Mike Gauba: why convergence leads to value dilution
In previous questions Mike Gauba explained why DoCoMo's control over handset design is of limited value for 3G synergy - and what he believes that it will take for DoCoMo and i-mode to succeed outside Japan in terms of new thinking.
His theories are driven by his belief that the "syndrome of convergence" is a value-dilution proposition.
iCF: Why do you believe so strongly that driving for convergent devices is a mistake for 3G success?
Mike Gauba: Convergence excites for it is able to offer high end features to a common man at very little extra cost – thanks to the advancements in microprocessor technology. It also excites masses to invest on it, little realizing that they will hardly use the secondary features during their lifecycles. Convergence is in fact a cherished dream of engineers to achieve optimum resource utilization and my experience also tells that pushing convergence of diverse services is counter productive.
However, it is important for all those associated with mobile voice to realize that anything bundled with it is likely to struggle through out its lifecycle unless a very special focus is brought on to it.
Technology companies rightly or wrongly have an obsession of overwhelming people with technology, overlooking the fact that more than eighty percent of the population in any market is either technology conservative or technology averse. The technology service providers are no different and take fancy in overwhelming their users with technology. The technology companies may be able to excite people into buying their technology but integrating that into their lives is a different story.
Interested readers can contact: Mike Gauba (mikegauba@gmail.com) see profile.
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Convergence Syndrome – A Value Dilution Proposition
I threw open a case study for discussion to my undergraduate students at the Korea University Business School – why was a specific convergent payment service struggling even after five years of its introduction. One of the smarter students pointed out that my sixth mantra of the Success Model holds good – the six diverse payment services are in fact diluting each other’s focus. Another student added “isn’t a simple user being overwhelmed by technology”. Well both of them were damn right. Again with the same class I took up PDA for discussion.
The common voice from most students was that it is positioned on too many services, with each struggling for visibility. In our research on what is the principal application of a PDA, we were told five different applications. The key application, which is in fact a message pad, was not one of them. I wondered how could well established consumer electronic giants from Japan, Korea, Europe and America could go so wrong – not positioning PDA on its principal application but trying to sell on a proposition, which is unclear and intangible.
I call this value dilution - a convergence syndrome.
The technology companies rightly or wrongly have an obsession of overwhelming people with technology, overlooking the fact that more than eighty percent of the population in any market is either technology conservative or technology averse. The technology service providers are no different and take fancy in overwhelming their users with technology. The technology companies may be able to excite people into buying their technology but integrating that into their lives is a different story.
I felt alone and sometimes stupid cautioning technology companies and service providers on the struggling aspects of technology convergence till I read "The home of the future" an article in The Economist (September 3rd 2005) and am including a couple of relevant paragraphs from it:
"Quiet easily, in fact. The technorati may disagree but a lot of their fantasies are not all that new and have repeatedly failed in the real world. The dream of super gadgets that can do anything dates back at least to the early 20th century. The Sears catalogues in those days was full of what would today be called converged devices-a food processor doubling as a pleasure vibrator for women; a vacuum cleaner that also dried hair, heated rooms and spray painted walls; a washing machine that also beat eggs and minced meat. Few of these devices ever made it out of the catalogue and into homes"
"Because convergence usually goes against the grain of human nature. A converged device is invariably complex and people like simplicity. A converged device represents a single point of failure and people like to know that they can still look at baby photos even if the TV breaks down."
Ever since then, I have build up courage to discuss convergence syndrome on the public platforms and in one of my recent Q&A sessions with www.imodestrategy.com, I questioned the convergent business model of i-mode and attributed this as the key factor for the limited ARPU generated from the data services. My position for similar offerings including Vodafone Live is that the convergence of diverse services dilutes the focus on each service, thus leaving it to struggle.
Since, a technology enabled service requires extremely high value proposition to over come high notional threshold, a strong focus is critical. MP3 and iPod are excellent examples of what focus can do.
I strongly recommend application dedicated devices to build up focus and synergizing the application and hardware to maximize user value. I would also like to take this opportunity to address a myth that people do not like to carry more than one device. People already carry one or more of the following, when they step out of their homes: wrist watch, reading glasses, sun glasses, wallet, bag, umbrella, water bottle, cosmetic kit, keys, fountain pen, ball point pen, Discman, Walkman, MP3 or an iPod, mobile phone, PDA etc.
PC, home cable and three-in-one stereo are some every day convergent solutions, which stand out as successful but interestingly, have had very different dynamics. The PC has evolved into a convergent platform, since its introduction in nineteen eighties. However, when a certain application on a PC becomes critical to business or lifestyle, there is a tendency to dedicate it to a separate PC. At home, also the growing tendency is to have a separate PC for the children or household chores.
Again on the home front, each service in a home cable is usually an established offering on a different platform before being included in the convergent home cable suite. A little known service on a home cable often struggles unless a special focus is brought on to it. Its survival chances significantly improve, if it is included into a relevant focus group like entertainment, news, cartoons etc. We buy three-in-one stereo for our homes for it is a good value for money but end up mainly using CD/DVD during its lifecycle. Well that is the dynamics of convergence.
It is important for all those associated with mobile voice to realize that anything bundled with it is likely to struggle through out its lifecycle unless a very special focus is brought on to it. SMS has survived and prospered on a mobile phone because it first established its value proposition on a separate platform i.e. pagers before it was migrated to a mobile phone. If the text messaging had been directly introduced on to the mobile phone, it would have struggled.
Having said that, SMS is prospering on a mobile phone because it is not diverse to mobile voice for it addresses the same broad messaging need. Email again addresses the same broad messaging need as voice and was an established service on Internet before being offered on smart phones. It co-exists with voice on smart phones but is not exactly prospering. It is in fact surviving on them for the lack of synergy between the technology platform and the application (Mantra 2 of the Success Model). If email had been first introduced on mobile phones, before it got established on Internet, it would have literally struggled all through.
The usual challenge to technology companies is to differentiate their products and in the process often resort to gimmicks like convergence. The technology service providers like mobile operators also become partners to these gimmicks to increase their uptake. The gullible users are often the victims, who get carried by the newer convergent devices.
Convergence excites for it is able to offer high end features to a common man at very little extra cost – thanks to the advancements in microprocessor technology. It also excites masses to invest on it, little realizing that they will hardly use the secondary features during their lifecycles. Convergence is in fact a cherished dream of engineers to achieve optimum resource utilization and my experience also tells that pushing convergence of diverse services is counter productive.
I have innovated management theories to design and effectively manage high technology convergence in the market place and would be happy to discuss convergence related issues with readers.
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