Monday, March 20, 2017

Making Stupid Phones Smarter: Will a New Strategy Be Imitated?

Qualcomm just announced products that will be used to help feature phones take advantage of 4G networks. Let me translate that sentence (for those who need it). A feature phone is what some call a stupid phone – the opposite of a smartphone, because it is missing features such as the ability to install software. The screen is also simpler, and the price is much lower – around $20 in the markets that sell feature phones. 4G networks are made for smartphones, not for feature phones. Qualcomm is aiming for smarter feature phones, which would use 4G networks for higher bandwidth material such as video transmission. The trick is that consumers would like such material and might pay more for phones that provide it, and the telecom carriers would also like consumers to move into 4G so they can start shutting down 2G and 3G networks.

Feature phones that use smartphone (4G) networks is an example of a market position, and a pretty innovative one too. Will it remain Qualcomm’s position alone, or will others follow? Well, Qualcomm’s usual market position is smartphones that use (of course) smartphone networks, and there they have seen rivals such as MediaTek move in. Market positions are not secret, and an easy way to make a strategy is to imitate what others do. In fact, these market strategy moves are a reminder of a paper I published in Administrative Science Quarterly in 1996 on the diffusion of a market position. I found that such strategic moves probably involve a lot of planning inside the firm, but from a researcher’s point of view they just look like copying. Strategic actions are taken after planning and thinking, but plans and thoughts are very much influenced by what the competition is doing. As my son (who studies data mining) might say, strategic planning is a human task that a computer can mimic.

If we think about this particular strategic move, can we use the evidence to predict the next strategic moves? I think so. Innovations like the feature phone using 4G happen for a reason. The reason is that smartphone sales are stalling, and a key reason is that some of the largest phone markets (India and Indonesia) have remained stubbornly dominated by feature phone even though the telecoms are making 4G networks and local and foreign producers are offering smartphones. The advanced market is not doing well, and the in-between market has a gap. I think we will see MediaTek and others moving to imitate this market position.

Let me add a small postscript to this post. Every now and then I look for an old ASQ paper to write about, and this time I decided to go 20 years back. Then I realized that I published my second paper in ASQ 20 years and four months before becoming the ASQ editor. Here it is: