Mobile phones may win the battle to become the new “desktops” for billions of people, starting in the emerging markets. What will make successful strategies for manufacturers, carriers, and their business ecosystems? Expect dynamic applications to feature.

Even casual readers will already know of the global explosion in mobile communications. At the annual Mobile World Congress, held in February in Barcelona, the focus was on the ubiquitous mobile. We’re not quite there yet. Traffic is still predominantly voice, but texting, music and videos are of increasing importance. And soon, financial services will be as common on handsets as SMS and just as easy. PBM – pay, buy, mobile (cute, no?) – is on its way. Innovation is being driven by these new uses but many handset manufacturers and carriers are just adding bells and whistles. The common business model seems to be constant platform obsolescence driving purchase of new equipment, which requires new operating systems, which creates opportunities for new software and functions, and so on...until the customers rebel.

Many of these functional upgrades – such as photos, music and videos – demand more and faster internal operations, more sophisticated operating systems, and greater local storage capacity – but add little traffic.
The real payoff for carriers will come from new, consumer-driven uses demanding constant back-and-forth traffic. Trillions of tiny, individual transactions together make for very large, and profitable, numbers. These new uses are dynamic applications – they are iterative and interactive, hence traffic-building.

And this is already unfolding but mainly in the emerging markets (EMs) and largely out of sight. EMs are the engine of handset growth. India and China add hundreds of millions of new users every year. Industry-watchers expect the EMs to drive every aspect of the industry. Dynamic applications will, I believe, be a major factor in this growth.

So what do EM customers want and need? Research by myself and my former colleagues at the World Resources Institute suggests that they place very high value on mobile com-munications. Even very poor people are willing to spend up to six percent of their income on telecommunications. In 2002, global ICT was conservatively estimated to already be a $50 billion market. Why the enormous appetite for telecom services? It’s simple but largely unanswered by industry: connectivity equals productivity.

But which dynamic applications are both needed (and wanted) by the billions of new customers, and sufficiently iterative and transaction-heavy for the industry to sustain? The list is long: education and training, front and back office business operations management, agricultural services, and general commercial transactions. Of many possibilities we have room to briefly examine just two: financial and health services.

Financial Services

As mentioned, PBM is on its way. The technology exists, it just awaits broad deployment. A low-end estimate is that commerce-over-mobile will alone be a half-trillion dollar industry by 2011. Financial services over mobile are already a reality in some emerging markets:

Vodafone, with its Kenyan affiliate, Safaricom, for example, has introduced a highly successful platform in Kenya, M-PESA. The service, which started as a public-private partnership with funding from DFID and Vodafone, was originally designed as a tool for managing micro-credit transactions.

In the Philippines, mobile carriers Smart Communications and Globe Telecom have created a virtual currency of credit for SMS text message units.

Extraordinary growth here is largely not directed by the carriers; but a response to customer demand. Very low income consumers are spending scarce disposable income on highly sophisticated applications.

Unmet Potential in Health Services

In health services, telecoms are in use, but with huge unrealized potential. Voxiva is employing both wired and mobile phones for disease detection, reporting and record management systems. South Africa uses mobiles for management of HIV/AIDS, TB and other disease treatment, and of patient medication, via voice and SMS text messages.

Research is needed on whether mobiles can deliver better health outcomes but it’s easy to imagine the well-being benefits and commercial implications of people having their full medical records on their mobile, immediately accessible to doctors over secure networks.

Implications for Strategy

Eventually nearly everyone will have a mobile, a status desktops will never achieve. In the developing world, mobiles are a necessity, not a luxury. This capacity for mobile applications to deliver massive improvements in life circumstances for the Base of the Pyramid (as opposed to the incremental life benefits that any new application brings to rich customers) demands attention. As phones become more technology-rich, new applications can define new business models and add significant revenues and profits. They can also do much of the work of development - increasing productivity, improving health and well-being, and providing access to knowledge and skills. In other words, connectivity equals not just productivity but also improved well-being in these markets.

Carriers, manufacturers, and their respective ecosystems, have yet to focus on pushing the envelope on dynamic applications. I see two logical and immediate openings.

• Chipset manufacturers, particularly the flash memory companies, would do well to explore these applications. Flash memory is already the technology of choice for mobiles, cameras, PDAs, and laptops. Memory is a commodity business - success demands ability to provide specialized chips in bulk. The markets mentioned here are thus ideal for this part of the industry but it must rethink who its customers are, what partners it should seek, and where future growth can be found.
• GSM (Global System for Mobile communication) is under-utilized. The industry should cultivate more dynamic application use inside and outside firms – the payoffs would be much greater than from somewhat cheaper new handsets. This is the strategic oppor-tunity which could redefine the role of ICTs for many generations.