The M-commerce roadmap

Apr 19, 2002 12:00 PM

Mobile commerce seemed like a sure thing a few years ago. The value proposition was solid, the stakes clear, the path to success a sure one. But neither the banks nor the operators were able to create many viable m-commerce offerings. Here are just a few things that happened:

• Two major banks developed an m-commerce system to allow customers to download credits to their credit/debit cards. The project was cancelled after two years because of low consumer interest

• A major telecom company established alliances with a large group of banks for its mobile banking solution. Now mobile isn't even on their top-ten list of most valuable applications

• Another telco offered several transaction-based applications, but there was not enough take-up to justify the investment.

But some significant technology developments on the horizon promise to allow m-commerce finally to live up to its initial hype. There's 3G (the much-anticipated third-generation wireless infrastructure) as well as GPRS (general packet radio service, a standard for wireless communications more than 10 times faster than current systems, and especially suited for the small bursts of data sent in mobile commerce).

With these new technologies as a base, banks and telecommunications operators are planning a whole new wave of m-commerce projects. But can they avoid making the same mistakes they made last time? Can they master the complex mixture of technology, business and human elements necessary for success? Can they be both aggressive and patient, realizing that the race is a marathon, not a sprint, requiring the wisdom to negotiate through a series of developmental stages?

General principles

Mobile success involves following principles that have proved themselves at almost every stage of technological innovation:

• Clearly establish real, pragmatic value for the customer. The temptation to overstate the value of mobile applications for every kind of environment and every kind of transaction continues to haunt companies. In the first phase of mobile commerce, companies thought that most transactions could go mobile. That didn't happen then, and it won't happen now. Companies must first focus on those areas likely to have the most value quickly, and thus the best chance of an initial payback

• Minimize the behavior change required. If it requires upfront training, forget it. Ideally, it will be integrated or packaged with something else the person is already using. Even if it's new, there must be something familiar about it

• Establish trust. The dot-com period taught everyone the value of a brand name. In a time of great change--technological, regulatory, commercial--an established and trusted brand is a sort of psychological haven for the typical consumer. But when it comes to mobile, the trust issue is even more complex than building on brand value. The fragmentation of the wireless market will continue to stand in the way of establishing trust on the part of consumers or any of the various industry players

• Build industry momentum. In the first mobile race, cooperation between banks and operators was limited. There are many complexities and issues when it comes to establishing synergies between these industries. But without cooperation, it is doubtful that mobile will achieve more than a fraction of its potential, at least in the near term. Ultimately, what both the banks and the operators should be seeking is a general rise in the tide of mobile opportunity, which will raise everyone's boat higher.

Tactics for the mobile competitor

Given these principles, and given the lessons learned from the last foray into mobile solutions, here are some concrete tactics for companies so they can position themselves properly for the next surge of m-commerce activity and opportunity:

Plan the journey

The path to mobile success is a journey in stages. The ability to move from one stage to the next will depend on several things: consumer attitudes and behavior, technology maturity, industry cooperation and regulatory developments.

In terms of consumer attitudes, it is critical to recall the principle to focus on clear consumer value points. Where are consumer attitudes and behaviors most entrenched? Primarily in the real-world system of payments. For transactions at a store or restaurant, for example, use of a mobile device for payments isn't clearly valuable right now. Most of the purchases are not uniquely mobile, and existing payment systems are perfectly adequate, so currently there's little impetus to make a mobile transaction. On the other hand, a mobile environment--driving into a parking garage, for example--can establish a great deal of perceived value for a mobile application. (Pointing a cell phone at a payment device would be much superior to fumbling for change or a credit card at the exit booth.)

Using this kind of discriminating approach to picking value points, companies can better figure out where to begin. Towards that end, let’s place different types of mobile applications on a matrix. For the axes we’ll use two of the important mobile principles we’ve mentioned already: the amount of consumer behaviour-change required, and the amount of perceived value in the mobile proposition.

The resulting matrix (see figure below) indicates that for many real-world types of transactions--from buying a train ticket to visiting the doctor to pay a bill--the behavior-change needed to move a consumer to a mobile-based system for the transaction is high, and the payoff relatively low. But virtual applications have a high m-commerce value proposition and do not fight against entrenched behaviors. Here we find applications like mobile games, opinion polling, bio-monitoring and other kinds of tracking. Finally, between those two are hybrid solutions--unfamiliar applications linking the virtual and real worlds.

Combining these ideas, you end up with a sort of 'roadmap' of how to proceed with applications for this next phase of the mobile commerce race. Companies must start with simple, virtual applications, even if they appear to be smaller in scale than big-ticket items. This will allow them to grab the 'low-hanging fruit' and begin to develop the necessary capabilities as the solutions get harder. In time, companies then move into hybrid transactions. Only when this groundwork has been laid will it pay to tackle the larger task of competing with entrenched forms of transactions for commerce in the physical world: capital goods, food, clothing, utilities and so forth.

This approach of beginning with the virtual in planning high-value mobile applications is already happening. Consider, for example, Barclays Bank in the U.K., which delivered a mobile application allowing Barclays stockbrokers' customers to access real-time information and execute 'live' trades on UK markets, anywhere in the country via a WAP-enabled mobile phone. The nature of trading--in which time delays can translate into loss of money--means mobile transactions are highly valuable, and Barclays was able to establish a clear value proposition for the mobile application.

The primary lesson here is to focus on areas where the return on investment is likely to be higher and quicker.

Customer care

Technological challenges obviously cannot be ignored--mobile commerce will not succeed until the technology platform is fast, widely available and built to avoid delays. But rather than allowing technology alone to drive product development and marketing--possibly at the expense of customer concerns--companies must build long-term, intimate relationships that place the customer at the center of all activities. Here are some guidelines when it comes to establishing proper customer focus in the m-commerce world:

• Work outward from the customer value proposition to the technology, not inward from the technology to the customer's needs

• Make trust-building an explicit part of your strategy. Emphasize your own established brand, or use alliances with other companies, to build consumer trust. Security concerns will also be an issue with consumers, so trust-building will also need to focus on this area

• Make ongoing education of consumers another goal

• Use information services as a gateway into the bigger domain of mobile transactions. Information services such as e-mail, stock quotes, weather, and traffic reports will be the mobile content that alters consumer behavior and makes people more dependent on their mobile devices. Although these services do not represent direct commerce opportunities, they can be leveraged by companies to help build customer relationships and to lay the groundwork for mobile commerce.

Cooperation

Fragmentation plagues almost every sector of the wireless market-operators, terminal vendors, applications developers, would-be retailers and customers. U.S. wireless carriers work on different network standards than carriers in Europe and Asia. That lack of uniformity makes it harder to create an international m-commerce coverage area.

Operators must upgrade to accommodate higher throughput and richer applications. All companies providing content and applications for mobile delivery need to rethink the number of standards and platforms for which they develop products.

In light of this fragmentation, 'co-opetition' becomes increasingly important, if banks and operators want to create a viable mobile marketplace. Almost all operators in Europe today are applying for banking licenses, raising many regulatory and competitive issues. But if m-commerce is to become a reality for the masses, companies must establish industrywide de-facto standards that both banking and the telecom industry will support.

In smaller countries, where the economics almost dictate greater cooperation, banks are beginning to talk creatively with communications companies. The resulting synergies point in some new directions.

Understanding the general m-commerce roadmap, and understanding the human dimensions (and obstacles) of m-commerce, is key.

Tunc Yorulmaz is a senior manager in the communications and high-tech market unit of Accenture. Don Ragas is a partner in its strategic services practice and specializes in payments, electronic commerce and retail/commercial financial services strategy.

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