolies. A few companies enjoy the benefit of nobody else wanting, or being able, to enter the market.

Deregulation has meant cheaper calling rates, more choices for consumers and higher speed of innovation. However, the current oligopolistic situation seems to have the side-effect that customer satisfaction and customer experience is neglected. Customer satisfaction in the eyes of operators is at present often equal to the technical quality of their most sensitive asset, the mobile network. Many operators argue that coverage, call quality and data speeds is the driver for customer satisfaction. I believe this to be true to the extent that network quality is a hygiene factor, just like you would expect the motor of a car you just bought to run well. However, the average car buyer doesn’t worry very much about the exact amount of horsepowers. In a similar vein an average mobile operator customer doesn’t care on the exact data speed per second as longs as the overall Internet experience is good, and as long as you can make a call from places where you’re supposed to. There are however other things beyond network quality that make customers happy. This is where the gap of the Quality Index appears.

As a consumer it’s disheartening to see from the Quality Index study that no Swedish operator appears to walk the extra mile to provide superior customer experiences on the fallacy that people don’t care anyway. The mobile handset industry only a few years ago learned the hard way what happens when people’s thirst for superior experiences is unsatisfied. Apple showed that there was a huge market for experience and design above technology, and virtually revolutionized the mobile industry. Functionality is a hygiene factor in many cases but the product or service experience can deliver dreams and differentiation. As a customer to an operator in most countries there are few exciting experiences available beyond the basic network service and possibly lower monthly fees. Again looking at the telecom market structure it’s unlikely that a new entrant will come and compete on superior customer experience. The question is really which one of the established ones dare to be first and get a good shot at reaping the first mover benefits.

Network quality is no doubt important, but operators must realise that market demand has moved beyond that. Network quality is not a differentiator, it’s a prerequisite. Premium operators should strive to deliver happiness and high satisfaction, because that is what creates loyalty and willingness to pay. Apple’s highly profitable iPhone business is a clear example and there are plenty more outside the telecom industry. It’s time to let consumers have the attention and experience they deserve – and that’s much more than just network quality.

/ Erik

Erik E. Byström is a Senior Consultant at Northstream

Feedback to blog@northstream.se

09 Nov 2011 | Northstream

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Private affairs...

A while ago we noted the disappearance of phone booths. As mobile phones became the dominant voice telephony tool there was no longer a need to stand in a specific spot and talk. That is certainly true when it comes to the connection of the device itself. But, whatever happened to the need for clarity and privacy? The phone booth at least helped the caller to hear and be heard – by the called party only.

Have a look around these days! Thanks to improved microphones and headsets we can make calls in noisy environments. However, our own voice is overheard by people around us and can be quite disturbing. Further, research has shown that people are more annoyed by hearing half a conversation than by the sound that they are actually hearing. No wonder that mobile phone conversations are forbidden in some trains while physical conversations are still allowed.

With regards to privacy it seems that people are becoming more and more relaxed with using their mobile phones and tablets in public. In buses and on the subway teenagers are happily and loudly chatting about their recent crushes and conflicts while others are playing games and watching movies, although using headphones. We are now less embarrassed by showing how and for what we are using our mobile devices.

This does not mean that we are ready to openly display all of our curiosity or ignorance. And, that’s why voice-based interaction, as in the shape of iPhone’s Siri, is much more likely to be used in a car, or in other situations when we are not overheard by others, than in public transport. Siri certainly seems impressive in its application of artificial intelligence and groundbreaking in its conversational user interface. Its (Her?) bold answers may even be sharper than Google’s. But if we are afraid to ask the questions, virgin Siri’s areas of learning are likely to be very different from Internet search queries in general…

/Johan

Johan Ragnevad is a Senior Manager at Northstream

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13 Oct 2011 | Northstream

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Wi-Fi – From backstage to centrefold

One recent and interesting curiosity is how quickly new devices can change usage patterns [read: increase internet traffic even more]. It is claimed that mobile devices accumulate approx. 8% of the total internet traffic today (noting that the traffic generated by mobile devices can also be carried over a fixed network), and tablet type devices take an impressive 3% of this share (38% of the total mobile traffic). Of these 3% nearly all come from iPads - a device that has been on the market for less than two years! Tablets are essentially designed for media consumption, so the increase in traffic does not come as a surprise. Cisco seems to have been quite right with their tablet traffic estimates as a population of less than 50 million devices, compared to the over 500 million smartphones, generates 38% of the mobile traffic, i.e. a per device traffic of ca. six times more than smartphones.

Connected and surfing tablets is of course only the beginning, and as new devices emerge people will increasingly consume services such as music, videos, TV and other media online which inevitably leads to a continued steep traffic growth, it is then only natural that networks adapt as well. Not only do we see new generations of more efficient technologies and networks, but also network convergence is increasingly used to cope with the traffic. Wi-Fi is already well spread globally and a standard component of our home and office environments. Last year close to 70% of sold smartphones were Wi-Fi capable and estimates vary on the outlook, but we could likely see 100% reached within a year from now, and non-WiFi Tablets would be unsellable. So it comes pretty logically to consider using Wi-Fi to offload the mobile networks basic traffic, but it also opens a door for new innovative use cases and business models.

From a Nordic viewpoint, Wi-Fi might not strike as the hottest topic in the industry, but globally the stir is greater. In parts of Asia and US Wi-Fi is a true complement to cellular networks, and not only in areas where mobile broadband build out is not as extensive. Innovative use cases of Wi-Fi do not only include user applications for remote controlling, wireless data transfer and the like but solutions to bring connectivity to challenging locations (mobile Wi-Fi hubs, Wi-Fi in airplanes) have proved the technology is mature and secure enough for wide use. Sooner or later the global device and service ecosystem will open up and encourage models based on Wi-Fi to prosper in the Nordic countries as well.

/Suvi

Sources: Cisco VNI, ABI Research, Strategy Analytics

Suvi Lintusalo is a Consultant at Northstream

Feedback to blog@northstream.se

29 Sep 2011 | Northstream

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