The Mobile Wars: 2015-2020 (Part 2)

For the second part of these series of posts, the focus will be on Apple’s biggest competitor (at the moment), Samsung.

Samsung

Unique among the plethora of Android vendors, Samsung has actually beaten Apple in terms of smartphone market share in many countries around the world. Its tablet market share is climbing, albeit slowly and in some countries and regions, Samsung’s tablets already out-sell Apple’s iPads.

But it is also a truism that when you’re at the top, the only way to go is down. Plus, you will constantly looking over your shoulder at what your competitors are up to. While Samsung is sitting pretty, if a little precariously, at the top at this moment, it could easily fall over the precipice in the next few years if its competitors get their act together.

Today, Samsung still sees Apple as its main competitor. Witness the ads that come out of the US market and elsewhere and it is clear which brand they are targeting, even if it isn’t spelt out clearly. By being so focused on Apple, however, Samsung risks being blindsided by other Android vendors, especially those coming out of China.

Strategically, Samsung’s most glaring weakness is that their mobile division has no significant revenue stream other than those derived from the sale of their handsets. Yes, Samsung does have its own app store on their devices and Samsung also has KNOX, a new security platform it is trying to use to convince businesses to switch to using Samsung Android devices rather than Blackberry or Apple. It is interesting to note, though, that Samsung has not trumpeted its revenues from either of these, suggesting they are insignificant in the context of the entire division’s revenues. Contrast this with Apple’s iTunes, which rakes in tons of money for the fruity firm on top of the (high) margins they make from their device sales.

Without these additional revenue streams, Samsung’s margins face high downside risk. Indeed, the latest quarterly financial reports have already shown a significant drop. A consequence of depending on someone else’s ecosystem and saturated smartphone markets in the developed world.

While revenues and margins can be increased via sales in emerging markets, where smartphone demand remains strong and continues to grow at a brisk pace, this particular segment faces increasing threats from the brands coming out of China and, in some cases, local brands as well.

And herein lies another strategic danger for Samsung. As an established MNC, its overheads are higher than those of smaller, more nimble competitors. So even if everything else is the same, higher overheads will mean higher unit costs of its low-end smartphones and therefore higher prices for consumers. While its brand perception and acceptance will insulate it somewhat, it will be increasingly tough for Samsung to increase its market share in emerging markets if the division and company continues doing business the way they are doing now. (On a side note, I can still remember the time when I was competing with Nokia, it was a hard fight and Samsung only started winning because we outflanked Nokia with touch-screen feature phones and smartphones).

Furthermore, Samsung’s well-known broad portfolio of devices, while helping it grown tremendously in the past, has become a drag on profits instead. Samsung’s senior executives have admitted as much recently and aim to reduce their portfolio so as to increase their margins. Anyone who even knows anything about manufacturing will tell you the same thing, the longer your production lines produce the same thing, the more efficient they get (up to a point). But keep switching production on those lines, and efficiency drops, sometimes dramatically. And from the recent announcements, Samsung appears to be grappling with this very issue right now.  Will it work? Only to a certain extent as I have a nagging suspicion that their staff overheads are unsustainably high.

To sum up, Samsung is leading the pack, but its position looks increasingly untenable. It will not be easy to knock this behemoth off its perch as the market leader does enjoy a certain incumbency effect. However, the warning signs are already there and the next 5 years will look increasingly challenging for this company as the Chinese manufacturers get their act together.

More to come in subsequent posts as I look into Sony, HTC and LG, followed by the Chinese brands.

Winston

"Open your eyes, the world is not what it seems"

Disclaimers:

1. Opinions expressed are my own.

2. This is not an academic work so I won't be posting sources. In any case, my comments are based on my own observations and experience, mixed in with the news that's being reported. Conclusions are my own (as far as I know).

3. This post is not 'sponsored' in any way, no money or gifts changed hands for this posting. If a post is 'sponsored', I will clearly state so at the beginning.

The Mobile Wars: 2015-2020 (Part 1)

The end of 2014 is near and the product launch cycles for the major mobile manufacturers have ended. The biggest launches in recent months, Apple's iPhone 6 and iPhone 6 Plus, as well as Samsung's Note 4 and Note 4 Edge, have already reached plenty of markets around the world.

While Apple and Samsung continue to dominate profits and market share, the questions that everybody is always asking are: (a) how long can Apple and Samsung sustain their positions at the top of the market? and (b) What will be the fate of the second-tier players like Huawei, Lenovo, Xiaomi, HTC, Sony and LG? The following is my take on what might happen in the next 5 years in the mobile space. There will necessarily be a lot of assumptions and conjecture, as with all opinions of such nature. And I will try to spell them out clearly so that you, the reader, can assess for yourself whether they make sense or not.

Apple

Apple will continue to sit pretty and generate the lions' share of profits for the next few years. The logic is simple: unique amongst all the smartphone vendors fighting for a slice of the pie, Apple owns its own ecosystem, from the platform to iTunes (music, movies, books, apps). Barring a major disaster (the U2 album and the iCloud hack do not count since there has been no lasting financial or PR impact), Apple will continue to mint money here and make its products as sticky as always. Furthermore, its practice of not discounting consistently means it will generate a higher margin than its competitors as each iteration of iPhone and iPad moves through its lifecycle. Additionally, as production runs continue, it is usually the case that the production cost per unit of iPhone and iPad will get lower (to a point). I would speculate that Apple might possibly generate higher per unit margin in the second and third quarter of a particular model's sales cycle.

Where market share is concerned, Apple continues to hold its own (and sometimes, it even increases) market share in the USA, its worldwide market share is trending down.

This last point must be especially troubling for Apple as the emerging markets are where the smartphone markets are growing. While Apple has demonstrated that it continues to hold a large and significant percentage of the population in developed markets in its thrall, it has struggled in markets where median income ranges from a couple of hundred to a thousand US dollars a month. With household incomes at that level, it is hardly surprising that people in these markets can't and won't spend a month's income (or more!) on an iPhone or iPad. The alternative for them? A cheap Android handset that retails for USD150.

Even so, there might be a silver lining for Apple in emerging markets, namely through the trade in used handsets. To date, I have not seen any attempt to discover how many used handsets are being traded around the world. Yet, personal experience tells me there is a large and lively trade for such devices in countries where people cannot afford the most expensive products. But while these provide consumers in emerging markets the means to get a hold of Apple products, the danger for Apple is that there isn't a means to monetize these transactions. Furthermore, while Apple can track (and earn) from transactions through iTunes even for used handsets, it is more likely that such handsets are jailbroken and therefore bypass Apple's own ecosystem altogether.

To sum up (ceteris paribus), Apple's ownership of its ecosystem, together with its loyal following in developed markets, will stand it in good stead to remain a key player in the smartphone and tablet market in the next 5 years. Beyond that, as emerging markets develop and incomes grow, the question remains whether Apple will be a key player, or simply a sideshow.

And of course, it goes without saying, there could be another player coming along with the next 5 years that provides starry-eyed consumers with something that's out of this world. In which case, all bets are off.

More to come in subsequent posts.

- WG

"Open your eyes, the world is not what it seems"

Disclaimers: 
1. Opinions expressed are my own.
2. This is not an academic work and neither am I a journalist so I won't be posting sources. In any case, my comments are based on my own observations and experience, mixed in with the news that's being reported. Conclusions are my own (as far as I know).
3. This post is not 'sponsored' in any way, no money or gifts changed hands for this posting. If a post is 'sponsored', I will clearly state so at the beginning. Feel free to comment if you disagree with anything I've said

Corporate Social Media Engagement: Be Careful What You Wish For

A continuation of my earlier post about corporate social media engagement.

While there can be lots of positives when corporates actively use social media tools. There are certainly plenty of potholes on the road to watch out for too.

Assume you've started using Twitter and Facebook to engage your customers directly. The number of followers / fans is rising and things are looking up. Suddenly it hits you: an increasing number of customers are starting to use these channels as an alternative to the standard customer service touch-points (CS hotlines, emails, service centres).

Now what?

The ideal situation would be to have dedicated customer service staff monitoring the social media channels constantly (even 24/7, given the nature of social media). This way, a corporate's own customer service team is cued into the issues or concerns that are most relevant to its customer pool, thus allowing for a more proactive approach to managing the issues customers face with a corporate's product/service.

Yet this is likely to be the biggest bugbear corporates face, given the necessity of a bureaucratic (in the Max Weber sense, not the derogatory sense) organisational structure among corporates. Certainly, the inherently chaotic nature of social media makes it highly challenging to monitor and measure the social-media-as-customer-service approach.

Highly-challenging, but not impossible.

If social media is conceived of as a large chat room with many people within talking at once, the answer is clear. Corporates need to invest sufficient resources in customer service to ensure that these voices in the chat room can be listened to and handled with respect and care as expeditiously as possible. Just because social media is chaotic doesn't mean that the usual customer service check lists can't be applied. On the contrary, the offline customer service tools and experiences can be adapted and deployed to social media.

Which brings us to just 1 thing: convincing the boss to sign off on this....

3 Days Of Creativity And Innovation In New York City

Recently made a trip to New York City to attend a company sponsored training course conducted by WhatIf.

I have to admit, when I was first informed about this, I was highly skeptical. After all, it seems counter-intuitive to think that creativity and innovation could be 'taught'.

Furthermore, the course was pitched as one that's focused on new product development. Given Singapore's small size, it hardly seems likely that anything new will be commissioned from this country. Singapore is used frequently as a test market, but certainly not a breeding ground for new products, at least, not in this company.

So, it was quite a surprise when I turned up in NYC to learn that:
(1) This was the first time anyone from Samsung had been enrolled in this course. In other words, I had the privilege of being 1 of the first 15 in the entire company to be there.
(2) The classroom certainly didn't look like a classroom. In fact, the first thought that struck me was how much it resembled a playroom in a kindergarten back in Singapore.
(3) We didn't have to do the case studies so beloved of other marketing-related courses I've attended. This was a huge relief, since those case-studies tend to be pretty divorced from reality.

In fact, the learning experience was the best I've come across in a long time. Our trainers, Lisa and Gareth, made the effort to break the ice. They taught us about different techniques we could use to cultivate creativity and innovation, all in the context of developing a new product.

And the way it was taught was certainly memorable. Of course, principles were explained and definitions clarified. But throughout the course, there was role-playing, actual field-work, demonstrations and hands-on sessions where everyone chipped in.

And it was during the course of this training that Lisa & Gareth helped me realise that the techniques and tools didn't have to be restricted to new product development. In fact, the techniques and tools could be applied in everyday work, if we took the trouble to do so.

All this certainly made the long trip there worthwhile. And it was definitely s very positive experience to be remembered and lessons to be applied.

A Paradigm For Corporate Social Media Engagement

I obviously hardly post anything up here (although I really ought to). But this subject has been tossing around in my head for some time. So here's something to chew on.

There has clearly been a lot of talk about this 'new' phenomena called 'social media', and the tricky part where a company is concerned is how to get to grips with this social institution. By and large, most of the talk has seemed to be pretty much clueless about the 'rules and guidelines' of engaging with this 'beast'.

Yet, it is also clear that these 'rules and guidelines' have been derived from the traditional PR model, which is one of controlled messages, style and imagery. To a large extent, it seems the trend among corporates is simply to transplant what has been developed for traditional PR into the social media scene, and leave it at that.

Clearly though, social media is a different creature, and certainly not an animal that can be tamed by using the old ways of communicating with the outside world.

To start off: what, after all, is social media? In the common sense understanding of the term, 'social media' simply refers to people who blog and post comments on social networking sites like Facebook and Twitter (among others). Yet this can include a lot of people who only log-in to such sites say, once a week, post a couple of updates and leave it at that. Do these people qualify as 'social media' ? Obviously not, at least, not to the corporate world.

Certainly, if corporates were to follow the traditional PR model, such an example as above would hardly be worth the time and effort to reach out to (come now, be honest). And yet, such a person might very well be a key influencer within his or her circle of friends.

So clearly, traditional PR doesn't quite work where 'social media' is concerned. What then?

The answer is simple: corporates need to think of the 'social media' scene as one big (REALLY BIG) chat room that is potentially open and active 24/7. In other words, there is no one set of clearly defined messages / image to be communicated within a clearly defined period of time under a clearly defined set of rules. It is, literally, anything goes.

Corporates, obviously, are uncomfortable with losing this level of control, which explains why so many find it difficult to engage the 'social media' scene closely and with a clear vision. After all, a chat room (remember IRC?) can have multiple people talking all at once about multiple subjects that could potentially fly off in an altogether unpredictable tangent at any one time.

So, what's a corporate to do? Here are some quick and dirty guidelines to follow:

Rule #1
Forget traditional PR, social media should be thought of as a BIG CHAT ROOM that's open 24/7

Rule #2
Loosen up a little. If a corporate is going to do nothing except post the usual PR spin, why bother with social media? Stay with traditional PR. A related point: have a little fun. Even if corporates poke fun at themselves, its hardly going to damage their brand and company image. Quite the contrary, it shows maturity, confidence and a generosity and sincerity of spirit that is priceless.

Rule #3
Know your stuff. The more you know what you're doing (in terms of products, services, marketing etc), the easier it is to engage in an ongoing conversation with 'social media'. If corporates don't know this. Then, again, traditional PR is probably the safer route to take.

Rule #4
Be prepared for criticism, and be sincere in doing something about that criticism. The social media scene can be exceedingly harsh. But the more you try to hide the truth, the more you encourage people to flame and criticise.

Rule #5
Be conscientious about monitoring the what's being said online. Its one thing for corporates to say they are going to engage 'social media', its another thing to actually do it. Doing 'social media' isn't simply a matter of posting some tweets or setting up a Facebook fan page.

Rule #6
Drop the ROI mindset. 'Social media' is currently too diffuse to be tracked with any degree of accuracy. Until the monitoring instruments become more fine-tuned, any ROI discussion about social media is largely a waste of time.

Having said that, some matrices can be used. Typical ones include the number of fans, followers etc. These can, and should be, tracked. Just don't waste time translating this into anything more concrete.

Another caveat: brand perception surveys can and should be continued, since these track the corporate's entire communication spectrum to the world at large.

Rule #7
Social media is fast, so be prepared to make any necessary decisions or reactions equally fast

Rule #8
Respect the social media scene. Just because some people in the social media scene don't write for a living doesn't mean they cannot influence others.

Rule #9
Don't be fixated on simply getting a message out. Social media is an excellent networking / relationship-building tool. Make full use of it.

Rule #10
This is actually an extension of Rule #2, but I've included it as a separate rule for added emphasis: don't be a control freak. If corporates aren't comfortable with giving up 'control', then they have no business engaging social media in the first place.


That's pretty much what's been buzzing around in my head for awhile. Comments, flames, requests for interviews (LOL!) ? Feel free to drop me a note.