Mobile applications
Mobile applications must be built around customer needs not technology capabilities.
The auction of Third Generation (3G) mobile licenses in the summer of 2000, highlighted the enormous risk and opportunity within the sector. the prices paid in the UK were many times higher than anticipated. This was partially due to the influence of the dot-com bubble, however it also reflects the risks and opportunities of a new market with huge growth potential (see Capital markets and hyper growth below).
This volatility and uncertainty can be seen in the chart below of Vodafone's share price. The Capital Markets were very bullish on the sector and Vodafone in particular until March 2000. However this has fallen away and is only recently showing signs of potential recovery. Innovys believe that the Capital Markets are struggling to see the customer-driven applications coming through, that will recoup this enormous investment in 3G licenses and future infrastructure.
We believe there is indeed enormous opportunity for those organisations that are able to develop true customer insight and deliver . Based upon this knowledge they will be able to develop additional applications and deliver increasing value to their customers.
Mobile applications are a classic New Economy play, with winner-takes-all characteristics that are very attractive to companies and their shareholders.
The stage of growth of a market has different implications for potential value creation, as illustrated in the diagram below. The stage of market development along the S-curve has different implications for growth and value creation.
Innovations creating new markets provide a challenge for the Capital Markets, as they have the highest levels of uncertainty. It is unclear whether the market will explode immediately, later or never. It is also difficult to say at what rate of acceleration the market will grow. If a company jumps in too quickly they may be left holding a product or service that nobody wants yet.
Optionality provides a basic conceptual framework to understand the value creation associated with mobile applications and other new markets. This approach considers a company as a portfolio of options, which may or may not be exercised some time in the future, Two key organisational factors become critical to success within this framework - innovative capacity to create options and timing skills to execute them.
We are very bullish on the opportunity for mobile applications and believe that it is a market at the start of its S-curve, shortly to accelerate rapidly. Access to this market requires the ability to innovate based upon customer insights and knowledge of the capabilities of the technology.
Innovative processes need to be kept separate from other elements of the value chain. If they are too closely associated with the prime elements of production, they risk becoming subservient to capacity management processes and will lose their customer focus.