Evaluation of current and emerging mobile phone ecosystems

Thesis: S.M. in Engineering and Management, Massachusetts Institute of Technology, Engineering Systems Division, System Design and Management Program, 2013.Cataloged from PDF version of thesis.Includes bibliographical references (page 79)."The battle of devices has now become a war of ecosystems..." - Stephen Elop, CEO, Nokia The mobile phone industry has changed dramatically in recent years. What used to be a closed, vertically integrated, device-centric industry has become more open, modular and oriented around software platforms and the ecosystems of complementors they enable. There are currently two dominant ecosystems in the US mobile phone market, built around the two most successful smartphone OS(s). More OS developers are launching competitive versions of their smartphone OS, looking to build equally strong ecosystems around their platform, making this "war of ecosystems" more intense. In order to win this war, the organizations have to anticipate the shifts in value flow and be ready to respond in order to create maximum value and capture it. They also have to understand the ecosystem dynamics and various roles within an ecosystem available to them, to help create, grow and sustain thriving ecosystems of component manufacturers, device manufacturers, accessory manufacturers, software application developers and service providers for their platforms. Shifting Value: Over the last few years, the mobile phone solution stack - hardware components, OS, services and content available to the users, has grown increasingly complex. It has evolved to include a number of hardware components and an increasing number of software features and services - either through features in the OS or through applications developed for the OS. At the same time, the emergence of a dominant design for mobile phone hardware has resulted in standardization and modularization of some hardware components and forced the device manufacturers to look to complementors for ways to differentiate their mobile phones through software. According to the law of conservation of modularity, as the mobile phone hardware becomes further modularized, the value will move away from phone hardware to other points in the value flow or the solution stack that are not yet "good enough" like software components like OS, applications and services, and to the components that are bottlenecks for device performance like display and memory. (Christensen, 2003) The mobile phone market has already moved from categorizing phones based on their hardware capabilities to categorizing based on the software operating system (OS) the phones run on, revealing the increasing value of software platforms in mobile phones. Ecosystem Dynamics: As some applications and services become more valuable, the OS platform will expand to integrate those features and services into the platform, making the applications obsolete. However, the growing ecosystem of complementors is what makes a mobile phone attractive to the users and no organization alone can develop the variety of applications and services on its own. Thus, organizations looking to be successful in this market have to be ecosystem leaders and balance the needs of different stakeholders to create and sustain the mindshare amongst the complementors. The iOS ecosystem is the dominant ecosystem in the mobile phone market and it needs to keep innovating on its hardware and software platform to attract new complementors and create new waves of innovation. The Android ecosystem is the second most dominant ecosystem. Google and Samsung, the two key organizations have a symbiotic relationship that works now as they have very different business models to capture value. In order to make the ecosystem more successful, the ecosystem needs a keystone or keystones that can create a vision and set a direction for ecosystem growth that balances the device manufacturers' need for openness, which has caused fragmentation with the need for a stable, secure platform, of the users and application developers. The Windows Phone platform, from Microsoft (with Nokia mobile phones), is a new entrant based on the modular structure of the Android ecosystem. However, the software and hardware platforms are very integrated and need to become modular enough to support the incremental innovations needed to keep the platform competitive. And Microsoft and Nokia have to develop the skill set needed to create an ecosystem where the value is created and some of it is also captured by the complementors. Blackberry has a strong mobile focus and has created an ecosystem of application developers for its old platform. It has to leverage the experience it has with creating ecosystems and services and solutions to make its platform more attractive to the users and complementors. Thus, to win this war of ecosystems, both Google and Samsung, and Apple have to be at the forefront of hardware and software platform innovation to attract new types of complementors, while growing their mindshare amongst the current groups of complementors. While, to be a contender in this war of ecosystems, both Microsoft (and Nokia), and Blackberry need to rapidly increase the adoption of their hardware and software platforms to be able to create a compelling value proposition to attract the complementors to innovate on their platforms and create a successful third ecosystem in the mobile phone market.by Rutu Manchiganti.S.M. in Engineering and Managemen