Cell Phones, Continued - Business Model Innovation

If everyone knows that cell phones are both a boon and pain, then why haven't the phone companies made the pain go away? It's only a matter of design, after all.One reason is that the makers and providers of mobile phones are in a huge race for market share, so short term thinking dominates the drive to sign up more subscribers. Hence, they're putting their money wherever they think they'll sign up the most users, so they probably won't get around to fixing all these annoyances until subscriber growth hits the wall.Another reason is that different segments of the market have very different needs, and technology adoption tends to follow a classic curve that is largely driven by fashion first, and function second. Here's a thumbnail view of the 3 major market segments, only slightly tongue-in-cheek:Fashion phones: Booming market. For the young, who have no trouble learning how to use technology, cell phones like Razrs are fantastic for fashion, fun, and nonstop IM. Every year there are millions more youth who can finally get their own phone, so this is where the attention goes.Function phones: Static market. For those approaching middle age, cell phones are all about functionality. If it's simple and it works and I can figure out how to use it, fine. Is this a fast-growing market segment? Probably not.Fogey phones: Niche market. The older you get the more difficulty you have using technology - ergo the running joke about the 4 year old who programs the VCR because the parents can't figure it out. Thus, a lot of older people find cell phones incomprehensible - remember the time you called your grandmother (or uncle, aunt, parent, etc.) on the cell phone she borrowed, but she never answered because she couldn't figure out how to use it? GM understands this, so their OnStar service is REALLY simple - all you have to do is push one button to talk to someone who will help you.The innovation opportunity here is clear enough. Sooner or later when the market is saturated a new business model will emerge in the cell phone industry. A handset maker and a service provider will team up to segment the market by needs, and they'll focus on the different types of functionality that people really care about. And how will they learn what people really care about? It's all about research, and the difference between the stuff everyone knows and the stuff that everyone experiences but can't actually articulate very clearly. More on that in the next post.In the mean time, keep that arm loosened up for the cell phone throwing contest (see yesterday's post).For more on innovative business models, check out my white paper "Business Model Warfare." There's also about 10 pages on Business Model Innovation in Permanent Innovation. Click here to go to the download page and then see Chapter 7.