Grand Convergence Means Grand Competition (Google, Apple, Facebook, Microsoft, Samsung, etc and all the mobile operators/carriers)

I talk about competition very much in my conferences and workshops around the world. It is frequently a requested topic and I have written on it quite a lot in my books from 3G Marketing the fastest-selling telecoms book of all time which focused on competition, customer loyalty, churn, segmentation etc from inside the telecoms operator world and competing against other telecoms operators; to Digital Korea the first case study of the area of Grand Convergence. Grand Convergence is what I call the massive collision of 17 major global industries heading into digital and mobile from music and gaming to advertising and broadcast, from internet and telecoms to insurance and banking. And all sorts of industries inbetween. A grand collision of 17 global industries that I often liken to a death-match, where giants like Facebook, Google, Apple, Microsoft and Samsung try to eat the lunches of Vodafone, Telefonica, AT&T and China Mobile (and vice versa) where some players like print publishers and camera makers are dying, other industries like watch-makers and mapping companies are under siege and some aren't even aware they are being ambushed like banks and insurance companies.

Why does Facebook buy Whatsapp? Why does Microsoft buy Nokia's handset business? Why does Apple launch the Apple Watch? Why does Samsung launch an operating system? Why are Bharti Airtel, MTN and America Movil launching payment systems across their telecoms footprints? These are all early warm-up steps in the big battle of Grand Convergence. Thats why Google launched Android, why Microsoft bought Skype, why Vodafone launched M-Pesa and Apple launched the iPhone. They were testing the waters. Is this Grand Convergence for real. It is. Lets dig in.

GRAND CONVERGENCE

I have been collecting industries into this theory I call 'Grand Convergence'. Note that this is not a mapping of all industries. To qualify, the industry has to be large enough, global in scope and be clearly headed to become mostly if not completely digital in nature. So farming is not in the picture as is not forest management nor fishing, all huge industries. Retail, hotels, restaurants can yes use digital tech, especially on mobile, but they won't be replaced by digital (completely). Airlines around the world will continue to fly over a billion passengers per year. Yes they'll give us a mobile boarding pass, let us buy the airline ticket online and manage our frequent flier program via the internet but they still need those jet planes from Boeing and Airbus to physically fly us from one airport to the next (until some day Apple will introduce iPortation their teleportation service on perhaps the iPhone 9 haha).

So I've been mappiing what industries are either totally digital from the start or will become essentially totally digital in about a decade or so. So far I've found 17 industries which have some overlap but mostly can be identified as their own businesses with clearly defined products and services and identifyable customer segments. They are mapped in this slide I keep showing around the world about the Grand Convergence:




The above slide by Tomi T Ahonen may be freely shared

So  we have the obvious ones, telecoms, internet, media, computers, cameras. Google says the future of the internet is mobile, so too says Yahoo. Microsoft, HP and Intel have said the future of the computer industry is mobile. Apple Computer dropped the 'Computer' from its official corporate name and calls itself now a moblie company. 90% of all cameras in use are on mobile phones not on stand-alone cameras, film-based or digital. And yes, in 5 out of 6 cases, if you call a random telephone number on the planet, it rings on a mobile phone not a fixed landline phone. Part of this picture is familiar territory.

Some parts are newer, Social Media most obviously is a new industry that is only about a decade old as a viable business now (anyone remember MySpace haha). The virtual worlds market is similar new industry. Others are smaller and less broadly reported on, like mapping and marketing research. And some are classic big industries but far past their prime such as the wristwatch and clock industry.

You notice in the above picture that all arrows are the same length but are a different thickness. The thickness illustrates the size of the industry in very rough terms but the wider the arrow, the bigger the industry. Telecoms is a 2 Trillion dollar industry (mobile most of that). Print is about a Trillion dollar industry. Advertising is about a 500 Billion dollar industry while music is a 25 Billion dollar industry. I have tried to arrange the industries so that typically 'similar' industries are near each other, so the internet is between telecoms and computers, and broadcast media sits between print media and music. The relevant point is that these 17 industries are in the death-match, they cannot avod digital and they will all become mostly 'mobile' industries in this decade and the next. A retailer or hotel or restaurnt or car manufacturer can decide whether they want to add digital/mobile parts to their business. These 17 industries do not have a choice. They find themselves in the deathmatch. The giants in these 17 industries will literally disappear if they don't adapt. And even adapting is no guarantee of success.

HOW FAR HAVE THEY GONE MOBILE

So I do an annual review of where the industries of Grand Convergence sit, on their migration to mobile. We just heard that games have hit the point where mobile gaming now accounts for more reevenues than console gaming, so mobile has become the largest part of the gaming industry but is not yet half of the revenues (as there are for example still PC/internet gaming). So I say 45% of the gaming industry has migrated to mobile (roughly speaking, rounding off to the nearest 5 percent). (Strangely, nobody else publishes numbers or any data on this grand race, even as its the biggest contest on the planet. The total race is worth 7 Trillion dollars in 2014, thats much more than global car industry or airline industry or travel or housing or food or war).




The above slide by Tomi T Ahonen may be freely shared

This is what I call the 'map to your career' to anyone who sees any of my presentations. This is the ultimate guide to where the dangers are, who are your most dangerous competirors and where there might be easy wins for you. So telecoms has seen 85% of its journey completed to moblie. The Fixed Landline telecoms business is in severe decline with many countries already past 50% of all households having gone pure mobile (as Finland did first among advanced industrialized countries that achieved 100% household telephone penetration rates in the past decades. The Emerging World then leapfrogged this obsolescent technology and went directly to mobile telecoms).

But take banking for example. They are clueless about this looming disaster on their horizon. Bankers are still trying to get their heads around the types of threats from new digital currencies and don't yet even fully understand why BItcoin is merely an obscure gambling instrument but mobile money will demolish cash. Apple's Apple Pay will not be the world's predominant moblie payment system but they did finally last year help convince the skeptics in the financial world that mobile money is real. Even so, few bankers accept mobile money is inevitable. My readers know all about this as I wrote the worlds' first book on mobile payments (Pearls Vol 3 Mobile Money).

So yeah. Reality check for those of you who are not regular readers of the CDB blog. Sweden is on plans to abolish cash as is Kenya, Somalia and Turkey. Estonians have a national Identity card on their moblles which allowed them to vote in the national elections. South Koreans have an identity SIM card on whch all bank and credit card identities are converged. Turkey was the first country to set the target date to end the manufacturing of cash. Coins were invented in Turkey and cash has powered the global economy 3,000 years. We will be the first humans alive to live in a post-cash economy and its powered by mobile. But is that what you read and hear in conferences about money? The presentation is just as much about how to fit 10 keys onto the plastic credit card or how to do colors and holograms in coins to make them less easy to forge. This is exactly like the Captain of the Titanic seeing the ice berg ahead and orderig the patio chairs to be rearranged on the sun deck.

IF YOU DON'T ADAPT, YOU DIE

So yes, 85% of telecoms is now mobile and 90% of camera business is mobile. That industry - cameras - gives us an interesting 'warning' about Grand Convergence. If you don't adapt, you die. Lets look at the global camera industry and the 'Golden Decade of Photographs' for a lesson. The camera industry has grown on a steady clip for over 150 years. Every decade, roughly speaking, the total global camera populatoin doubled. There were great innovations that helped push the camera industry forward bringing cheaper cameras and cheaper film and faster film-processing to expand the total camera population. We had the Kodak Brownie camera, and the Kodak film cassette innovations up to the consumer 110 film cartridge. And eventually such amazing things as flash 'cubes' so basic cameras could have a flash, and then there was Polaroid's family of instant cameras ever better and faster (Like Outcast sang in his big hit: shake it like a Polaroid Picture). And for a while the basic camera tech was so cheap, it was built into cheap disposable cameras that came pre-installed with a roll of Kodak fillm inside the throw-away, use-only-once camera.

So that pattern held very nicely up to year 2000. At that time the world had about 300 million total cameras in use worldwide (almost all were film-based cameras, Apple's Quicktake 100 the world's first consumer-oriented digital camera had only appeared in 1994 and year 2000 saw only about 9 million digital cameras sold worldwide, a tiny slice of the global camera sales that year. The cameraphone had not even been invented yet.

In year 2000 the four giant camera manufacturers were Minolta, Nikon, Canon and Konica of Japan. The world's lsrgest film makers were Kodak and Polaroid. These six were the six giants of the camera industry and they were about to enter the Golden Decade of Photography. If the normal growth pattern in cameras had continued, the planet would go from 300 million people owning a camera (5%) to 600 million by year 2010 (10% of the planet's population of any age and across all continents). It would be a great time because the growth in the decade would match the size of the industry at the start of the decade. Everybody loves an industry that doubles in size every decade.

But the Golden Decade of Photography was far better than that. The total worldwide population of cameras did not double from year 2000 to 2010. It did not trple or quadruple. It grew 10 fold !!! Yes by year 2010 there were a massive 3.5 Billion cameras in use worldwide and literally 50% of the planet's population owned a camera by year 2010. Wow. This was the true explosion of cameras. So what happened to the giants in the Golden Decade of Cameras? Minolta quit the camera business. Konica quit the camera business. Kodak went bankrupt during hte Golden Decade of Photography. Polaroid went bankrupt.. twice. 

In year 2010 the world's bestseling camera brand was Nokia. The world's most used camera brand was Nokia. The second largest was not Nikon or Canon. It was Samsung and Apple sold more cameras on its iPhones than Nikon or Canon total annual production. But here is the frightening part - in year 2000 Nokia had not produced one cameraphone. Neither had Samsung nor Apple. In less than a decade these newcomers wiped out global giants. Nikon and Canon only survived by retreating into the professional and semi-pro camera niche segments. Kodak and Polaroid are very late to the game when they release their cameraphones now for 2015 (only 14 years after the first cameraphone was launched by Sharp in Japan) and Nikon CEO has suggested they may be also doing their first smartphone later this year.

This is the lesson of my theory of the Grand Convergence. It is a death-match. These 17 industries and every major player from those indiustriees is locked into this fight. They find themselves locked into a cage where everyone fights everyone and most will die. That is why Google offers us mapping, Apple launched its payments system and mobile operators in India offer us FM radio content via cellular. This is a deathmatch. Anyone in that picture is a rival who can eat you cake like Nokia and Samsung ate that of Minolta and Konica and Kodak, or anyone can be the victim who dies and will go into the dustbin of history. This is the Grand Competition within the Grand Convegence.

OPERATORS ARE BAD AT INNOVATION

So first, the telecoms operators/carriers. These are the giants who were early to this race and beat out their older rivals from the landline side. Do you remember more than a decade ago when BT sold its wireless business as did AT&T? For a while it was the rage, fixed landline operators divesting their mobile sides 'because of saturation' haha. I was arguing loudly that it is foolish and against all the evidence of this new industry but it happened. Look what happened later, AT&T's brand was sold to rival Cingular (a mobile operator/carrier in the USA) and in Britain BT is now shopping for a mobile operator to be able to return to the industry it abandoned.

But what about all those who were 'wise' to this convergence? Vodafone and TeliaSonera and Orange and Telefonica, T-Mobile. Telenor and China Mobile and Bharti Airtel and MTS and MTN and Axata and Zain and Vivo and America Movil (and the US carriiers too haha, Sprint, Verizon, AT&T). They are strong rich profit-making giants who have a long history of dabbling in the opportunities of Grand Convergence. Who remembers Vodafone Live? What happened to Sonera's Zed? The mobile operator industry is a vast graveyard of great ideas, executed horribly. Now yes, there are some exceptions, Vodafone's M-Pesa is likely the best example that something can be done beyond just providing a telephone connection. But apart from some national anomalies (NTT DoCoMo in Japan and its amazing lineup of highly successful and profitable service units from app stores to advertising to mobile money, yes the prototype of Apple Pay is NTT DoCoMo's Felica on NFC literally ten YEARS before Apple Pay) the operators/carriers hae been quite phenomenally inept at capturing any meaningful slice of this opportunity. They saw these diagrams (or early versions of it) literally more than a decade ago and essentially all major operator groups had projects to capture their place in that future. Today they are threatened by Skype and Whatsapp and find that Google's Play Store and Apple's App Store are taking all the retail revenues that should belong to the gatekeeper's role (well, except for Japan and South Korea and a few other exceptions where the carriers were forward-thinking and not as greedy as in Europe and America and the rest of the world haha).

The mobile operator has all the assets and is the only entity with a direct contact to potentially every consumer in the market (when we get to 200% SIM card penetration rates shortly). That power is from the SIM card. The operators have a license form the national regulators to operate the cellular telecoms spectrum - a limited natural resource - and have an oligopolistic competitive environment in all markets. So its not open competition, its limited competition with 3G licenses granted for periods measured in decades. Thats as close to a monopoly as you can get legally haha. No wonder most operators are comfortably profitable and tend to view their markets as entitlements where digital rivals are not welcome like Skype and Whatsapp for example.

Now where is the movement in this chart? If we look at the big telecoms giants, China Mobile, Vodafone, Orange, Telefonica, T-Mobile, America Movil etc. What do they provide out of this chart? Telecoms services. And some dabble in selling handsets under their own brand. But beyond that, internet maybe. But thats it. An occasional social media epxeriment or music platform. To dismal success. The main reason is tha the mobile telecoms industry kept growing so fast, and had near criminally profitable businesses like SMS that made any other things look tame and not worth doing. So the most phenomenal failure to capture a piece of the future was by the carriers. They didn't need to innovate so they didn't.

GOOGLE

So lets look at a few of the big rivals and what they are doing. First up Google who won this race already but now its a question of what else can they take with them into their victory lap. So Google obviously is the biggest entrant from the Internet industry. They studied this map very carefully and you remember a decade ago Google's then-CEO Eric Schmidt wrote in his bombshell guest editorial to the Financial Times when he said the future of the internet was going to be mobile. Today we all accept that, but try to find other tech experts in 2004 who said that? (I said it ih my first books from 2002 haha). Yes today its clear but it was a radical thought ten years ago. Then he chanted 'moblile mobile mobile' in all internal meetings for years at Google and then talking to outsider partners he said 'put you best people on mobile'. Google saw this coming. And what did Google do four years after that landmark article in the FT where they signalled their intentions? Google launched Android. Not as an internet platform but as a mobile phone platform for smartphones (and later, also tablets, netbooks, TVs etc). This was Google's masterstroke and they have now become the entity with the biggest footprint out of the Grand Convergence. China Mobile the biggest mobile operator can reach 800 million pockets. But Google's Android is on 1.5 Billion devices, mostly smartphones. 

Because the biggest gadget by unit volume in the world sold today is a smartphone, and Android owns that industry with over 80% market share, Google has won. Because the second largest product category by unit sales of the digital connected devices is dumbphones, and now all handset experts agree with my early view, that all phones will become smartphones before this decade is done, yes Google will have Android reaching something like 80% of all pockets on the planet. And then the third largest digitally connected platform by units sold per year is tablets. And whose the biggest in tablets? Android. Who cares where Microsoft ends with some Windows on some PCs or Apple has a slice of some rich people with their iToys. Google won the war. They won it through stealth, with Android, and because Android is free, there can no longer be a global rival to take half that cake. Not in this decade and very very likely not in the next decade either.

All Google has to do is keep updating Android at a good refresh rate - Kitkats and Lollipops etc - and keep it free, then nobody can catch them anymore. Google gets into 1.5 Billion actual consumer devices today, its more than at its peak what Microsoft had with Windows or what Nokia ever had when both dumbphones and smartphones are added together. Google today has more active customers than any consumer brand has ever had concurrrently. Yes more than Timex was on human wrists at its peak or the number of people drinking Coca Cola or wearing Levi's blue jeans. And Google has only just started. It was 1.5 Billion people last year 2014, it will be 2.0 Billion at the end of this year and about 2.5 Billion consumers by end of next year 2016. No brand has been anywhere in that kind of stratosphere, essentially twice the reach of the next most popular brands the planet has ever seen. And even there Google will not be finished growing. So what is Google up to? Its already the biggest web browser and the biggest internet and mobile advertising platform so its big in the overall ad industry. They are our maps and they are on most of the smarthpones sold. What else? YouTube most obviously but Google is also interested to do money and want to connect the unconnected world and they also are preparing for 'the next big thing' ie Augmented Reality as the 8th mass medium beyond mobile, for the next big planetary digital race. Thats why we're seeing an early Google Glass and now an update to that concept next.

Why is Google in this game? They said in 2010 that if they achieve 500 million users on Android, it would be worth 10 Billion dollars per year to Google through their various services. Now they are three times that and by the end of the year will be four times that. Is the Android platform already delivering 30 Billion dollars of annual revenues to Google, probably not, but in the coming years, it will deliver more than that easily. Where is the money? We heard from the co-owner of this blog Alan Moore when he examined the mobile digital convergence opportuntiy in more detail in his second book Social Media Marketing. Alan is the guy who coined the term 'New Black Gold' for measuring our consumer behavior via our digital platforms, in particular through mobile at the epicenter of that activity. When mobile becomes as Ajit Jaokar explains 'our magic wand' it will have all the essential functions we would want. In Stockholm Sweden you can check into Clarion hotels and they'll have your hotel room key issued directly to your smartphone using NFC. Starbucks achieved 15% of its total revenues in the USA paid via mobile wallets. Finnair gets over 50% of its passengers using mobile check in. Talking of Starbucks, in Britain they partnered with Uber so that if you buy a coffee and pay by mobile, Uber will drive you to the nearest Starbucks for free. How cool is that? Estonia was the first country to hold a general election where people could vote via SMS. In Uganda and Kenya its totally normal to have your full salary paid to your mobile phone and all payments can be processed directly at one click from paying car payments and rents and student fees to yes, taxes. In Spain and Turkey you can sign contracts via SMS. The US state of Iowa has already started to issue driver's licences that are on mobile phones. Sri Lanka was the first country to declare its intent to be a 'mobile first' eGovernment provider. 

So its not that we bought x song from iTunes or subscribe to y station on digital media or watched z movie or liked it in Twitter or made a friend of that on Facebook. Yes all this is ALSO in our digital footprint and valuable. But how much MORE valuable is our digital footprint when it includes our keys and salaries and loyalty schemes and preferences of how we drive to work and where we consider going on a vacation and whether we voted in the last election etc? ALL of that will be potentially harvestable on only one device, the epicenter of Grand Convergence. Our mobile phones. That is what Google wants. Its what they said is the valuable part in mobile. And its for example what the world's largest advertising empire, WPP (owners of Ogilvy & Mather, Young & Rubicam, Grey etc) Chairman Sir Martin Sorrell (aka SMS) said. He said the competitors of WPP are no longer the other advertising and media giants like Omnicom and Publicis. Its now the data guys like Gallup, Nielsen, GFK etc. This is Alan Moore's thought. The digital footprint we create, that is the new black gold. Or how he phrased it (I hope I remember it correctly) Social media intelligence is the new black gold of the 21st century. Google wants to be in every pocket so it can know as much as possible about us.

Why? So it can help us into the future, not unlike how Amazon now helps us find better books similar to what we looked at, or better DVDs and music CDs or whatever else we might want to buy. We don't find Amazon at all creepy, we love the recommendation engine. But its built on an incredible wealth of consumer behavior - across only a few categories of goods. Imagine this across everything we do, not just some of the things we buy. Google is sitting on the biggest data mining goldvein there ever was. And they are very cautiously starting to build their steps into that. They are in no hurry. They will not want to mess this up. But that is why I am totally confident, Android will always be free and nobody can catch Android now. Nobody can catch Google. Its their oyster, what they want to make of it, they can take their time and decide how to 'do no evil' while finding new businesses out of the digital Grand Convergence opportunity. And now that Google 'won' with Android, they don't have to 'destroy' anyone else to get a good-sized piece of the winnings down into the next decade and the decade after that.

APPLE

So what of Apple then? Sure, Apple makes the most desirable PCs and tablets and smartphones. They might succeed to take another industry in decline (watches) and find some profits out of that. But note, that these are all industries of hardware that are driven by Moore's Law into the toilet of thin margins. Like TVs before, an industry that once had Philips (aka Magnavox) and Matsushita (aka Panasonic) among the biggest and most profitable companies on the planet. Yes Apple makes the most desirable consumer tech products today but what happens to those margins not next year but by the next decade? it is a race to the bottom and until Apple can perfect Time Travel, the opportunity to milk exceptional profits as the most profitable company in history - will come to an end. Apple only has its hardware play in that picture. The only software/services play that Apple was able to expand in that diagram was iTunes so they took a tiny target of the opportunity and became a big fish in the smallest pond there was. Apple needs to think about where they go and how.

The App Stores are not it and the App Store will never be it. (All app stores combined across all smartphones, were only worth about 1% of the total telecoms revenues last year. That is yes, not 1% of the Grand Convergence diagram, its 1% only of the Telecoms arrow. That is not nothing. Its less than nothing. If it wasn't for so many tech writers being iSheep and believing all the iBullshit, they'd notice by now that the app store myth is only viable for videogaming - another of the smallest arrows in the diagram. After you remove gaming there is no sustainable economy in app stores for the developers. But we knew that here on this blog for many years now, as I've been calculating the math and economics of that waste of digital space) 

Apple is the most profitable company now, It cannot maintain the profit levels when Macs, iPods, iPhones and iPads become victims of commoditization of their box-mover industries. Wristwatches are not the savior. Apple had a chance to be a big player in the smartphone wars but lost to Google's Android. Now they face a destiny of becoming a marginalized player on the fringe with maybe 10% market share in 5 years. Thats nice but it will be the area where most developers won't bother to go and where Apple is locked into its own alteranate reality where everybody has to follow Apple's rules. It is not conducive to winning in this competition. And Apple does have to make its moves fast, it is now sitting on obscene piles of cash which should be used wisely now, as opportunities are abundant. Not as defensive plays five years from now when the best chances are gone. Oh and incidentially Apple Pay fails exactly because of the mass market situation. Nobody wants a currency that only works 10% of the time. Sorry Apple, you blew it in the grand contest. But currently you are profitable. I wonder if Apple falls back to the days of 1996 when it was months from bankruptcy. There is no guarantee in the HARDWARE business that is so rapidly becoming commoditized as Apple's current products are. Apple needs a software-service play into this future to survive.

Apple's world domination 'cunning plan' is of course the virtual SIM card (that we now see on the new iPads and Apple tried to bring to the iPhone). That would be the ultimate Apple trick and it would wipe out the operators because Apple could then become a virtual operator and sell its customer connectivity to the lowest bidder. This would be exceptionally damaging to international data roaming business where telecoms operators make a disproportionate share of their total profits. That is what Apple is trying and will keep on trying. The carrier community stood united to prevent the virtual SIM card from the iPhone but they were not able to stop it coming to the iPad. It wil be the game to watch. If the operators/carriers lose their lock on the SIM card, they have lost the game and will become nothing but low-cost bit-pipes.

MICROSOFT

So then the Evil Empire. Whats Microsoft up to? Well, they were at one point the biggest player from the computer industry and for much of the past decades have been the most profitable of that industry. They did see mobile coming early on, Bill Gates launched Microsoft into the mobile OS wars and Windows Mobile at its peak was the world's second most used OS on smartphones with 12% market share (slightly less than the level where iPhone currently is in 2014 - if you want a warning from history haha).

Steve Ballmer then threw all that away with his silliness starting with 'no migration path' (why on earth not, after Microsoft - which managed to migrate DOS users to Windows on the PC, how could that same Microsoft make such an elementary blunder). So today Windows Phone OS has under 3% market share of new sales, and all those phones were essentially given away - sold at a loss - and even after that we just heard last year that one in three Windows based smartphones had never been activated (likely most were simply manufactured, shipped to retail and never sold). So the real market share for Windows in smartphones is dismal now, at 2%. It is the most toxic of any 'ecosystems' and developers are abandoning the sinking ship. It is now only a question of time when will Nadella shut down (or sell) the Lumia unit.

What can Microsoft do, if it owned the computer 'arrow' through a Billion Windows PC desktops, then failed in joining the march from the PC to mobile? Microsoft is doomed to try to live 'on the outside'. Thats weird. So yeah, on desktops they are big, they are less big on laptops. They are horridly bad on tablets (Windows has 5%) and dead on smartphones (2% by selling at a loss). A tablet is an ultra-portable PC, it is not a 'mobile' device because we typically cannot operate the device while we move or are in movement. We can't use the tablet (connected) in a taxi or bus for example, and it needs two hands to use it, so as Gary Schwartz explained in his book Fast Shopper Slow Store, 'tablets immobilize people.' We have to stop when we start to use a tablet. But a phone we can use while we walk, we can continue the conversation or send a message or take a picture etc including using the phone comfortably with one hand, with something valuable on the other hand, such as our briefcase or the hand of our child.

So Microsoft was big on the internet, it destroyed Netscape and for a while Internet Exploder was the most used browser. That should have been a lesson to Microsoft. Their Evil Empire antics were so hated that as soon as we had a Chrome or Firefox we jumped away from IE. So even on its 'internet play' Microsoft messed it up. Where else are they strong? Gaming. But note, 45% of gaming has gone mobile. Microsoft XBox represents exactly like Windows on the PC, only the legacy dying part that is not mobile. Microsoft has no play on the mobile side of gaming. Once again they are left standing on the station while the train has pulled away. It is very difficult to see the end to your business if the industry you're in is still growing. Just ask Minolta or Polaroid or Konica.

So what of Skype then? This is the true test of CEO Nadella. He will sell or shut down the Lumia ex-Nokia handset unit soon anyway (I give it about 2 at best 3 years) but Skype prevents Microsoft from ever entering the overall mobile race. Skype was perhaps a smart move by Ballmer when considering Microsoft's rapidly depleted options to play in the internet game. They got Skype but it bit them in the ass. Skype then killed Microsoft in mobile. This is a true modern case of a Pyrrhic victory. Yes Skype is now the most used telephone voice calling service. But it was the reason why Windows Phone was comprehensively shut out of the mobile opportunity by the global carrier community. Don't believe me? Ask Elop, the ex CEO of Nokia, when he was still CEO of Nokia. Elop said that not just Nokia brand but all smartphones sold globally that carried Windows OS, were being boycotted by the carrier community. Not because they HAD Skype - they did NOT and rivals from iOS to Android did have Skype - the reason Windows OS was boycotted globally was because Microsoft had bought Skype, the single existential threat to the operator/carrier business at the time. Elop used the word 'of course' to underline how well this fact was known in the industry, when he asnwered a question from an investor at Nokia's annual shareholder meeting. Of course there was a global sales boycott against all Windows based smartphones, not just Nokia. It is why Sony quit Windows and went Android. Its why LG quit Windows and went Android. Its why Motorola quit Windwos and went Android. Its why Dell quit Windows and went Android. Its why Nokia itself rushed Android based smartphones to the market after they dumped Elop from the post of CEO as Nokia was seling the handset unit to Microsoft.

Skype did give Microsoft a big reach into the digital user base beyond Windows on the desktop. Skype is increasingly used on smartphones (also now on Windows Phone). As we all know, we can use Skype totally free (where it is not blocked) for basic calls between Skype users and then there are lots of premium services if you want something like for example a phone number active in the USA, or to call special numbers outside the Skype network itself. Skype of course also offers videcalling and direct messaging so it the only global 'triple threat' to the carrier business threatening voice calls, SMS text messaging and videocalls. And it is most used for international calls where much of voice call revenues and proftits are made in telecoms. But is Skype profitable? Most years, no. It might make a teeny-weeny profit maybe now, but nothing of the scale Microsoft used to have and could have had if it had even a modest but sustainable business in mobile. A true pyrrhic victory. Microsoft was able to regain a big footprint on the internet but in an area that is mostly on the fixed side/desktop side and one that then eliminated their chances in mobile. If Nadella suddenly sells Skype, that is the day we could say is the rebirth of Microsoft and they may have a chance inside the circle of Grand Convergence. Now they are destined to roam in the ever more bleak wilderness outside the circle. Meanwhile for the industry, Microsoft is not now the Evil Empire, its more like a suicide bomber terrorist, who uses Skype to blow itself up, while taking much of the (mobile operator core) community of this industry to death with its own suicide. Nice job Microbrains! We hate you, go die somewhere else!

Talking about hate, how's that Windows Phone OS doing for you Microsoft? Remember Sony? Darling Sony who once made Windows based smartphones and sold them happily? Well, after Skype, Sony quit selling Windows based smartphones but it still sold Vaio branded laptops running Windows for the desktop. And so some Microbrain went and bribed Sony to agree to return to Windows on smartphones. Sony took the Microsoft 'bribe' ie partnership enticement marketing bullshit money, and promised they'd not launch consumer smarthpones that they sold now successfully on Android under the Xperia brand, but some enterprise-oriented smartphones on the Vaio brand, yeah, sure, that made sense. There was arguably some synergy to that. So yeah. Sony announced that in 2013. Then they went and sold the Vaio unit. 

So how dead is Windows Phone OS for smartphones? Sony had prior experience with Windows OS for smartphones. Its Vaio brand laptop business unit is now an independent company. It is a 100% Windows house. If ever - EVER - there was honest real synergy and business sense for ANY company to launch Windows based smartphones, it would be the Vaio unit, that knows Windows on smartphones, and currently sells Windows based PCs and who had been developing a Windows based smartphone for a year. What did Vaio just announce? That their Vaio branded smartphones to run alongside Windows based Vaio laptops will run... Android. Windows is so dead its not even funny. In ten years Windows is as relevant to high tech as Cobol and Fortran are today. And in smartphones Windows OS today is as viable as IBM's System 360 mainframe computers (which BTW celebrates 50 years this year, congrats IBM for the worlds' first modular standardized computer system that ran standard computer languages.. When I studied computer programming the industry was known as IBM and the Bunch where IBM literally made half of the money. Fleeting is such fame, Apple iFans beware)

FACEBOOK

So then we have FB (what, is Facebook not dead yet?). Yeah a kind of tech darling and obviously the biggest of the social networking industry. Social networking is a child of the internet industry but its now a separate industry because we can have pure social networking companies outside of the internet such as social networks built on mobile (like say SMSall of Pakistan that runs on SMS) or the bluetooth social media networks like Firechat we heard about during Hong Kong's umbrella protests. So Social Media is its own legitimate category. And as we know, Facebook like just about every social media player didn't find its profits until it came to the 'dark side' of mobile haha. Exactly as I wrote in my book about mobile social networks haha (Pearls Vol 2: Mobile Social Networks). So where is Facebook? Its dabbling in advertising and looking for places to invest in or to play in. Its big play was Whatsapp which makes it the biggest independent messaging platform as an OTT (Over The Top) provider. Whatsapp just passed 700 million active users. That is bigger than any carrier/operator in the world except China Mobile, and if we count the OTT players, then ranks them fourth behind Skype, Facebook and China Mobile. Yes Whatsapp alone is the fourth biggest network provider. And it generates now messages at 30 Billon per day so Whatsapp alone is now bigger than total SMS text messaging traffic on the planet (even as SMS has 8 times bigger user base). Obviously Whatsapp and Facebook overall have tiny reveues compared to SMS globally.

(oh did you ask? 110 Billion dollars roughly for 2014, a little bit down from its peak in 2013 but yeah, SMS is by far the biggest messaging system on the planet 3 times bigger than email, 4 times bigger than Facebook and 8 times bigger than Whatsapp by number of active users in 2014. SMS isn't about to die any day soon. Only its peak profits and peak revenues are now past. Its still a very healthy global juggernaut four times bigger than the global cinema industry for example. Yes SMS text messaging.)

What does Facebook want out of this Grand Convergence? They seem to be adrift with no real focus or plan. They are not unlike what Yahoo has been on the internet side. Think about it. Google didn't do anything in secret. Yahoo watched right next door what they were doing and today we have Google and Yahoo two utterly differtent directions. One owns the future and the other is on a one-way ticket to oblivion. Facebook yes has Whatsapp but then what? Where is their vision. Remember that failed phone? Yeah as smart as Amazon launching its own phone. Wait, Amazon did launch its own phone haha. (so you think I love the Kodak phone or Polaroid phone now? After the Microsoft Kin and Google Nexus and Amazon Fire and (HTC) Facebook phone. No, Kodak and Polaroid won't succeed in this either. Not the way they are going about it. But thats for another blog).

SAMSUNG

So then there is the biggest tech company on the planet right now, Samsung. A dubious position as we can recall how many others once were there, like HP, IBM, Sony, Microsoft haha. But yeah, Samsung is more than twice as big as Apple in total sales across all of their businesses. In Smartphones Samsung sells about 50% more annually than Apple (dont' be fooled by the end-of-year numbers when Apple always has its best annual quarter, thats because Apple launches its new phones for Christmas sales, we have to consider Apple total smartphone market always on an annual cycle not a quarterly cycle). In all phones sold (including dumbphones) Sammy is about twice hte size of Apple's iPhone. Samsung also sells TVs and semiconductors and all sorts of other gadgets and tech. But its a curious company considering the Grand Convergence, Samsung has in the past seemed to be singularly inept at leaping across the industries with any 'synergy'. Take screens. Samsung is the world's largest TV maker and largest smartphone maker and semiconductor provider. It has also sold personal computers for more than a decade. Why is Samsung not the world's largest (or a Top 3) sized PC maker? Weird, isn't it?

This is quite different from say how Apple operates. Apple has been able to 'invade' other areas where it finds partial synergies - the iPod was a very simplified computer/media player partly taking functions from the Newton and just minimizing it. But while pundits of the music industry compared the iPod to Walkman cassette players and thought Apple had no synergies, actually the chips and codecs and memory of the iPod were computer industry gear, just repurposed by Apple. Yes an iPod is a basic and task-optimized pocket computer or call it a variation of the PDA. So its not as wild a jump technically for Apple as it seemed or would have been if Apple launched a cassette-tape player against the Sony Walkman haha.

Then Apple is able to gain dominance in the areas where it expands for a while. Best example iPad obviously. But no. Samsung seems to ignore its corporate strengths, never use any synergies to support its divisions and only manage to grow within a given industry. Like becoming the biggest player in televisions or phones or semiconductors. This is not unlike Sony, which is another company utterly inept at taking advantage of almost any of its vast array of brands and technologies to expand a given unit's business (the original Walkman branded musicphones are the main exception).

Why dont' we have a Playstation smartphone running Android? Or why are Sony's smartphones very ho-hum in cameras while Sony owns the Cybershot camera brand? Why is Samsung able to boast the best cameraphones far outclassing Sony. It makes no sense. And bear in mind, Gangnam sits in the meccha of digital convergence in Seoul, the most connected city in the most connected country where the kind of digital convergence exists today that most only dream about. As I said, I wrote the book on it, Digital Korea as the first case study of Grand Convergence on a national level. So Samsung R&D can see the digital converged future in their daily lives when they step outside their offices. How can they so miss this opportunity? It baffles the mind

But at least Samsung has been trying. The software play was once strong and serious with bada released and Tizen on the pipeline. Now Tizen has had what, six delays to its launch for two years and the OS seems to become stillborn. We have only seen two smart watches on Tizen (that then inexplicably were annoucned to be Osborned and Samsung would return to Android for future Galaxy Gear smartwatches? WTF?) Now we see Tizen on some TVs and there should be or might be a Tizen smartphone launched (fingers crossed) in India maybe later this Spring, who knows. But yeah, Sammy did try to go where the logical expansion is for a major handset maker. When the PC era went to box-moving at slim margins, it was Microsoft the OS provider who made all the profits and the box-mover PC makers lived in a razor-thin margin if it was a good year. Most years they reported losses. And it led to huge consolidation. That is what the future of digital convergence looks to Samsung. The saving grace for Sammy compared to Apple is one word: scale. As long as Samsung remains the world's largest tech provider then they have the cushion of scale and should outperform other box movers in the mass marekt space like LG and Sony and the various Chinese players. That is a different business than a niche market (Apple) where bigger profits are possible. If Samsung remains only a handset/tablet/TV equipmetn maker, they are facing a slow long decline into becoming what Dell became in the PC world. Would investors love to hear of profit margins in a good quarter of 2%? Samsung is now huge and has deep pockets, it should now move beyond the boxes and use its insights and broad range of assets to find something next.

They don't seem to know what they are doing though. The Tizen mess is a perfect synopsis of how clueless Samsung is at the top. They simply don't know where to go or what to do. When Nokia was on the top, say what you will about their delays but Nokia had a clear vision and pursued bravely the first gaming phones and the 'multimedia computers' and the consumer smartphone space and app stores and mobile payments and industry-best cameraphones and mobile advertising and music and ultra-low-cost smartphones and NFC and mobile wallets etc (all literally years before Apple got around to doing it, or in most cases also years before Google got to it. This all was that old Nokia before Elop killed it ail).

Consider Apple and Samsung. Five years from now there will be devices that are still clearly 'smartphones' and 'tablets' and that hardware will still be a 300 Billion dollar industry plus/minus 33%. But 15 years from now the smartphone and tablet will be as quaint as a stand-alone telephone answering machine with its two cassette tapes haha. Or a VCR (Betamax or VHS? haha, real men had both!). Yes some connectivity gadgets will exist but the form factor of the 'phone' will be gone in 15 years. We may have some gadget embedded into our bodies but then if its digestible, how can anyone even see that cool iPhone 23 that is just a chip under my skin or embedded inside my tooth? Some tech is needed, say cars, trains, airplanes, ships. Some tech becomes totally obsolete like telegraphs, fax machines, zeppelins, telephone answering machines. The smartphone metaphor device and the tablet metaphor device - these are not sustainable. They will shrink and vanish. Not completely but so much that there isn't enough of a hardware business to bother with. In year 2030 the 'hardware' business of the portable pocketable digital connection device will not be as big as a third of today, at best at $100 Billion dollars in today's money (inflation-corrected). It might not even be as little as 10 Bililon haha. That is a comprehensive collapse of this slice of the industry. 

Yes there will be hardware but mostly it will be embedded or wearable and it will be miniscule. And it will be dirt-cheap. Did you read the blog I did of the analysis of the 10 dollar smartphone by 2020? Think through what that means? It does mean that we will buy other 'smartphones' and 'tablets' in 2025 like we would want to buy a CRT-based black-and-white TV set today. Yes it can be made but nobody would buy it. Apple will probably migrate to ever more luxury and fashion lifestyle products (led by Apple Watch) so they might be a jewelry brand by 2030 wth some semi-high tech thrown in. But Samsung will be the biggest box-mover who sits at the slimmest profit marging sustainable pushing its Chinese and Indian rivals to zero-profit quarters while occasionally buying one of the other giant rivals - much how HP kept being the biggest PC maker for so long, Buying up its rivals.

ULTIMATE RACE

So we are witnessing the biggest race of human history. This converged industry today when the 17 industries are measured separately, are worth 7 Trillion dollars. The migraiton to mobile has hit 1.7 Trillion dollars according to Chetan Sharma's 2014 number so we are about one quarter of the way to the end-state. We've seen some giants fall but this is a death-match. There will be huge deaths to come in the next 15 years and most of the winners in this race will be majors within this circle today. The operators are at the driver's seat as long as they can hold onto the SIM card as key to our digital connection. The carrier community would be wse to adopt as much tech into the SIM card and make it as indispensble as they possibly can, from what Estonia did with IDs to what South Korea did with the banking industry. And if Apple ever breaks that SIM lock to the consumers and gets their virtual SIM into the market, then the carriers/operators will become toast.

Google is the only definite winner so far with a nepharious plan to bypass the operators and get into every pocket. But differing from the operators, innovation is in Google's DNA. They kill off more live Google products than what carriers/operators can even imagine in their innovation workshops haha.

Microsoft was one of the strongest players but is now exiled to the outside. Apple has been brilliant when the early stages were hardware, they now have to do the same on the software/services side. They have the DNA to also succeed reinventing services and software, look at iTunes and the Apple Store but its not the App Store. Apple has to now do something radical and new, beyond Apple Watch in hardware or the futile bid of Apple Pay when only 10% of consumers would ever have that payment instrument. Its as stupid as a TV station releasing a TV show that is only visible on Sony branded TVs haha.

Facebook is lost but at least they are perhaps on the path having discovered the money in mobile. Who knows. Samsung is huge but their synergies are hopeless and their software and services record is spelled bada - something Samsung itself killed off. Tizen is the test of is there more to Samsung than hardware at thin profit margins.

There are tons of other players, Intel, IBM, Sony, BBC, Yahoo, Amazon, Turner, Time-Warner, WPP, Omnicom, Publicis, LG, the Chinese tech brands and internet brands from Baidu to Xiaomi; EA, Warner, Universal, Visa, Amex, Citibank (even Nokia on a comeback?) etc. Some of them will be driven by a visionary CEO who will be called the next Steve Jobs, who will make a bold brave move to another industry within Grand Convergence, like how Apple the PC maker launched iPod music players and the iTunes music store. Might we see an American Express smartphone? MIght we see Yahoo Insurance? A BBC internet service? There is gold inside the circle of Grand Convergence. We have only made one quarter of the journey. The biggest prizes are mostly still hidden and will come in the next 10-15 years. Who will be brave and bold to get there? Who will stumble along the way. Will we still identify brands that are now known as mobile operators/carriers by 2030 or have they vanished from our daily lives not unlike the water provider or electricity provider to our homes and offices today?

This is the richest time for innovaiton in human history and the Grand Convergence theory is your map to the future. There are enormous riches here to be had but also vast dangerous pitfalls that will imperil foolish companies. Print out the Grand Convergence map and frame it on your wall and save it on your phone and use it wisely. Imagine being an explorer who is suddenly given a map to where you want to go. This is that opportunity. Come back to the blog where I will review the Grand Convergence from time to time. We may have 18 industries in it next time we meet... 

PS Grand Convergence is of course one of the main themes I will cover in my big workshop in Dubai in May if you want to send someone from your team to catch a full workshop with me.

 

Comments

[charly]

@Tomi T Ahonen

If you include a totally unimportant sector like watches than i think you should also include keys (car, office access card and home) and telephones used on land lines (use an app which uses the cable-modem) or even the flash light (greatest Nokia invention)

[AndThisWillBeToo]

@Maggan
The news article is wrong. I think this is the original tweet which has eventually evolved into "Sweden is on plans to abolish cash":
https://twitter.com/tomiahonen/status/283272241024745473

[Winter]

@Boron95
"But getting government services, filing paying taxes, voting, getting your pension/social-security payments, signing up for health insurance (Obamacare et al), national security (spy agencies, satellite monitoring, evesdropping, data analysis, etc is now primarily digital, and accelerating."

Eh, that has already happened. At least in developed countries.

Every contact I have with local and national government is over the internet, including payments. I have filled my tax forms online for more than a decade. My real persona has to turn up only to collect my passport or drivers license (once every 5/10 years). And I do not even remember when the last time was I actually payed cash to my government.

[Winter]

@KPOM
"Apple Pay likely is coming to Canada and the UK next. NFC payments are more common in both those markets, so we'll see what uptake looks like in more mature markets soon. "

I am curious whether we will ever see Apple Pay here in the Netherlands.

We have a very solid electronic payment system using debit cards. I think everyone already has a debit card, including high school kids (and many primary school children). NFC is already incorporated and field tests with (standard) mobile phones are running. As was remarked, the costs of such payments are low.

Obviously, Apple can simply latch on to the system. Any phone with NFC can be used. But I am afraid they will have difficulty getting people to switch banks.

[Maggan]

@AndThisWillBeToo

An interesting link. That initiative didn't go anywhere as far as I know. Didn't see antthing about it last time I was in Uppsala. It felt more like a Mastercard puff piece, to be honest.

There are drives to reduce amount of cash circulating at merchants, for sure. Mostly led by the banks. But no wide spread "plan" is being implemented. Unless the inevitable march of technology constitutes a plan.

Cash is used less and less, pin and chip replacing it. NFC and cash cards were tried but didn't go anywhere. Might be a different uptake if it was tried now.

I think Sweden will reduce reliance on cash in the long run, as the banks make it more convenient to use alternatives.

Cheers

/Maggan

[Winter]

@Maggan
"There are drives to reduce amount of cash circulating at merchants, for sure. Mostly led by the banks."

Cash is expensive. Not only the trucking around of cash is very expensive, the costs of robberies to businesses are high. I know of shops that closed because the owners could not bear another armed robbery.

[Winter]

"They are clueless about this looming disaster on their horizon. Bankers are still trying to get their heads around the types of threats from new digital currencies and don't yet even fully understand why BItcoin is merely an obscure gambling instrument but mobile money will demolish cash."

Tomi, I think you do not understand the role of banks in the economy. Cash transactions are not really the point. Banks are there to connect the people, businesses, and governments using money. I am used to do all my payments electronically and I never enter a bank branch. But I really need banks to store and manage my money.

[AndThisWillBeToo]

Get the popcorn, guys and gals! Samsung Z1 Tizen phone is coming this week!
http://m.gadgets.ndtv.com/mobiles/news/samsung-z1-tizen-smartphone-to-reportedly-launch-this-week-at-rs-5700-648147

[Wayne Borean]

Heh. Read the article on the Samsung Z1 Tizren phone. Saw the phone name was a link, clicked on it, and newer article says it has launched.

http://m.gadgets.ndtv.com/mobiles/news/samsung-z1-with-dual-core-soc-and-tizen-23-launched-at-rs-5700-648492

While it looks interesting, the camera sucks. That could hurt sales.

Still, if it was available in Canada I'd take a look at it.

Wayne

[AndThisWillBeToo]

4GB internal storage, 3mpix camera. I wouldn't buy phone with so bad specs even to my kids.
But I guess 4GB is plenty when you don't have any apps to install. ;)

[Tomi T Ahonen]

A few comments:

Otto - haha seriously? This was 9,000 words just on the 17 industries that are inside the deathmatch and I did mention that every industry can benefit from mobile. Do you want me to expand the article to discuss the recent developments outside that circle? That would boost the article to 20,000 words or more, at least, to do that topic any justice. No, I think it best we leave that to another blog posting.

Maggan - Sweden is proceeding in an, ahem, typical Swedish way, working to achieve consensus before the decision is made. The first news several years ago was the Parliament started the discussions. Since then we've had news that the Abba boys Bjorn and whatshiname, Benny are joining the push to abolish cash. Their reasoning is that cash is filthy. So then the Swedish medical associations etc joined in and contributed. Then there was news that merchants want to get rid of cash because its handling is expensive. This is similar to other merchants in other nations in Europe like Netherlands and the UK. Meanwhile several labor unions of laborers working in cash-intense industries like for example bus drivers, joined in because cash is a crime opportunity that threatens their members. So that is about where I've last seen the developments in Sweden but that was spring of last year, havn't heard where it is now. This is not happening this year or this decade but the process is ongoing and we may see Sweden decide to abolish cash towards the end of this decade for the action to happen in the next decade. That is the kind of time intervals we are looking at. But Sweden already abolished cash from one small industry, that is bus tickets :-)

PS thanks to AndThis - no, my thinking was not based on that Tweet, it started earlier and is far broader than the city of Uppsala but thanks that is yes one further piece in the pie. (I had totally forgotten about that, I tend not to focus on city-initiatives, only national ones haha)

charly - yeah, keys is on the horizon and may be added soon. We only now are seeing Americans accept that mobile phones could be keys. The world's largest lockmaker, Assa-Abloy of Sweden (haha and the Abloy part used to be Finnish) has been providing NFC based home door locks for years already, we even see them here in Hong Kong. Japan and South Korea were first to go there but only now we are starting to see for example rental car companies talk about introducing NFC locks to their cars that renters could use their smartphones. I am willing to add locks when it is accepted by that industry that it is headed there (or the numbers are overwhelmingly obvious) but at the moment keys is only a prospect.

Baron95 - that is definitely on the radar. Government (and education) are strong candidates to join the 17 industries already in the race. I am waiting for acceptance of voting through digital means in more than Estonia, and government official documents in mobile like we now see the state of Iowa with its Driver's Licence. Can all or essentially most of government services be delivered via digital? I think yes. Singapore declared its intention that everything other than passports and driver's licences will be delivered via their eGovernment service. Kenya is attempting an even more ambitious project where all of eGovernment would be made available via USSD so it works on the simplest of dumbphones. But we are still a way out on it. Even if we take police forces out (arguably an integral part of government) and military, as separate industries that could be (and in some cases are) farmed out to the private sector - we do see the adoption of early drones to help police work (and the miliatry obviously) so we can also remove many of the humans in that process and automate it more. Yeah, its a strong contender to join the 17 but Government is not there yet haha.

Tomi Ahonen :-)

[Winter]

Rs 5,700 comes down to around US $92

It is about the price of an HTC Explorer or LG Optimus L5 II E450 in India

http://www.mysmartprice.com/m/custom_list.php?company=&subcategory=mobile&property=|200030-200158&start=25&sortby=price-asc

[RottenApple]

@Baron95:

Your quasi-religious belief in Apple magic is stunning.
I really wonder how much they'll be able to sustain without another magician to produce it all.

This would also necessitate for an entire generation to be haunted by that magic, aside from the current iCult.

I think the biggest asset Apple has is that under Steve Jobs they somehow managed to truly monopolize some customers. But to sustain that they cannot afford to stumble, they are doomed to release one miracle success after another, and that's never going to work endlessly.

And the last word about the smartphone market hasn't been spoken yet. Apple's biggest reason for their high sales is still that for most customers the true price of the phones gets hidden in convoluted contracts. Look at every market where they are strong and you see the same picture. Look into most markets where they are weaker and you see a more open pricing scheme. So Apple's fate depends on the carriers, if that turns sour somehow (e.g. by Apple trying to take over some of their profitable business) or if the subsidising goes back, things may change quite drastically, especially if they don't constantly give the impression of innovation.

So whatever happens, the one thing I strongly disagree with is that Apple magic will last forever. And since it won't last forever so won't Apple's profits. Like every market leader, at some point they will inevitably be outpaced by a younger, fresher competitor. This has always happened and will always happen, unless you got some kind of government-sanctioned special treatment. It will especially happen in a highly competetive and by necessity innovative environment. Look no further than Microsoft for a company that relied too much on their past achievements. They ultimately descended into a downward spiral because they became too complacent, too arrogant and maybe just too big to act as quickly as needed.

[Tomi T Ahonen]

More replies

Winter - haha, good argument. Note, I didn't say Banks will die. I said they are in the death-match and they must adopt to digital AND mobile or else they will disappear. Nokia didn't kill cameras or photographs. The cameraphone revolutionized the camera industry and the digital change crippled the giants especially those living on film (Kodak, Polaroid) and then the MOBILE boost to the digital camera, ie cameraphones rather than stand-alone digital cameras, wiped out the stand-alone camera industry killing off Minolta's and Konica's camera businesses and forcing Canon and Nikon to retreat. By the camera analogy, 'banking' will not disappear but 'Banks' might. Its very possible that other ways - microfinance as one early step - can replace parts of what banks do. Then other rivals - mobile operators like Safaricom in Kenya (ie part of Vodafone group) with m-Pesa is BY FAR the biggest bank of Kenya by number of customers even if other major banks handle more total volume of the transactions. Its like what OTT is doing to messaging and Skype doing to voice calls. Exactly the same disruption to the banking industry.

But that brings an interesting angle - do we NEED 'banking' services like we had in the past? The banks grew very rich and powerful by acting as the go-between where people wanted to 'park' their money into something safe to earn some interest, and banks then were able to lend that to businesses who needed loans etc. That was very useful and valuable service in the time before digital connectedness. But do we need that now? I bet I could get a loan through my Twitter followers. I explain what I want, I post the link to my blog on Twitter, and promise a return better than banks and I get a loan cheaper than what I'd get from a bank. Why do we need the middlemen anymore? So if you like these kinds of thoughts, go read Dave Birch's book the Digital Money Reader, its a very eye-opening book about where money and banking is headed. We do need those services yes, but the institutions of 'Banks' they are an optional extra. They have to discover value-add roles to remain relevant. Or they will become the next Minoltas, Polaroids and Konicas among the casualties of the mobile revolution.

Now one last thought, Winter, if you really want to consider what is the BIG tsunami coming to the money industry beyond just mobile payments and mobile wallets... its the concept Jonathan JMac MacDonald introduced a couple of years ago, called 'Advocurrency'. Today every city has numerous locations where you can exchange currency. This is a totally standard process in all countries, I give you Hong Kong Dollars, you give me back Euros or UK Pounds or US Dollars etc. With a standard 'exchange rate'. That concept, exchange rate, can be expanded. Imagine a future when our digital footprint and our reputation is relatively accurately measured and is relatively stable, ie we can't manipulate it with one popular blog article about Nokia or Apple, and suddenly I have a much higher Klout or Kred score haha. But over time yes, our value as an advocate will be easily quantified and as easy to check as we can today check the exchange rate of the Thai Baht to the Japanese Yen.

Then consider advertising. A coupon is an advertisement. Come buy my product, with this coupon you get 25% off. Or this coupon is good for 25 cents discount on my product, etc. A coupon is both an advertisement and a kind of currency. Very limited, obviously, only works with one specific product (or brand or store etc). But paper coupons like in our Sunday newspapers were the first case of advertising becoming money. Now take JMac's theory of Advocurrency. Jonathan imagines a future where there is a clear 'exchange rate' mechanism between our real cash/money/currency, and our online reputation, ie our 'advocacy' and that of advertising. So, in the future, say 5-10 years from now, it may be possible to go to Pizza Hut, and pay in dollars. Or the same cash register at Pizza Hut can accept my payment through my Advocurrency Wallet. That advocurrency wallet could have a balance already and it is partly based on my reputation. But I could recharge that wallet by watching ads. And because its a whole system and reputation and value, I don't have to 'watch the ad now' before I eat Pizza. A brand that is interested in me, like say Audi, could have offers waiting for me, Tomi if you agree to watch two of my new ads about the S8 within the next week, I will top up your Advocurrency Wallet now with 25 dollars.

So Advocurrency would utterly devastate both the advertising industry and the money industry (by merging them with the social media industry). Is this a bizarre scenario? In London there are cookie shops that you can pay for the cookies just by posting Tweets. In Spain the world's first Advocurrency based company has already launched, called Qustodian. They have over 100,000 happy users and they've recently expanded to the UK.

So yeah. Banking will continue. Money will continue. Banks may go the way of telegraph stations. But some Banks will survive and they may adapt radically and change in their trip to digital and mobile. Look at Eastern Telegraph Company. That company was born in the early days of the telegraph. It then morphed into Cable and Wireless. C&W expanded and split and morphed further as radio services and telephone services replace most but not all of telegraph business. Pars of C&W in Asia then evolved into PCCW which is now one of the big mobile operators/carriers in Hong Kong. It still offers telecommunications services in the same country now, here in Hong Kong as the Eastern Telegraph Company 100 years ago and has gone total changes many times but it adapted to the technology changes and still provides a service that would be recognizable as long distance communications as telegraph operators did a century ago. Now today the rate of change is far faster but definitely some banks will embark on this journey and will discover some money-related opportunities in the digital space and will survive. But most of their staff will not be bank tellers just like PCCW doesn't have any telegraph operators in its employ which were the bulk of the labor force a decade ago in its grandparent company.

Some food for thought, eh Winter? This is EXACTLY what the Grand Convergence is all about.

Tomi Ahonen :-)

[Winter]

@Tomi
" I give you Hong Kong Dollars, you give me back Euros or UK Pounds or US Dollars etc."

Actually, I go to the shop and pay using my debit card and PIN. That worked everywhere in Europe and in the USA. I can also go to a bank and withdraw cash if I need to (that even worked in China and Indonesia).

But I agree, some of the functions a bank performs can be done peer-to-peer. But the fate of Mount Gok and bitcoin have shown that there is something to say for banking regulations. Note also that bank loans "prints money". Every institution that can handle overdrafts and loans can lend more money than it has. That destabilizes the financial market and without oversight (and even with oversight) this can lead to horrible crises like the 2008 financial melt-down (or the Mississippi/South Sea bubbles in the 18th century).

I think that whenever some corporation will assume banking function using mobile, the central bankers will come pay a visit. The same happened with PayPal. That will happen to Facebook and Twitter if they step into this field (as they really want to).

In short, you are right, new banking services and new financial institutions will emerge. But they will be brought under banking regulations. If this will bring down established institutions, great, but there will be national and international oversight on anyone who tries to handle large streams of money.

Peer-to-peer money transfer? That is peanuts and the sooner we can get rid of the banking overhead for clearances, the better.

[Tomi T Ahonen]

Winter

Ok, and again, nowhere in the blog did I say that regulations will disappear haha. So yeah, valid point, I totally agree that banking regulations are needed also in an era of purely digital money but that was never in doubt and I never said that would not be the case. We agree. In fact we have a good case study, Kenya. M-Pesa launched into a wilderness where mobile money transfers were not part of the financial institution rules in Kenya. After a few years of M-Pesa growth, the operator Safaricom approached the govermment that new mobile money/mobile banking regulations were needed because the M-Pesa uses were starting to resemble banking business (and because Safaricom wanted to expand its banking services into 'full' banking business but without setting old-fashioned banks with tellers and ATM/cash machines etc). Today Kenya under those rules there are already 7 mobile payments providers.

So yeah, 'banking' regulations are needed. Bitcoin is not mobile money and many say its not even a proper digital currency its a gambling instrument (like for example Dave Birch argues and I totally agree). There will be fraudsters in any new technology. That has nothing to do with MOBILE money. Look at Smart Money in the Philippines or Osaifu Keitai in Japan, look at mobile payments in Finland or Tanzania or Brazil and you start to understand what is possible with MOBILE money. Bitcoins are a joke.

Tomi Ahonen :-)

[Winter]

@Tomi
"We agree."

Yes indeed we do.

Do not be fooled by my remarks, I like your examples a lot. One thing that is keeping poor people poor is lack of access to banking services. Be it money transactions, be it saving accounts, be it cheap loans.

And you are right, mobile will be a watershed in this respect.

[Maggan]

"But Sweden already abolished cash from one small industry, that is bus tickets :-)"

Sweden didn't abolish cash payments of bus tickets, but _some_ Swedish cities are using NFC cards for public transport. Not _all_ of Sweden, but the biggest cities and some geographical regions. You can still use cash to top up the cards at a cashier, but you can't use cash on the bus itself.

So it's a slow process, and not much of it is coordinated. Swish has made a small impact, the most important step has been chip and pin on the credit cards, coupled with easily accessible terminals for accepting payment.

/Maggan

[Yan]

Why not talking about Alibaba and its Alipay, Tencent with its Tenpay integrated into Wechat? Those guys are already offering payment, banking and financial services within their platform. They have already blurred the border between banking, social networks, e-commerce platform, etc.
For innovation and your convergence battle, look at China too :)