Feb 16, 2018

Innovating and Investing Strategically in New Service Categories

A few weeks ago, the UK mobile operator O2 decided to shut down it smart home business [1]. O2 stated that it had not seen "category-leading take up" of the service to justify continued investment.

This episode encapsulates a recurring challenge for businesses in the mobile eco-system, laboring under the opportunities to exploit mobile technology in adjacent industries and new application categories. Just think back to the promise of mobile money and mHealth (another category that Telefonica entered and subsequently exited a few years ago [2]). The new waves of opportunity today are in the industrial IoT and smart city markets, to name a couple of examples.

At an industry level, the complication for mobile businesses is to create innovative services that users may not be clamoring for. These are also domains where mobile businesses lack expertise and, potentially, the right incentives for staff to take medium to long-term risks and innovate.

And yet, if mobile is to expand its reach beyond voice and data communications services, industry participants have to create incentives to work with outside partners through business models that deliver valued and commercially viable services. In other words, "category surfing" is a collective activity, not a solo effort, unless you happen to be an Amazon or an Apple.

In order to promote a category, firms will have to pursue a mix of initiatives, collaborating with competitors while retaining the agility to differentiate themselves. Example initiatives include:

  • Co-promoting a Category - It sounds a lot more credible if several firms are pushing a common message to raise market awareness and support a new category. Think about how Blockchain garnered market attention and is now drawing in mainstream financial institutions. Soft-standardization is also important. It ranges from educational efforts to help customers understand what they are buying through to codes of conduct and even technical specifications that drive economies of scale (and hence affordability and ubiquity). No one firm can address this on its own.
  • Establishing organizational clarity on value chain positioning - Individual firms need to develop a view on how the category is developing to establish their role and scope for competitive differentiation. This helps in: aligning the firm internally; understanding risks from non-traditional competitors; being proactive about new business partnership opportunities; and, actively resolving potentially adverse consequences for business-as-usual operating models.
  • Contextualizing resource commitments against a strategic roadmap - First generation services in a new category probably won't succeed as intended and will require modification. More importantly, first generation services are a stepping stone to second- and third-generation concepts as complementary innovations emerge and customer expectations rise. For example, the smart home category began with the notion of a connected home. This was mainly about information services based on connected thermostats, surveillance cameras, door and window security sensors etc. The next generation of services evolved through the addition of voice recognition technologies to enable 'smart' services [3]. Smart home experts reckon that the next transition will involve presence and personalization technologies which will enhance the user experience and expand the service category yet further. The interval between these transitions is roughly 3-5 years so a category-player has to factor the resulting investment implications into its plans; it can’t simply rely on a business plan based around the first generation offering.

When Vodafone's CEO outlined the company's plans to enter the consumer IoT market, one noteworthy caveat was that Vodafone's strategy had a 10-year horizon. This planning horizon and the risk-management proposals listed above might sound daunting for many firms. Intelligent preparation, rather than deep pockets, has to be the answer. After all, with all the resources at its disposal, even the likes of Google/Alphabet struggle as evidenced by their acquisition and subsequent closure of the Revolv smart home business [4].

[1] O2 Smart Home will be closing down soon https://home.o2.co.uk/en-GB/o2-smart-home-is-closing

[2] Rethinking the mHealth Value Proposition http://www.more-with-mobile.com/2013/08/rethinking-mhealth-value-proposition.html

[3] Deutsche Telekom integrates Alexa in the Qivicon smart home platform https://www.iot-now.com/2016/09/19/52554-deutsche-telekom-integrates-alexa-in-the-qivicon-smart-home-platform/

[4] Revolv devices bricked as Google's Nest shuts down smart home company https://www.theguardian.com/technology/2016/apr/05/revolv-devices-bricked-google-nest-smart-home

Photo by Jeremy Bishop on Unsplash.com


  1. 19 Feb 2018 update

    In the context of security and the role for regulation in the IoT sector -

    "A cooperative approach could ensure safer products and a more stable and secure IoT network. It is only through a robust IoT infrastructure that public sector bodies will be able to successfully take advantage of the IoT"


  2. 25 Feb 2018 update

    Vodafone has teamed up with Samsung to expand its consumer IoT offering, with the first combined service providing monitoring solutions for the home.
    The V-Home by Vodafone service will bring together the operator’s IoT management platform with Samsung’s SmartThings devices.