How partnering with startups is helping incumbents grow

For a long time, incumbents didn’t need to worry about competition from startups because the barrier to entry was too high. The auto industry, for instance requires billions of startup costs so you would think that Ford and General Motors would be safe from such disruption.

04 oct. 2018

In the Next Mobile Economy Everyone Needs a New Game Plan

In 2016, for the first time, more people around the world accessed the Internet from their mobile devices than from desktop . The change is even more stark in some markets, like China, where consumers spend 72.6 percent of their time on mobile devices versus 27.4 percent on desktop.

Mobile isn’t just the center of consumer activity though, it is also increasingly where work is being done; it is now possible to ditch your laptop and do all your work on a single device. Already, some 50-60 percent of full-time employees are not at their desks. Mobile connectivity also coincides with an increased reliance on contract workers who can jump in on projects and contribute to more of a dynamic and agile approach to work. Currently, some 62 percent of companies use flexible workers, like freelancers, temps and agency workers. A recent survey showed 72 percent of executives thought that the need for mobile employees will increase within the next two to three years.

Mobile technology itself is also changing. Some IoT devices don’t send data to the cloud but collect and analyze data themselves. While cloud computing has defined the last decade of innovation, now “fog” computing in which there is intelligence on edge devices is a new paradigm. It is not an exaggeration to say that mobile is now the vortex of business evolution or what Samsung calls the Next Mobile Economy.

The Next Mobile Economy, an era defined by the centricity of mobile and an embrace of open architectures will separate businesses into those that thrive by embracing an open system and those who suffer by clinging to the vestiges of a closed, dying system. For business leaders, the Next Mobile Economy offers two choices: disrupt or be disrupted.

4 global trends that are changing business

There are four trends occurring at the global level that define the Next Mobile Economy. Those are:

1. More mobile workforce : The predicted value of the connected work economy is $63 billion. Some 70 percent of employees admit to using the same phone for work and personal usage, a trend that will pick up steam as the smartphone effectively replaces the laptop.

2. Both employees and customers expect custom solutions.Sixty-six percent of IT executives said they will invest in custom software solutions over the next five years. Eighty-one percent of the C suite are looking to mobile to drive new business models and revenue streams.

3. Businesses increasingly recognize the need to be more open and collaborative to succeed. Some 80 percent of business leaders believe mobile will create future opportunities for their company to lead in their sector. More than half of the world’s 500 biggest companies already work with startups.

4. The increasing need for better security.Two-thirds of CEOs view cybersecurity as a top concern that must be addressed. The overall cost of data breaches will reach $2.1 trillion by 2019. Seventy percent of Millennials admit to openly breaching IT policies. Businesses will need to balance being more open and collaborative with the ongoing need for security.

Technologies including 5G, IoT, AR/VR, AI and the cloud are driving these trends. The trends plus new mobile opportunities via technology are critical challenges for businesses

Creative destruction on steroids

With the exception of security, which will temper adoption of some technologies, the first three trends are driving unprecedented volatility in the business world. In 1942, economist Joseph Schumpeter coined the term “creative destruction” to describe the process of industrial mutation that destroys old economic structures while creating new ones. This dynamic nature of creative destruction has been hastened in the mobile age.

Research has shown that in 1958, a company could expect to stay on the Standard & Poor’s 500 Index for 61 years. Now the average is 18 years. Some 75 percent of companies on the Index will be replaced by 2027, according to estimates. The smartphone, meanwhile, appears to have spread faster than any technology in human history , having gone from 10 percent to 40 percent penetration in under five years.

The two developments are related. A Samsung survey found that 81 percent of C suite execs were looking to mobile to drive new business models and revenue streams.

Realizing that mobile technology offers a new, more personal channel for communication with consumers, an insurer can itself as a full-service destination where consumers can meet their healthcare needs. “You don’t just create a healthier world by selling insurance,” said Stephanie Woerner, a research scientist at the MIT Sloan Center for Information Research who studies how companies have adapted to mobile. Woerner said that such insurers can recast themselves as lifestyle firms and partner with companies offering training and dietary services. Working in an open ecosystem helps facilitate such partnerships more seamlessly.

Why the Next Mobile Economy thrives on openness

In another example of a brand taking advantage of their mobile presence to become a lifestyle brand, Dunkin’ Brands, and its flagship Dunkin’ Donuts stores noticed almost all of its consumers carry a smartphone. That means that for the first time the chain implemented an omnichannel model to engage consumers. “Dunkin’ was thrilled to death that they actually had a way of learning more about their customers,” said Woerner. In 2012, Dunkin’ introduced an app that let consumers pay for their purchases. A rewards program, DD Perks, helped drive adoption to 8.5 million members this year.

Companies that want to exploit such opportunities find that they don’t need to reinvent the wheel. For instance, a travel app or ride-sharing can base its technology on a mapping API instead of creating one itself.

In another example, rather than create their own delivery services from scratch, Costco has partnered with Instacart. Why not go it alone? “It’s hard to be great at everything,” Woerner said. Most companies realize this: Samsung’s research shows that 56 percent of business leaders think going it alone will be a thing of the past.

But these won’t be partnerships in the traditional sense. This is an age in which new ecosystems and consumer usage occasions are created in rapid succession. Three years ago, few people were using voice commands to shop. Now, voice-based shopping is a $2 billion business in the U.S. and the UK and is expected to grow to $40 billion-plus by 2022.

Brands have to figure out how to penetrate such emerging ecosystems. Creating completely new solutions from scratch for every emerging use isn’t a viable strategy. That’s why the winners in the Next Mobile Economy will embrace open solutions that give them autonomy to use APIs and partnerships to react quickly to market demands with bespoke solutions.

Threat or opportunity?

There are two ways of looking at the shift to mobile: As a threat or an opportunity. Those who view it as a threat will try to find ways to adapt their closed systems and walled gardens to a mobile-centric environment. But those who see it as an opportunity will see it as a chance to rely less on their legacy systems and forge a new way forward that relies on an open architecture, collaboration and customization.

For businesses, the choice in the Next Mobile Economy is clear: Though embracing open architectures is a break from the past, in the long run, maintaining the status quo is the riskier approach.