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Motorola’s market dilemma

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Wandering through the halls of the enormous 3GSM World Congress in Barcelona in February, it was plainly evident that mobile communications is still in the very active stages of the innovation cycle. This event, which brings together most of the world’s top telecommunications technology and network companies, has come a long way from its humble beginnings last decade in the French seaside town of Cannes, when early attendances numbered in the hundreds.

This year’s event was a sprawling multi-hall event with 50,000 attendees and 962 exhibitors. Coincidentally, it was held at a venue immediately opposite the Placa des Toros les Arenes, a former bullfighting arena now undergoing massive refurbishment. One can only hope that the bulls of the mobile revolution meet a happier fate than their biological namesakes who fought across the road.

The energy in the mobile industry is almost palpable. Along with broadband application development, mobile technology and represents one of the most rapidly developing fields of innovation. Technology platforms are cycling rapidly, from GSM through to 3G and now HSDPA, in parallel with significant activity around WiFi and WiMax networks.

But even in an industry experiencing such rapid change, some sectors are already hitting issues normally faced in much more mature industries.

For mobile phone makers, one of the big issues is how to grow market share and differentiate products in a mature market. There are generally three paths. One is to concentrate on design and style as a key point of difference. A second is to pack in more features, such as e-mail, or higher quality versions of existing value-added features, such as mobile phones and MP3, to appeal to niches and early adopters. The third is to rip out features and lower the price to hit emerging markets.

Mobile handset maker Motorola has demonstrated some novel innovation across all three areas. But in terms of the second, rather than looking solely to pack in more hardware options, the company is integrating access to mobile services directly into their devices. With physical additions such as cameras and MP3 players having become standard, the company is looking outside the device to provide a better experience for customers. With this in mind, it recently announced partnerships with Google, Yahoo and Kodak.

In an interview at 3GSM, Motorola’s Vice President and General Manager for the Global xProducts group, Scott Durschlag, said such actions were necessary in terms of attracting customers and fuelling Motorola’s growth ambitions. The Google relationship, for instance, is intended to simplify the process of finding information using the phone, and will lead to the appearance of a ‘G’ button on some models that will take consumers directly to a local Google mobile search portal.

In its deal with Kodak, Durschlag said Motorola was trying to ‘liberate’ many of the millions of pictures that have been taken using camera phones but never transferred off the device. The 10 year deal will initially see Kodak’s image enhancement software incorporated into Motorola phones, with co-branded products to become available before the year’s end.

Motorola is also following the path of ripping out features to make phones cheaper. The company plans to deliver a phone that costs only US$30 to make (there is talk of that falling to as little as US$25 before basic material costs prevent further drops). These phones are primarily designed for emerging markets such as Africa and India, where people have lower incomes.

But Motorola has had to learn that even these markets will not accept inferior technology and design in exchange for lower prices. When a person’s income is limited, the purchase of a low-cost mobile phone still represents a substantial investment. Possession of a mobile phone infers status, and who wants to make a significant investment in a device with a shoddy design that diminishes that status?

Whether these strategies will prove successful or profitable in the long term will not be known for some time. But it is interesting to watch how Motorola has been willing to think laterally in terms of innovation in order to further its growth ambitions.

*Disclaimer: Brad Howarth was a guest of Motorola at 3GSM.

Brad Howarth is a journalist and author of Innovation and the Emerging Markets: Where the Next Bulls Will Run, a study on the challenges facing small Australian technology companies. You can read his blog at lagrangepoint.typepad.com

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