Rob Trice and Ursula Oesterle have their pulses on the state of the mobile industry from their vantage point while working in Silicon Valley for telecommunications giant Swisscom.
Trice, 45, is an established international venture capital investor with Swisscom Ventures. He has been involved in the mobile industry for more than a decade, working as a senior managing director of SK Telecom Ventures and a co-founding partner of Nokia Growth Partners. Before becoming a venture capitalist Trice worked at DirecTV in Los Angeles and Tokyo and as an international policy analyst at the Washington- based Center for Strategic & International Studies.
Since 2003, Oesterle has managed Swisscom’s open innovation and scouting activities as vice president of innovation. She is a leader in the mhealth movement. Before joining Swisscom Oesterle worked as program manager of a Swiss national science program. She has earned a PhD in physics from École polytechnique fédérale de Lausanne and has a business degree from the International Institute for Management Development, also in Lausanne.
In a recent interview with Arabic Knowledge at Wharton, Trice and Oesterle discussed the mobile industry and the challenges ahead. “It’s on fire,” Trice says. “There’s nothing that stops the innovation.”
An edited transcript of the conversation follows:
Arabic Knowledge at Wharton: Let’s begin by looking at the future of the mobile industry as a whole. Where do you see it going in the next 12 months to 24 months?
Rob Trice: What will happen over time is mobile will work itself out of an industry. It will no longer be standalone. We won’t be talking about a mobile Internet. There will be one Internet. I don’t think we will see this gap of a wire line Internet and mobile Internet.
Ursula Oesterle: If we go 12 months or so mobile needs to become a strategy for every corporation. Most corporates are looking at how to use mobile, how to access a customer, how to transaction, how to sell on the mobile and how to advertise. But many are in the early phases. In two years every company will have a defined strategy as how to use it. There no longer will be a differentiation and competitive advantage for some brands.
Nobody designs anything for a PC only anymore. That phase has already happened.
Arabic Knowledge at Wharton: So it’s clear we’re headed down the mobile pathway. Where will it lead us?
Oesterle: Mobile is an integral part of everything. You don’t even listen to a startup pitch that does not include a mobile component. What is much more interesting is how broad will mobile will go? How much of real life will it really replace? Your wallet? Your office keys? Those thing will happen. The next level is how much pro-activity and information can it push to you? In health, how much the mobile needs to tell to go get some exercise, you shouldn’t eat that. It is a tool to basically help you manage your life.
Trice: We’ve had the discussion about what happens when your life is actually run by a device. What does that do to the living experience? But that’s a much deeper topic.
Arabic Knowledge at Wharton: So are we experiencing something of an experimental period of mobile technology?
Trice: It depends on the level of the apps. Since the iPhone came out you’ve seen a lot more processing power and seen a gyroscope, GPS and a good camera. In areas of gaming where you have much better graphics, that’s happening. On different levels of verticals you have that much more maturity.
On the health side we’re just getting over some of those issues: how you can make the device smarter about your lifestyle while overcoming privacy issues.
Oesterle: The discoveries are in what are the real user needs and user behavior. In the end we emulate the same human social interactions we’ve always had before. The means haven’t changed we just have new tools to satisfy those needs. While the technology has been around for a while and can do a lot of things many apps haven’t worked because they didn’t address the human need.
Arabic Knowledge at Wharton: In other words it is less about the technology and more about how to improve living?
Oesterle: That will come in all sectors so they are experimenting in fine tuning the needs and fine tuning the business model, who pays what and what can you build on top of the value. Then you have the mobile infrastructure as devices get more powerful, bigger screens, more colorful screens and then there is a question of mobile broadband.
Let’s be honest there are many areas in the world where we still don’t have that so we can’t ignore that. That will take many more years – there are a whole bunch of technology issues that constantly need to evolve with the demand.
Trice: I think you see a virtuous cycle. You will see some devices and see some apps take advantage of the new device technology and that starts to strain the networks so there is improvement to the networks and then you go back to the devices and there is more content.
Oesterle: Innovation never stops.
Arabic Knowledge at Wharton: In talking about basic human needs will there be localized innovation? Should we expect to see innovation in say MENA or Latin America?
Trice: You’re already seeing it. You’re seeing more innovation on the mobile device in the developing world because the demand is much greater. I am thinking of one application in Ethiopia. It was a local market for commodity exchange all done on a mobile. You’re seeing things in the Southern Hemisphere where people are using minutes of use as a currency because they can store those minutes on their handset so they don’t have to walk around with cold-hard cash in unsafe environments. You see people buy insurance straight from their mobile phone, paying their bills straight from their mobile phone. And these may not even be smartphones.
Oesterle: We’re seeing a whole bunch of uses related to pregnancy information, farmers getting weather reports. So you get a whole bunch in some emerging countries.
Trice: About eight years ago I backed a company that was doing a text a day for pregnancies in India. If you became pregnant in an Indian village now you could get a text saying ‘this is what I should expect today’ for nine months. Otherwise, are you going to talk to your mom? Who else are you going to talk to? For those little villages that’s a great service.
Arabic Knowledge at Wharton: It does sound like a wonderful service. How does something like that pay for itself?
Oesterle: Most [developing such a service] don’t monetize it. They are doing it to spread information. So it is a government trying to get basic health awareness out to rural areas. It’s a means of education and training. In India they also have apps where kids can learn English on a mobile phone. It’s bringing society to the next level so costs usually are carried by the government or a nonprofit organization because that brings core value.
In emerging countries we have real needs. In the West we have such a high standard of living it’s about fun, it’s about desires. It’s why gaming has taken off and you get more money off of it. There’s a whole new series of components what I call functional needs that make your life easier and better. In the West we are starting to catch on but they’re not as a sexy because people aren’t going to pay much money for it. But in emerging countries it’s the government and development aid that really used mobile because it solves a need they couldn’t otherwise.
Arabic Knowledge at Wharton: It seems like there is a lot that could be done in solving real issues in more developed countries such as traffic in Cairo or Los Angeles.
Oesterle: Asians are much more demanding than the Westerners. If you take a Chinese business traveler he expects his business hotel to allow him to get identified with his mobile phone, that he doesn’t have to do check in and that his mobile phone is cleared to open his door. He can pay his bill on the mobile phone. That the mobile phone will automatically switch to Wi-Fi. That’s expectations of a Chinese businessman, which we just dream about here.
Those are things that are being build there. It is coming out of those emerging countries. I think the Middle East, too, is using it for its own needs such as a form of communications in spreading news. They have applications for women to connect. Dating in the Middle East is more difficult so they use mobile phones to avoid direct contact. Prayer timings reminders are one of the most successful apps.
Arabic Knowledge at Wharton: So you are seeing tailored-made usages of these devices from region to region?
Oesterle: We need to differentiate between what’s global play and what’s local play. On the local play the sky’s the limit.
Arabic Knowledge at Wharton: Do you need to keep the local needs in mind when building products?
Trice: If there was any company at one time that created devices for the needs of the specific market Nokia was tops at that. In India it was really important to have a flashlight on the top of the phone. An FM radio was a necessity. But you couldn’t put an FM radio on Nokia headset here. You would just assume people would connect to the Internet with Pandora.
The other thing is just hitting the cost point. That’s where you are seeing innovation out of China. These Chinese low-cost mobile phones manufacturers are moving into quasi-smartphones and they are going into Africa just at a time submarine optical cable is significantly increasing the capacity in sub-Saharan Africa. It’s a perfect storm for a huge mobile revolution there.
Arabic Knowledge at Wharton: Is there a battle going on between the big innovators such as Silicon Valley and China to get into an advantageous position in emerging markets such as Africa?
Oesterle: Not more than usual. Silicon Valley is about global plays. Silicon Valley is about disruptive innovation, really changing the world. The rest of the world is more linear reality in innovation that satisfies a need. Silicon Valley still is and will be for a long time the capital of disruptive innovation.
Arabic Knowledge at Wharton: What are the big obstacles that must be overcome for the mobile industry to grow?
Trice: I don’t see any. It’s on fire. There’s nothing that stops the innovation.
Arabic Knowledge at Wharton: Practically speaking, what about battery life and network infrastructure?
Trice: I would look at those as incremental improvements. I wouldn’t look at them as barriers to adaption. People will figure it out. When the iPhone first came out people walked around with a little battery charger that gave them an additional two hours. Or people learn to turn off their Wi-Fi and GPS as I did today so I could get through a day. That’s the cool thing for me. Throughout the ecosystem you are seeing that adaption that’s leading to innovation all over the world.
Oesterle: Nothing is stopping it. It is happening. But one of the biggest issues is network capacity. The cost and time horizon of network infrastructure is just so completely different to the cost and time horizon of apps. With networks we’re talking billions of dollars, long cycles, returns on investment in tens of years.
Apps have another problem: There are thousands of them. How do you get visibility? For the mobile industry everyone wants to go in there. For them it is going to get tougher and tougher. The biggest thing is can the network keep up? It evolves through several phases and it is a question of timing: When do you invest in the network infrastructure? And nobody wants to pay for it. Things are free on the Internet and more and more they are free on mobile and it’s just not free. The cost of the infrastructure is huge. We all expect great mobile experience, access all the time and who picks up those costs?
Trice: That’s a good point but what I am finding with heavy downloads for news apps I’m using the one that is more efficient because I don’t have the time to wait. What you will see as we hit that network capacity ceiling the app guys will have to adapt.
Oesterle: I agree. In many emerging countries they just don’t have the mobile band capacity yet. That part is incremental. It is not a long-term barrier.
But if you ask about issues, the battery life will be solved. But we underestimate the network, especially with everyone using more video. The quality of the global network has gone down. Even in Europe, Japan or Korea the quality has gone down because we cannot have perfect quality anymore because people are not willing to pay for it. So there are a lot of questions rather than barriers. It’s happening. It is happening faster than anyone can imagine.
Arabic Knowledge at Wharton: One issue is the open versus closed platforms. What do you make of it?
Trice: If you look at Google and Apple, they are masters of the kingdom. They call the shots. They can change those policies at will and have a big impact on some of the startups. Then there is HTML5 and you go to an open Internet. It should be more open and less constraining.
Arabic Knowledge at Wharton: And other types of issues that you have seen or experienced?
Oesterle: My mother says, ‘Why do I need this app?’ I can go to the browser and get the same thing. Yeah, you’re right. Why bother learning it? Those are some interesting aspects. Which way are these people going to go? That goes back to the user experience. That goes back to discovery. There is total overflow of information. There are tendencies that there are too many apps. There is no way you can manage your apps anymore.
Trice: The average user only has 40 apps. That’s one of the things you need to look at when considering the monetization component. You watch the amount of traffic on Facebook versus Twitter and Foursquare. It just drops off. You are seeing the haves and the haves not. The haves have the eyeballs and the have nots it’s really hard to monetize.
Oesterle: And then you have all those people who want to have fun and offer things for free. That destroys everything. It is going to happen in all the verticals. The business model is a big issue.
Trice: The cost of developing all these cool open-sourced tools and cloud-based things are becoming really small. There is a do-it-yourself angle now where you can go and disrupt markets as a non-rational economic actor. You can just decide I am going to create a better way to do this because I am paying SMS [short message service texting]. All these startups are doing IT-based startup apps. There are 40 or 50 of them out there. It is crushing the SMS revenues for the carriers but the reason they came up with that is because people were paying so much for SMS. The market efficiencies are in play but you can’t stop a non-rational economic actor.
Oesterle: It’s not a killer. We will have to figure it out because there is no way back.