Recently I was asked to think about how to improve the phone features and functionality in a commoditized “Terminal market” (an Ericsson acronym). There is a lot at stake here; many people buy phones, 2.2B of them to be exact, and not enough of them buy the associated internet service.
Improve the specs and make it look good is the easy answer to that question. That is, if you are building a phone, not a PDA. You can pull technology, services, and memory into a bulky enclosure in a PDA and rely on nerdocrats to buy them, not a large market. So how do you build a phone that is just as smart and fits in the enclosure of a RAZR? Or smaller? Research shows that people buy cool-looking phones rather than bulky ones stuffed with functionality.
The answer, in my view, is services. Just as the power of the iPod stems from the iTunes library on your desktop connected to the iTunes store, phones should become re-play devices to services provided on the backend. The phone should be an iPod geared towards managing and replaying service data; contacts, calendar items, music, news are pushed out to it automatically, pictures are taken, stored, and uploaded automatically to your section of the “store,” ready to be shared and, yes, sold. Enabling free-market principles to the content distributed by these services completes the value chain and drives the platform’s growth, regardless of phone.
Phone manufacturers need to learn how to build a value chain, not just a phone. Business innovation is just getting started.