Ofri Markus, SDM 08, Senior Technical Account Manager, extensionEngine
note: In his SDM master’s thesis, The Mobile Common: A Guide to Mobile
Open Source and Its Effects on Mobile Device Manufacturers, Ofri Markus
examined the mobile phone industry from a systems perspective in order
to provide product managers with a guide to influences and developments
likely to affect the industry’s future. In this article, Markus (who
currently works as a senior technical account manager at Extension
Engine) summarizes his findings.
I entered MIT’s
System Design and Management (SDM) Program after working for 10 years
in software development and telecommunications, first for the Israeli
Air Force and later for Tadiran Telecom, a private telecommunications
company. Although I already had a depth of understanding in my field,
SDM appealed to me as a way to broaden my outlook. In fulfilling SDM’s
requirement for a master’s thesis, I chose to examine the mobile phone
industry from this broad, systems perspective, hoping to gain an
understanding of ways in which product designers within the industry
could prepare for the uncertain future.
To date, the
mobile phone industry has experienced both slow, steady growth and giant
leaps. Although the first public telephone call placed from a mobile
device was made in 1973 (by Martin Cooper, who is considered today to be
"the father of the mobile phone"), it took more than two decades for
cellular phones to become widespread. What enabled the change was the
transition to digital network technology (aka 2G networks), which
allowed not only improved features and computing power, but also
enormous cost reductions at all levels of the industry. In 1995 there
were less than 90 million mobile subscribers in the world; by 2000 that
figure had risen to 700 million.
For years, the mobile
industry value chain was dominated by the mobile phone carriers.
Stringent regulatory environments and high initial capital costs of
infrastructure erected high barriers to entry for new players, leaving a
handful of carriers in each market to compete for the business of
several million customers. Carriers were therefore able to control the
type of devices that would work on the network (in many cases, these
were sold only by the carriers), applications for mobile devices, and
the content that users could access via their mobile phone.
as customer demands grew, the mobile phone began to be perceived as not
just a device for communicating using voice and text, but as a
multimedia device, useful for entertainment, research, and information
storage. At this point, the industry’s main players discovered what
their colleagues in the PC industry realized years before—that
versatility is the key to winning the hearts of customers. Platforms
that provide the most features garner the most users.
an MIT class called User-Centered Innovation in the Internet Age,
Professor Eric Von Hippel discussed switching from "manufacturers’
innovation" to "user innovation," a recent trend in which companies
abandon efforts to understand user needs fully themselves and choose
instead to outsource innovative tasks to users equipped with appropriate
That’s exactly what telecom carriers and
manufacturers did. In order to cope with the massive need for innovation
and understanding of user needs, industry players turned to their
users, promoting an open operating system that allowed third-party
In June 2001, Symbian released
the first "open" operating system, which ran on the Nokia 9210
Communicator. In 2002, the first smartphone running Windows Mobile
debuted. Both platforms provided open application programming interfaces
(APIs) for software developers.
iPhone—Open or Closed?
open operating systems had little impact on the industry at large,
affecting neither the business ecosystem nor customers’ expectations.
But that changed in 2007, with the release of the iPhone.
the iPhone is a closed source system, it had a profound impact not only
on the dominant design of smartphones and on consumers’ expectations,
but also on the balance of power in the mobile industry, changing the
dynamic that existed among network operators, mobile device
manufacturers, and software developers. For the first time, the device
manufacturer had the upper hand: Apple (maker of the iPhone) was able to
dictate terms to the carrier, AT&T.
up the power of dealing directly with applications developers,
determining which applications go into the devices, and charging fees
for that. Instead, Apple maintains these relationships and captures the
The iPhone capitalized on the
biggest advantage of open-source systems—third-party software
development—by introducing the Application Store, a completely new
ecosystem that allowed software developers to quickly and easily develop
beautiful applications for iPhone, and sell them instantly to millions
of iPhone users all over the world.
It seems that Apple
has found a winning formula, gaining a high level of control of the
design, features, and content in its devices, while maintaining enough
openness to foster innovation and build a community of developers.
Apple’s ability to gain control can be partly explained by what is
perhaps its greatest resource—a brand name known for innovation,
quality, and hype. While other reasons are less clear, Apple has been
able to balance control and innovation to some degree with other
products as well.
While some companies, including Palm and RIM, have tried the same tactics, other players have opted for an open source strategy.
Open source initiatives
that make closed source products usually make money by selling the
products. Since open source products are free to the public, companies
that make and promote these products have to generate revenues in other
ways. The most notable example is Android, an open source operating
system for mobile devices based on the Linux kernel. Announced by Google
in late 2007, Android has been adopted by many of the world’s leading
device manufacturers as the future operating system for their devices.
The main incentive for Google to release Android is expanding its
advertising into the mobile arena and ensuring the availability of
Google services on multiple devices.
Nokia, as a
response to the Android threat, decided to open source its operating
system, Symbian, and release it to the public. Although Nokia is a
hardware manufacturer that is very good at making and selling devices,
management realized that in order to stay in business the company needs
to transform into an Internet company, providing additional services and
complete solutions around mobile devices.
A changing industry
that consumers have gotten a taste of open devices and access to a
variety of services, there’s no going back. It’s clear that the industry
will need to accommodate more and more openness, from applications to
operating systems, to meet consumer demand for total flexibility. The
result is a profound shift in the current business ecosystem at all
risk losing control over the devices, applications, and content on
their networks, ultimately becoming dumb pipelines. In spite of their
awareness of this risk, the world’s leading mobile carriers are openly
and broadly supporting open source platforms, hoping to gather consumers
and manufacturers around them, and to create opportunities to provide
unique content and services.
are currently enjoying an explosive demand for their services, as
creators of potentially killer applications for device manufacturers and
carriers. There is a risk, however, that this is a bubble that may
are expected to join the mobile industry as device manufacturers using
open source platforms. Many, however, are skeptical about their ability
to create and capture value, due to the high barriers to entry beyond
the cost of developing an operating system.
not all device manufacturers consider openness as a “strategy changing”
trend, nearly all I spoke with during my research agreed it brings two
major changes to the design and development process.
openness affects design, because working with open source components
requires careful modularization of the products. Both development and
maintenance processes need to be simplified because, if open source is
used, these tasks will be decentralized among thousands of people and
distributed over multiple locations.
openness has changed the context in which mobile devices are operating.
This context is evolving rapidly, and that is why systems thinking is so
important in this arena. Companies—and in particular, incumbent product
managers—must not think of their products a standalone devices or
services, but as parts of larger, highly integrated systems that deliver
value to users and fit into business ecosystems that support value
creation and capture of value by players at all levels.
openness cause such vast changes in other industries as well? In light
of the recent movement toward open source and open innovation in the
academic and business communities, it is interesting to consider what
advantages might accrue—particularly to such service oriented industries
as health care and energy. These industries are facing great challenges
and are in desperate need of innovation. Openness might help to foster
Friends all her moneys
3 years ago