Friday, November 8, 2013

Native mobile: a new (and scary) link in the enterprise value chain

In my Defrag talk this week I tried to make the case that the accelerating pace of technology change has reached a point where most large companies can no longer keep up.

Technology risk now presents the single biggest existential threat to established companies + brands, and nowhere is this more true than in the current rapid shift from web to mobile.

One of the books I read in preparation for the talk (thanks to a recommendation from the brilliant Venkat Rao) is Charles Fine's Clockspeed: Winning Industry Control in the Age of Temporary Advantage. While some of the examples in the book are showing their age (it was published in 1999), the basic framework is still very useful as a tool for thinking about the impact of ever-accelerating cycle time on business strategy.

The core of Fine's thesis is that technology is accelerating the "clockspeed" -- and thereby shortening the economic lifespan -- of every product, process and capability in the enterprise value chain. Companies can't manage this risk just within the four walls of their business -- to survive, their entire value chain must become more agile and responsive to the shifting needs of the market.

The shift from desktop to native mobile computing is the most profound -- and fastest -- disruption to the enterprise value chain the world has ever seen.

It took about 15 years for the combination of PCs and web browsers to shift the default mode of interaction between customers and businesses from voice / face-to-face to visual / digital. Along the way, the technology industry developed many effective ways to drive customers to a website, offering brands a range of competitively priced options for both organic and paid customer acquisition. And once those customers arrive at a website, the real-time nature of the Web allows companies to quickly spot friction in their digital customer interactions and address them -- or escalate them to a human -- before the relationship can be lost or damaged.

But just as brands were beginning to figure out how to embrace the Web as the front door to their business, yet another door has been added to the stack, and it's not one they fully control.

The iPhone and iPad are so deeply embedded in our culture now that it's hard to believe they didn't exist until just a few years ago. The slide below (excerpted from Ben Evans' excellent long-form analysis) shows just how quickly and decisively the PC has been replaced by mobile devices.



It's tempting for brands to think of mobile as just an extension of their Web strategy. After all, mobile devices have browsers too, and websites can be adapted to render on those smaller screens without a significant loss of fidelity.

But treating mobile like an extension of the Web is a potentially fatal mistake for any large company (and many small ones too).

There are at least four critical differences between Web and native mobile that require mobile to be afforded the same strategic significance as any other entirely new link in the enterprise value chain:
  1. Distribution / customer acquisition

    Apple and Google have constructed well-defended tollbooths through which customers *must* travel to access native mobile apps. Unlike the web, which offers a huge array of customer acquisition methods (both paid and unpaid), the app stores are currently the only way that mobile apps can make it on to a customers' device (ignoring for the moment the small-but-passionate jailbreaking / sideloading communities).

    Not only is the eye of the distribution needle for both iOS and Android incredibly small, it's also -- for the moment -- frustratingly opaque. Even if you're willing to devote resources to mobile customer acquisition (and the dollars here are huge, for reasons we'll come to in a minute), the app stores have made it frustratingly difficult to definitively link a specific install to any specific marketing campaign, leaving marketers in the dark about how to spend their budgets most effectively.

  2. Experience / customer value creation

    Once you get a customer to install your app, the potential to create powerful experiences goes way beyond what's possible on the Web. Access to the phone's full range of sensors -- GPS, accelerometer, touch interfaces, haptic feedback and more (not to mention direct integration with the address book) -- makes it possible to create immersive, contextually relevant experiences unlike anything the Web can deliver. The net result, based on data from a range of both consumer and enterprise mobile publishers, is app engagement times in the tens of minutes per session, versus single digits for either web or mobile web visitors.

    Brands that understand the power of native mobile are much more likely to create experiences that delight smartphone and tablet users. Those that simply port their web experience to mobile -- or worse yet rely on mobile web alone to serve their mobile customers -- risk losing engagement and loyalty to firms that take full advantage of the native runtime to engage their customers. The lifetime value delta -- and existential risk of losing customers to "mobile-first" competitors -- keep driving the cost of paid mobile installs to new heights.

  3. Connectivity / customer intimacy

    The gains in customer experience quality that come with native mobile can easily be offset by losses in customer intimacy resulting from device-based software and spotty mobile connectivity. Unlike a web experience that can be instrumented and managed in real-time, mobile publishers are often blind to user actions on native mobile until well after the fact, making it difficult to know when customers are having trouble until it's too late, the customer is disappointed (or worse) and the app is uninstalled.

    Brands that have built a reputation for customer service are the ones most exposed to the loss of customer intimacy represented by third party app stores and native runtimes. Those that develop new and creative solutions for restoring customer touch and intimacy on mobile devices will have an unfair advantage over brands who fail to recognize the risk, or simply accept it as a cost of doing business in a mobile world.

  4. Engagement / customer activation

    Native installs are expensive and hard-fought, so maximizing lifetime value for each install is a core driver of business value. But unlike the web -- where search marketing, retargeting and email campaigns can all be used to draw past users back to a site -- native mobile customers are much more difficult to re-engage. Push messaging is the single most powerful tool for mobile customer engagement -- especially when integrated with location, day-part and behavioral data triggers to increase relevance -- but also risks customer annoyance, fatigue and privacy concerns if used too aggressively or for messages that deliver too little value.

    Learning how to market effectively to native mobile customers -- taking full advantage of the always-on nature of the mobile relationship, and using both onboard sensors and data-intensive customer intelligence to activate mobile customers without alienating them -- is a powerful new area of both risk and opportunity for major brands.

Accepting that native mobile is a permanent addition to your enterprise value chain -- effectively the new front door to your business -- is fundamental to the continued competitive relevance of nearly every firm. 

Companies that try to wish it away -- or hope that adapting their digital offerings to the mobile web will somehow be good enough -- fail to understand how different the basis for competition in native mobile really is.

Only by developing a deep competence in each of the disciplines outlined above -- mobile customer acquisition, mobile customer experience, mobile customer intimacy and mobile customer engagement -- can incumbent firms hope to defend themselves from "mobile first" challengers who are able to meet modern customers where they want to be.

The accelerating speed of technology change in the mobile environment means there's no time to waste in developing a competence in native mobile. The fastest clockspeed segment of your value chain is the one that calls the strategic tune, and the pace of change in mobile is the fastest the world has ever seen.