m Commerce Notes

Chapter I

NTT DoCoMo's i-mode: DevelopingWin-Win Relationships for Mobile Commerce David J. Macdonald Strategic Alliances, i-mode. Japan

ABSTRACT In February 1999. Ja/xw's NTT DoCoMo launched the i-mode service, becoming, tilth over 3J million active subscribers, titk/oitbtedly the world's most successful mobile Internet service. While mobile commerce is on often-discussedtopic aroiithlthe world, it is important to look to the success ofi-mot/e in Japan, to gain real insight into the potential for mobile commerce In other markets, i-nuxle is a success because of a careful balance of the right technology, the right strategy, the right content, ami the right marketing. On this successful platform, many players Itaw developed successful business mot/els. be it premium content, e-commerce. advertising, or others. With the expansion of i-mode, it has now become a "lifestyle infrastructure " and a series of alliances with major players such as Coca-cola litis expanded the possibilities. With new imode ser\ices being launched in Europe ami Asia. it is timely to learn, based on the experiences of Japan, wlntl tlw potential could be. Morethan two years have passed since Telecom 99 in Geneva, the industry event for the tcl ecommunications sector. Attendees will rcmcmbcrthataithat event wcweretoldthataiK-wwaoflniernetandcommercewasabouttobegin "Mobile Imenier and "mobilccommerce" became bu:mvcondtheirimaginalion Wewerepromised that we would su rf through multimedia websites using mobilcphoncsandwouldsoonbcusing those same phones for a multitude of transactions from online to physical payments Itwasanamazingconccpt Ovcrlwoyearshavcpassedand it isstill concept Thepromiscd world has not yet developed Around the world, the uptakebyusersofWireless Application Protocol (WAP)-enabledphonesand services has been slow. The acceptance of thisnew technology by industries other than the wireless industry hasalso been sluggish Whenattendingthemany"Wirelesslntemet"and"MobileCommerce" conferences and events, real examplesprovidingrealdalaarediftlctilttofind In such an environment, it is very easy for skepticsandcriticstodeclare that wireless Internet will neverdevelopbeyond concept. Tomakcsuchaboldstatcmcntisprcmaturc It is a statement that overlooks allofthefacts In truth.in Japan wireless Internet is aliveand well, andcontinuing logrowatanextraordinaryratc Asof Deccmber2001,nearly 50millionusersin Japan had wireless Internet -enabled handsetsof some sort1, with over 30 million Japanese actively using NTT DoCoMo'si-modc alone Topuithatiigurcinto perspective,approximatelyoneinfourjapaneseareusingi-mode Tlieyareusing i-modeforawholerangcofactivities, from scndingand receiving e-mail to surfing through over 50,000 websites designed for the small display sof the handsets(see l:igurel)Tlicversatiliryofthescrviceisgrcat HavingcrcatedascJidplatformupon which tobuildandtolinkwith other platforms, ascanbeseen through numerous projects and services, i-mode proves thai wireless Internet and mobile commerce are no longer mere concepts, hut reality In a book entitled A/r'/V/eOwwfrt'rt'i'ii is important toexamine theory and summarizcthcrcsultsoftest projects. It iscqually.if not more, important toshovv actualcasestudiestoexplaintherealitiesandtodefendihetheories. Thischapter isintendedtobejustsuchacascstudy i-modcisanoftcn-uscdcxamplcofwirelcss Internet, but it is also often misunderstood. Through real examples and real experiences, it is hoped that the real reasons forrttesucccssof i-mode will become apparent This success is not found in some mystic oriental alchemy or in the activitiesofblond-haired.miniskirtedgirlsiniheentertainmentdistrictsofTokyo,

The Ecology of Mobile Commerce: Charting a Course for Success Using Value Chain Analysis Andreas ROIke PRTM.UK Anand Iyer and Greg Chiasson PRTM.USA

ABSTRACT The convergence of the Interne! with wireless telecommunications has profound and pressing implications for enterprises ranging from longdistance carriers to record labels to automakers. The fast-growing ability of wireless devices to handle a wealth ofdata content as well as voice transmission is opening the door to the creation of new products, services, markets, and revenue streams. But in what prevailing form will mobile commerce—the still-nascent effort to assemble and monetize the wireless Internet—emerge? How will the vast potential variety of data-based content be created, aggregated, and profitably delivered lo both individual and business customers? The essential tool for approaching these still-open questions is value chain analysis. A value chain is a map of the entire set of competencies, investments, and activities required to produce, deliver, maintain, and reap the proceeds from a product or service. The profits and competitive advantages of participation in a given value chain reside dynamically within the chain, pooling at the positions of greatest value. (The returns to the different forms of participation in a value chain, particularly one as complex as mobile commerce, are anything but equal.) This chapter presents and analyzes an extended model of the unfolding m-commerce value chain. The goal is to provide an effective tool for planning and executing relevant business decisions in theface of such complicating factors as technology migration, the absence of market data, and inescapable constraints on organizational resources. The analysis and recommendations are supported by data from a survey with wide participation conducted by the authors.

INTRODUCTION How does a breakthrough technology, or a breakthrough combination of formerly separate technologies, becomea viable business? What are the necessary conditions, competencies, and organizing mechanisms? Which enterprises are in the best positions to provide the various competencies and to organize the new business? How will the new business unfold? Such are the questions posed by mobile commerce, the stil 1-nasccnt effort to monetize the Intcmet'sconvcrgcncc with wireless telecommunications. Businesses ranging from telecom service providers toautomakers are grappling with these questions, and are betting heavily on their answers. The purpose of this chapter is to present a tool for understanding the ecology of mobile commerce: the very dynamic relationships among all the elements that are required to make it work as abusiness. The tool is the valuechain model. In the pages that follow, we'll examine the multiple elements of the mobile commerce valuechain. The specific technologies, investments, and competencies required to executeeachelementwillbemadeclear.as will the relationships among the elements. Wc*ll also describe the key approaches by which companies can create positionsof strength within the value chain, including the useofdifferent partnership structures to create integrated m-commerce products and services. Our goal is to impart an understanding ofhow to use the m-commerce value chain as an effective tool forplanningandexecutingbusiness initiatives inthefaceofahost of complicating factors, including technology migration, globalization, the absence of market data, and organizational resource constraints.

DEFININGMOBILECOMMERCE M-commerce is"simply" wireless electronic commerce. Just as e-commerce is a layer of applications on top of the Internet, m-commerce is a layer of p. 124 While the idiosyncrasies of Japanese consumers—their love of gadgets, eagerness to adopt fashionable technologies, and so on—are routinely cited in connection with i-mode's success thus far, the most important factor may be that each of Japan's mobile Internet services isan independent, vertically integrated entity unto itself. The networks, devices, and downloadable content of i-mode and its two current competitors, KDDI and J-Phone, are proprietary and non-interoperable. This 'silo' arrangement would not work in the West, since North American and European network operators, application providers, and handset makers are independent businesses, operatinginmarkets that willnotacceptanon-interoperable product or service. As independent businesses, all three types of entities are reluctant to complete their pieces of the 3G puzzle until the other two pieces are inplace. None wants to am veat the party beforeit starts, burdened with armloadsofnot-yetperfonningassets(RowelIo,2001). DoCoMoalsoenjoysa geographic advantage. Operating in a relatively small country, it can afford to overspend on infrastructure in order to ensure that there are no "dead zones" in coverage. North American wireless-service providers deploy their networks over vastly larger geographies than do their Japanese counterparts, so they need to economize as much as possible on infrastructure costs. In short, the direct lessons that Western companies can draw from the DoCoMo example are limited. That is not tosay, however,that DoCoMo'sdominant-provider, volumedriven strategy could not be successfully deployed by a North American or European wireless-service provider. In addition to a basic monthly charge for voice service, DoCoMo charges on a per-packet basis for the data content used by its subscribers. DoCoMoretumsthoscrcvenuestoits content-provider partners.after deducting a 9% commission. The question of whether DoCoMo is giving away too much revenue to its content partners isafairone.butthcresultthus far has bccnadominant position in contcntdclivcry, which has driven growth in both network traffic and new subscriptions.

CHALLENGES OF DEVELOPING A MOBILE COMMERCE STRATEGY A valid m-commcrcc business model must surmount a host of analytical challenges. In ourview.these challenges takethreeformsxomplexity.uncertainty, and disruption. Complexity—Today's wireless phone networks are more complex than most people realize. Makingacall involves the use of a handset, a radio tower and base station.anda wireline network. Add the transmissionofacoupleoflinesof data from the Internet, such as a quick weather report, and the complications

p. 126 create economies, industries, and markets that are changing at unprecedented rates of speed. Fine has categorically stated that the rate of change makes all forms of competitive advantage temporary. That will be a truism of mobile commerce, a scctorthatwillbe continually reshaped by fast-evolving technologies, companies, and markets. A valid and useful m-commercc business model must explicitly account forall the complexities, uncertainties, and disruptions that will characterize the sector. Which brings us back to the value chain.

EMPLOYING VALUECHAIN ANALYSIS TO CREATE A BUSINESS MODEL A value chain is a map of the entire set of competencies, investments, and activities required tocreatc,produce,deliver,maintain,and reap the proceeds from a product or service, and the relationships among those investments and activities. The profits and competitive advantages of participation in a given valuechain reside dynamical ly within thechain, accumulating at the posirionsofgreatest value. The enterprises that hold these positions have a great deal of control over how the chain operates and how the benefits are distributed (Rtllke, 2000). Harvard Business SchoolprofessorMichaelPorter is wellknown for helping to popularize valuechain analysis, beginning with his 1983 book. Cases in Competitive Strategy. Porter contended that understanding the structure of an industry is the key to strategic positioning. As the wireless Internet has gathered momentum, various academic institutions and businesses have published depictionsofmobilecommcrce value chains, including INSEAD (2001), Goethe University (2001), and Intuwave (Jeremy Burton, 2000). Let's look al the mobile commerce value chain's multiplying modes of participation since its birth in the mid-1980s with the first commercial deployments ofcellularphonc service. The first commercial cell phone services, based on analog, or so-called'1G' technology, appeared in the mid-1980s. These services in vol ved just three business elements: a wireless service provider that erected and operated the radio towers

thai distributed the signals; manufacturers o 1 the terminals and handsets used by customers; and the system integrators, value-added resel lers, and specialty retailers that installed the terminals and handsets(sce Figure 1). Due to the weight and bulk ofthe equipment and the limited livesofthe batteries, most ofthc early cellphone installations were in customers' vehicles. Due to the high costs, the market was generally restricted to business users. It is interesting to note that AT&T initially rejected the technology, but later reversed its position, buying McCaw Communications in order to form AT&T Wireless Services. Motorola, Nokia, Ericsson, and Siemens dominated the early market for handsets and terminals, and remain the market leaders today. Digital voice and simple data services appeared in the early/mid 1990s. The value in the chain became more distributed, due to both the outsourcing of service and infrastructure providers' services and the emergenceofnew businesses within the chain that provide data-based content and services(see Figure 2). A particularly popular data-based application is simple textmessaging(ShortMessagingService, or SMS). Today, billions of these messages are generated every month, creating substantial revenues for network operators. In terms ofthe value chain.SMSdoes not require any additional elements. It is

noteworthy that SMS capabilities have been available since the early 1990s, but exploded in popularity only in the last couple of years. This says much about the unpredictable nature of consumer adoption curves. It is worth noting that with the growing segmentation of any value chain comes the demise of some technologies. It was not until the arrival ofthe WAP protocol in the late 1990s that data-based services such as mobile banking became commercially viable. Despite WAP's general failure, its advent marked the addition of content and service providers to the mobile commerce value chain. But value chain evolution can mean

subtractions as well as additions. Formerly important products may disappear the pager industry israpidlyshrinkingbecauseof the proliferationofwireless phones, for example. Ongoing value chain analysis can help companies anticipate the displaccmcntsof technology elements, and shift their modes ofbusiness participation accordingly.

ELEMENTSOFTHEMOBILEVALUECHAIN Our model of the unfolding *3G' mobilccommcrce value chain groups the participants into five major elements. Examples of current participants in each value chain element:

This value chain is highly horizontal, reflecting the multiplication of ihe required investments andcompetencies(seeFigure3). The sections numbered 1-5 highlight thepaths and supporting capabilities required to consummate mobile commerce: to a dial-up modem connection with a local number, customers connect toa computer at a regional POP (Point of Presence). The POP then connects the user to the Internet, enabling access to all public sites on the World Wide Web. ISPs differentiate themselves through thcirability to provide on-demand access, their connection speeds, and their pricingstructures. Traditional ISPs will face strong competition as wireless Internet services come into their own. As wireless network operators begin functioningas ISPs, giving their customers Internet access through handheld wireless devices, the market forconvcntional ISPservices will likely diminish. Onlythe ISPs thatprovide content as well as access, such as AOL. will be in a position to counter this challenge. Element 3: Wireless Network Operators These operators provide the communication channels—the highways over which content is transported from providers to consumers. Wireless networks, which can reach customers anywhere,

are an important alternative to today's wireline networks. Building and operating wireless networks is very expensive and complex, and requires a large organization with very substantial resources. In contrast to Internet highways, on which users can travel for free, the owners of wireless networks bill their customers. The wireless network operator clement consistsofthe following: Wireless Service Providers—These are the customer-facing elements of wireless networks—the services whosequality is perceived by customers, spcedof connection, clarity, and so on. Wireless service providers can buy or rent capacity from network operators. They base their strengths on brand name or customer channels. Virgin Mobile, for instance, which buys wholesale airti me and resells it to end users, benefits from the high brand recognition of the Virgin name. Network Infrastructure Operator—These are the network-facing elements of wireless networks, which provide the software and hardware that enable online communications. Customersjudge network infrastructure operators according to how long it takes to obtain a connection, the quality of the signal, and the frequency of lost connections during calls ("call drops"). These characteristics reflect the quality ofanctwork'smanagcmcnt.

Element 4: Support Services Service Provisioning, Billing, and Support—Various individual elementsof customer service may be outsourced by wireless service providers, depending on their business focuses and competencies. The printing and mailing of customer invoices is beingincreasingly outsourced, for example. The billingfiinctionitselfis generally kept in-housc, however, since billing information captures customers'

p.132 alsoaffordsasignificant advantage over wireline ISPs, which don'ttypically track users* whereabouts. Wireless operators have other advantages as well. They haveex tensive billing systems in place, which arc generally flexible enough tocapture m-commerce as well as access charges. This isof particular advantage in areas of the world where credit cards are less common, or where there is greater reluctance to use them for online transactions. The microbilling system used by NTT DoCoMo's imode service to aggregate charges from approved sites is a substantial factor in the service's success. Value chain analysisatso reveals how the positions of advantage within a chain may shift. The key challengers to wireless operators will be the Internet and 'dotcom' companies that are part of the World Wide Web. These companies include many thousands oflSPs, business portals, content providers, and other software companies. These entities tend to be extremely quick to react to—or even to create—market changes. They're in the business ofbeing first to market with a product that works. They'realso in the businessof continuous product improvement, iterati vely building customer solutions that are very much on target. As traditional and nontraditional wireless enterprises con verge to form content/delivery partnerships in the mobile commerce space, the positions of advantage within the industry's value chain will shift according to still-emerging patternsof consumcrdemand and preference. How will the distribution of revenues and profits change overtime? What typcsofserviccoffcrings and business structures willbe required to manage these changes? How can companies best implement the necessary changes?

EXPECTATIONS FOR NEXT-GENERATION MOBILE COMMERCE In 2001, our firm, management consultants PRTM (www.prtm.com), conducted a survey in order to get a sense of the wireless industry's expectations associated with the rollout of next-generation wireless technologies over the next five years. We used our value chain model as the basis for the survey. A total of 91 respondents, representing more than 80 companies, participated in the survey. Wireless infrastructure manufacturers, terminal and handset makers, wireless operators, content and applications providers, portal companies, and providersofa variety of specialized wireless-related services were all represented. A brief overview of the findings was published in the October 15,2001, issue of Telephony magazine.

The survey results were quite consistent with the expectations stemming from our valuechain model and analysts. The first finding wasof immediate interest, given the recession in the telecommunications industry atthetime:respondents collectively expected next-generation wireless networks, based initially on 2.5G technology, to be operational in theirprimary geographies by early in 2003. The findings are presented here. Integrated Next-Generation Offerings—Companies are seeking to capi-talize on or compensatefor shifts inrevenues and profits among the various elements of the wireless value chain through integrated next-generation offerings. Respondents expected a gradual revenue shi ft away from wireless network operators and toward content and applications providers as the locusofvalue shifts from transport toward content. New location-based wireless services, coupled with an improved ability to charge for content (through microbilling, ASP models, etc.), are the key factors behind the anticipated reappointment of revenues within the wireless industry(see Figure4).Atthc same time, wireless operators face both mounting competition and thc commoditizafion of their offerings, much as we saw with land-line long-distance operators. While the largest share ol revenue will continue to accrue to wireless operators over the next five years, the distribution of revenue across the value chain elements will become more equitable. Respondents expect content and applications providers' annual revenues to grow the fastest, doubling from 11 % to22%of the total. This makes sense, given the coming growth in data-based content and the growing consumer willingness to pay for it. Today. Most of the revenue is generated through voice, and that revenue belongs to the wireless operators. In the future, portals will give customers access to graphics-rich websites via mobile handset screens. To limit Iheirdecline in revenue share, wireless operators need to avoid becoming mere fungible pipelines. Respondents expect the wireless industry as a whole to become more profitable over the next five years. Net profit margins are expected to grow, with the largest increases in profitability accruingto content and applications providers that are able to take advantage of economies of scale by spreading their fixed costs over wider customer bases. Wireless operators are expected to hold net profit margins constant by focusing on their most profitable customers, and through increasing efficiencies. Forthe wireless industry'sexpected gains to materialize, companies willneed todevelop offerings that span multiple value chain elements. The large majority of respondents (78%) report that their nextgeneration business plans focus on multiple value chain elements. Furthermore, companies with superiorrelati ve rates of revenuegrowthattach the greatest importance to integrated offerings. Traditional wireless companies will look to share in the growth and profitability of the new contentand applications-based developments, while companies new to wireless willneed tooffer solutions that combine delivery with content. Recent telematics ventures such as Wingcast and OnStar arc excellent examples of nontraditional playeis(automotivcOEMsinthiscasc)partneringwithcxistingwirclcssvalucchain participants tobringncwintegratedofferingstoend consumers.

Multi-clement participation in the value chain, both direct and indirect, is expected to increase over the next five years. The largest shift is expected from "one clemcnt"to'*t\voclcment"companies.Thenumberofcompanies participating in only one value chain element isexpected todecrease from 39% in 2001 to 28% by the end of 2005. Partnerships Preferred— Partnerships will be the preferred means of integrating across the nextgeneration wireless value chain. The desire to provide intcgratcdoiTcrings,andthcexpectationofparticipatinginmultiplevaIuechain elements both indicate the transition away from transaction-oriented interactions amongvaluechain participants in favorofmorecloselycoupledbusiness structures. Although the development of cross-chain capabilities in-house is the ultimate in integration, survey respondentsgenerallyprefcr to partnerwithholdersofcxisting capabilities. Figure 5 shows how respondents expect to obtain each of the five elements of next-generation capability. Note that the content and applications providers clement, which is expected to enjoy the greatest revenue and profitability growth, is expected to see the most partnering activity. Wireless operators expect to form, on average, 21 partnerships with content and applications providers by 2003. Conversely, content and applications providers expect to form, on average, two partnerships with wireless operators and three partnerships with delivery platforms and applicationsby 2003.

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Partnering Best Practices—Partnerships will be most successful when formed and managed according lo"partncringbest-praclices."Clearly,companics face challenges in partnering with newelements of the value chain with which they have no familiarity or relationships. The most-cited challenge in forming partnerships is in makinglhcrightconnections and introductions, particularly as traditional wireless companies and non-traditional companies try to make connections. Beyond forging these connections, wireless participants then face the challenges of sharing customer information, integrating processes and systems, and aligning business models. Those hurdles are not insurmountable. For instance, NTT DoCoMo has formed a partnership with Coca-Cola to trial "intelligent" soft-drink vendingmachines that disseminate brand messagingto consumers in conjunction with the i-modc network. Through its engagements with clients in the wireless services industry, PRTM has identified a set of seven partnering best practices. We asked respondents about their application of those practices.

Most companies use some sortofstructured approach to determining whether a partnership is warranted, selecting the best partner, and then building an effective partnership. Over two-thirds (70%) use two or more of the partnering best

p.137 commerce valuechaintochart its telematics strategy. When ourclientfirstdecided to incorporate telematics services into its vehicles, it assumed that it was competent to provide two inputs: the vehicular component of the delivery platform, and a captive customerbasc—the drivers. But when value chain analysis was used to map out the elements, links, and layersofthetelematicsoffering, the company saw that it could bring more tothetablethanjust cars and drivers. Itcoulddeliverahigh level of value by acting as a portal to aggregate automotive-specific content and present it to the driver ina safe and useful manner. In the telematics service envisioned by theautomaker.diagnosticdataon a vehicle's operational status (temperature,oil pressure, tire pressure, etc.) would be aggregated with information on the probable cause and seriousness of any current or impending problem. This combined information, when further aggregated with GPS location-based information and scTvices(i.e.,drivingdircctions to the nearest service station), would deliveranew and compelling typeofvalue to drivers, as dashboard indictor data are "upward-aggregated" into enhanced driver safety and security. This link-and-layer analysis of the telematics value chain allowed the automaker to leverage its deep competency in automotive systems diagnosis by creating a new contentaggregator role for itself. Once a company has charted the complete set of elements needed todcliver theintended solution, itcan begin to structure an appropriate business relationship with the complementary parties required. A fundamental question now arises: for which of the requiredelements can your enterpriseoiTer best-inclass value? Will you deliver this level of value through minimum cost structure, maximum customer flexibility, price, or some other differentiator, such as technology advantage or customer intimacy? Companies often rush to "own" as many elements of the solution as they can, despite their limitations. At present, there are telematics business models in which automakers have taken it upon themselves to provide all the solution elements. While these self-contained models have generated some awareness in the marketplace, they have not provided the business, its customers, or its shareholders with appropriate returns. Alternatively, there arc "distributed competency" telematics models. The c lient example just cited is one. Another is Wireless Car, the recent joint venture between Telia, Ericsson, and Volvo. In terms of our value chain model, Telia operates the venture's wireless network and provides support for the communications channel. Ericsson provides the delivery platform and applications, and Volvo provides the motor vehicle—also part of the delivery platform—along with its know-how in integrating automotive technologies. WirelessCar itself is the portal. Content providers, such as news, weather, financial services, and travel services, are brought in on an as-needed basis. Once you'vedecomposed the valuechain into its underlying elements, you can begin to associate elements with types or classes of candidate alliances. This brings us to an important principle: an alliance should be mutually exclusive, yet collectively exhaustive. Inotherwords.it should consistoftheminimumnumberofplayers (clementsuppliers)required to deliver the solution, with no overlaps and no gaps. And, of course, the fewer the players, the better: less administrative and governance complexity, and more margin to go around. We'll use 'N' to represent this minimum number of mutually exclusive/ collectively exhaustivcplayers. Once you've determined your candidatelistofN candidates, the options in terms ofbusiness arrangement can be depicted along a simple spectrum. At the far left of the spectrum is the consortium. At the far right is the formation of a new company ('newco*—see Figure 7). Along the way are intermediate forms ofbusiness arrangement. While there are no explicit variables that are intended to depict this continuum, one can envision that factors such as degree of management control, investment required, and governance complexity may increase from left to right. In the context of mobile commerce, it has been our experience that the partnership forms on the right side of the spectrum have worked better than those on the left side.

A Standards Consortium, Consisting of N Participants—A standards consortium is a collective of companies that define the elements of a common solution that each company could implement, either on its own orthrough the use of partners within or outside the consortium. Very often, the key outputs of such consortia are standards or design rules that govern how solutions should be implemented. The result is a higher level of commonality and interoperability than would be achieved in the absence of the consortium. The consortium also has been a prevalent form of business arrangement in dcsigningandimplementingcomplcx new products and services. Agood example is the CDMA Development Group, or CDG. In this case, intellectual property providers, chip manufacturers, device manufacturers, and wireless carriers were

interested in how to best approach the commercialization of the IS95 standard for Code Division Multiple Access technology. The objective inthiscase was relatively straightforward: how to make the transition from analog cellular to the next genera tionof standards fordigital voice communications. Asaconsortium.CDG has achieved its direct aim. But in the more complex case of mobile commerce solutions, where the objective spans voice, data, applications, content, and—very importantly— alternative business models, and callsfor uniting competencies in design, fabrication, anddelivcry.theconsortiumisalmostccrtainly the wrongform ofbusiness relationship. Why? Despite the fact that the consortium may be the corporate lawyer's dream, it rarely achieves the goals of the partnership. It's often too slow and awkward. Mobile commerce partnerships typically involve participants with very diverse competencies and fcw,ifany,prior relationships. Theconsortium approach to partnership poses the dangerofcombining enterprises that are structurally and behaviorally incompatible. Counterproductive competition among the partners is almost inevitable, and the governance challenges are apt to prove overwhelming. The endorsed provider solution certainly has the advantage ofexpediency. It's simplcto arrange, but it means surrenderingcontrolofthe customer solution to an outside party. The supplier-based approach represents business as usual. It won't maximize the collective potential of the participants because it won't align their interests. An Endorsed Provider—In this model, acompany may actually designate or endorsea specific vcndorto provide the solution through abidding or alternative selection process. The company itself may participate, cither by providing a captive set of customers, participating in thedefinitionsof solution requirements, providing sales support, or even providing co-branding services. However, the vast majority of the solution elements will be provided by the endorsed provider. For example, if telematics wasdcfincdasasetofposition-enabled wireless services that follow a customer (as opposed toa vehicle), then various automobile manufacturers might endorse a wire less carrier (e.g., AT&T Wireless, Verizon, Sprint PCS, etc.) to be theirtelematicsserviceproviderintheU.S. A Supplier-Based Solution—If your organization has the capability to provide many or most of the key elements of the solution, perhaps the entire solution can be best accomplishcdin-housc, with the assistance ofexternal suppliers. Nextel Communications' deli very of push-to-talk services, combined with PCS service, is an example of a supplier-based solution example, since Motorola is the sole telecommunications equipment manufacturer that supplies the ESM R-bascd solution. p.142

VALUE CHAIN STRATEGY: WEAVING THE WEB Todescribe mobile commerce as an emerging business opportunity, oreven as a "business of businesses," would grossly fail to capture its extraordinary dynamism. M-commcrcc is a genesis in

progress; a new and growing source of value at the confluence of two technological revolutions. The metaphor of a web is useful in that it conveys the ideaofan intricate and purposeful pattern, but the pattern of m-commerce is anything but fixed or final. Its patterns are being woven today, at the interconnections of the many diverse technologies, competencies, investments, and business models that comprise the mobilecommercevaluechain. As we have emphasized in this article, m-commerce participation opportunities arevalue-chain(or "value-web") participation opportunities, and the key to participation is partnership. The value chain model we have presented, along with the guidance we have orTeredonselectingthe most appropriate formofpartncrship.willhelpcompanics set appropriate participation strategies, execute their strategics effectively and efficiently, and revise their strategies as circumstances change and opportunities arise. We have identified some clear trends in revenue distribution within the mcommerce value chain: for example, the trend toward a more equitable distribution ofrevenue across theelementsofthc chain over thenextfivc years, notably favoring content and appl ications providers. The emergcnccofmobilccommcrcc, in allits complexity andflux, calls some basic business assumptions into question. For instance, to the old question, "Who owns the customer?", m-commerce value chain strategy poses the question, "Who are my customers in this web of entities and partnerships, and to what degree can lown the relationships with valuechain partners and end users?" The possibilities for positioning and branding within—and across—the value chainappcar boundless. Mobile commerce will become even more complex in the future. The companies that begin proacti vely carving out their positions now will be best able not just to cope with the value chain's mounting complexities, but to shape the chain'scvolutiontothciradvantage.

Wireless Application Protocol (WAP) Definition Wireless application protocol (WAP) is an application environment and set of communication protocols for wireless devices designed to enable manufacturer-, vendor-, and technology-independent access to the Internet and advanced telephony services.

1. Introduction WAP bridges the gap between the mobile world and the Internet as well as corporate intranets and offers the ability to deliver an unlimited range of mobile value-added services to subscribers—independent of their network, bearer, and terminal. Mobile subscribers can access the same wealth of information from a pocket-sized device as they can from the desktop. WAP is a global standard and is not controlled by any single company. Ericsson, Nokia, Motorola, and Unwired Planet founded the WAP Forum in the summer of 1997 with the initial purpose of defining an industry-wide specification for developing applications over wireless communications networks. The WAP specifications define a set of protocols in application, session, transaction, security, and transport layers, which enable operators, manufacturers, and applications providers to meet the challenges in advanced wireless service differentiation and fast/flexible service creation. There are now over one hundred members representing terminal and infrastructure manufacturers, operators, carriers, service providers, software houses, content providers, and companies developing services and applications for mobile devices.For more information, visit the WAP Forum at http://www.wapforum.org. WAP also defines an application environment (WAE) aimed at enabling operators, manufacturers, and content developers to develop advanced differentiating services and applications including a microbrowser, scripting facilities, e-mail, World Wide Web (WWW)-to-mobile-handset messaging, and mobile to telefax access. The WAP specifications continue to be developed by contributing members, who, through interoperability testing, have brought WAP into the limelight of the mobile data marketplace with fully functional WAP-enabled devices (see Figure

Based on the Internet model, the wireless device contains a microbrowser, while content and applications are hosted on Web servers.

2. Benefits Operators

For wireless network operators, WAP promises to decrease churn, cut costs, and increase the subscriber base both by improving existing services, such as interfaces to voice mail and prepaid systems, and facilitating an unlimited range of new value-added services and applications, such as account management and billing inquiries. New applications can be introduced quickly and easily without the need for additional infrastructure or modifications to the phone. This will allow operators to differentiate themselves from their competitors with new, customized information services. WAP is an interoperable framework, enabling the provision of end to end turnkey solutions that will create a lasting competitive advantage, build consumer loyalty, and increase revenues.

Content Providers Applications will be written in wireless markup language (WML), which is a subset of extensible markup language (XML). Using the same model as the Internet, WAP will enable content and application developers to grasp the tag-based WML that will pave the way for services to be written and deployed within an operator's network quickly and easily. As WAP is a global and interoperable open standard, content providers have immediate access to a wealth of potential customers who will seek such applications to enhance the service offerings given to their own existing and potential subscriber base. Mobile consumers are becoming more hungry to receive increased functionality and value-add from their mobile devices, and WAP opens the door to this untapped market that is expected to reach 100 million WAP-enabled devices by the end of the year 2000. This presents developers with significant revenue opportunities.

End Users End users of WAP will benefit from easy, secure access to relevant Internet information and services such as unified messaging, banking, and entertainment through their mobile devices. Intranet information such as corporate databases can also be accessed via WAP technology. Because a wide range of handset manufacturers already supports the WAP initiative, users will have significant freedom of choice when selecting mobile terminals and the applications they support. Users will be able to receive and request information in a controlled, fast, and low-cost environment, a fact that renders WAP services more attractive to consumers who demand more value and functionality from their mobile terminals. As the initial focus of WAP, the Internet will set many of the trends in advance of WAP implementation. It is expected that the ISPs will exploit the true potential of WAP. Web content developers will have great knowledge and direct access to the people they attempt to reach. In addition, these developers will likely acknowledge the huge potential of the operators' customer bases; thus, they will be willing and able to offer competitive prices for their content. WAP's push capability will enable weather and travel information providers to use WAP. This push mechanism affords a distinct advantage over the WWW and represents tremendous potential for both information providers and mobile operators. 3. Why Choose WAP? In the past, wireless Internet access has been limited by the capabilities of handheld devices and wireless networks. WAP utilizes Internet standards such as XML, user datagram protocol (UDP), and IP. Many of the protocols are based on Internet standards such as hypertext transfer protocol (HTTP) and TLS but have been optimized for the unique constraints of the wireless environment: low bandwidth, high latency, and less connection stability.

Internet standards such as hypertext markup language (HTML), HTTP, TLS and transmission control protocol (TCP) are inefficient over mobile networks, requiring large amounts of mainly text-based data to be sent. Standard HTML content cannot be effectively displayed on the small-size screens of pocket-sized mobile phones and pagers. WAP utilizes binary transmission for greater compression of data and is optimized for long latency and low bandwidth. WAP sessions cope with intermittent coverage and can operate over a wide variety of wireless transports. WML and wireless markup language script (WMLScript) are used to produce WAP content. They make optimum use of small displays, and navigation may be performed with one hand. WAP content is scalable from a two-line text display on a basic device to a full graphic screen on the latest smart phones and communicators. The lightweight WAP protocol stack is designed to minimize the required bandwidth and maximize the number of wireless network types that can deliver WAP content. Multiple networks will be targeted, with the additional aim of targeting multiple networks. These include global system for mobile communications (GSM) 900,1,800, and 1,900 MHz; interim standard (IS)-i36; digital European cordless communication (DECT); time-division multiple access (TDMA), personal communications service (PCS), FLEX, and code division multiple access (CDMA). All network technologies and bearers will also be

Mobile Business Services: A Strategic Perspective O\f09>

ABSTRACT

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Mobile business sendees are attracting increasing attention and they promise a multi bill ion dollar market whose characteristics are quite distinct compared to mobile consumer services. Competitive activity among players keen on tapping into this opportunity is increasing rapidly. In this article, we look at mobile business services from a strategic business perspective. We chart the mobile business services landscape and discuss the underlying market drivers and potential end-user benefits. Additionally, we describe the competitive landscape and discuss the relative positions of the primary player groups. INTRODUCTION Corporations and business users have traditionally been early adopters of telecommunications solutions. During the pastfewyears, however, it is the personal rather than the business market that has driven mobile service innovation in many leading-edge markets. Mobile chat, mobile games, and downloadable mobile handset icons and ringing tones provide good examples in Europe and Japan. In the U.S.,on the contrary, theevolutionof mobile services has been drivenmore by the corporate sector as seen in the mobile fleet management systems of FedEx and UPS, for instance. Such applications, however, represent only early precursorsof what promises to become a significant industry with real value potential. Although consumer services have attracted the greatest media attention so far, corporations are now becoming more active in deploying new mobile business solutions to achieve tangible business benefits. Moreover, in the mobile service development and provisioning industry, business solutions are attracting increasing interest as consumers have not rushed to use mobile business-toconsumer (B2C) services as enthusiastically as expected. This chapter sheds 1 ight on the mobile business services opportunity space from a strategic perspective. First, we discuss the underlying market drivers, current obstacles, and potential benefits of mobile business services. Second, we discuss the differences between mobile consumer and business services, and map the opportunity landscape of mobile business services. Third, we discuss the competitive landscape, the value chains, and the relative positions of various player groups in this industry.

A SILENT REVOLUTION: GRADUAL CHANGE IS Overtime, enterprise IT solutions have evolved from the mainframe and cl ient-server solutions to e-business solutions such as customer relationship management (CRM) and supply-chain management (SCM) that facilitate information flow and interaction within and between organizations. Mobile business solutions represent the next wave of this evolution, further extending connectedness and enhancing interaction. But should the emergence of the mobile data medium be considered predominantly as a newaccess channel to current

enterprise IT appl ications, will itaddanewfunctionality to these, or does the mobiledata medium represent a more fundamental shift inthe way companies operate? The mobile business services sector is driven by both demand- and supply-side factors. According to the Yankee Group (1999a), among large U.S. companies (with more than 5,000 employees), 20% of the workforce is already mobile, with the share of mobile workforce set to increase constantly in the foreseeable future. The adoption of mobile business services is thus driven by an increasing need for mobility, but also by technical opportunities to streaml ine business processes and enhance interactivity. The decreased time and place dependency of many business processes enable appealing value propositions to many kinds of organizations. According to the Gartner Group (2001a), over 80% of European corporations consider mobile devices and applications as very important for their