INNOBLOG

Attendees of the Mobile World Congress in Barcelona earlier this year might have easily overlooked what could become a huge success. Modu, an ultracompact cell phone launched by the Israeli technology start-up modu mobile, might be the first truly modular phone – a technology with significant disruptive potential in the mobile communication devices category. However, highly relevant questions on consumers’ jobs-to-be-done and the business model need to be thoroughly considered for modu mobile to be successful in the marketplace.

The technology

In essence, the 1.41 oz., 2.8 x 1.4 x 0.3 inch device is a no-frills cell phone with a small screen and just a few buttons that can be wrapped in one of multiple “jackets” to become a more advanced cellphone (e.g. with a full QWERTY keyboard, a bigger screen, or individualized design). When merged with a “mate,” the modu becomes the core of an entirely different compound device with different performance dimensions such as a portable music player, a car radio, a GPS-system, a bike computer, a camera, or an alarm clock with a docking station that displays incoming text messages. The modularity of modu’s hardware and software allows its processor, memory, and wireless technology to run the compounded devices. 

The job

The modu is set for success only if it precisely targets consumers’ jobs-to-be-done and does not get distracted by the technological possibilities. Instead it should focus on specific circumstances consumers face during their day where the modu could be a winning solution: “Help me enjoy my commute” when getting to work and back, “help me access my emails while on the go” during the work day, and “help me become available for communication” when going out at night might be examples. Now, each of these jobs is already addressed separately by illustrious products such as Apple iPod, RIM Blackberry, and small form-factor cell phones by Nokia, Motorola, Samsung and others. 

At the moment, modu mobile’s answer to these competitors seems to be a lower price. The anticipated price of $200 for a modu bundled with two jackets that range in price from $20 to $60 each might differentiate modu from its respective nonmodular competitors. Yet, competitors could simply decide to sell for less, cutting their margins to outcompete modu.

The true power of modu’s technology lies in its modular architecture. Modu mobile can create a competitive edge by translating the device’s customizability into two distinct performance dimensions. First, modu's modularity can facilitate the individualization of consumer electronics -- a trend that predates its most common and unfortunately popular example, the personal ringtone. The second performance dimension follows the broad job “help me make my daily life easier.” This might sound more straightforward than it actually is, but figuring out how precisely to align communication technology with cross-architectural usefulness will be key for modu to challenge the iPods, Blackberrys and Nokias of this world. In this context, swapping the modu between multiple jackets and mates per day needs to be as quick and easy as its teaser suggests.

The business model

Modu mobile plans to launch its device with support from major cellphone carriers in Italy, Israel and Russia this October, followed by the U.S. and other European countries in 2009. Modu's business model focuses on selling the phone while licensing the technology to third-party manufacturers, who will build jackets and mates on their own. Manufacturers could profit from licensing modu’s technology by launching their products without a slow and relatively expensive licensing process with the Federal Communications Commission, because the modu is already a phone.

Modu mobile, in turn, keeps full control over the core component of what they hope will become as standard as flash data storage devices, the last undertaking of modu founder and CEO Dov Moran, who was formerly CEO of msystems inventor of flash data storage devices that was acquired by SanDisk Corp for $1.6 billion in late 2006). The two main advantages of licensing technology to other manufacturers for modu mobile are that with an increasing number of jacket and mate manufacturers the modu would be more and more cemented as a standard, and as other companies also strive for success, modu mobile hedges its risk of failure by potentially not getting the job quite done for consumers.

The future

Modu mobile has the potential to disrupt the mobile communication devices category. It can target overshot and/or nonconsumers (an interesting occurrence of a potential low-end and new market disruptive innovation), if it is able keep the low-price promise along with increased ease of use, or by introducing a new performance dimension around the device’s modularity and striving for increased customizability. The business model appears promising, if the self-reinforcing mechanism of initial success results in a large base of third-party manufacturers.

These are all big ifs, and I am really curious to see what the future will bring for modu. 

The markets that exist at the bottom of the pyramid (BOP) have been garnering increasing attention in recent years. Traditionally, these markets have been served by charities and government aid programs but for-profit companies are increasingly targeting the BOP. This makes sense for two reasons. One: the business models of many charitable organizations and government aid programs are broken. Two: the opportunities for profit and impact in serving BOP markets are attracting for-profit players.

Why are charities and government aid programs ripe for disruption? First, the top-down business models offer opportunities for corruption as funds are collected and doled out by a centralized organization. Start-ups avoid dealing with the complaints of existing channels of distribution that have vested interests in continuation of an existing model. Moreover, the administrative costs incurred in order to prove to donors the efficacy of spending and services leads to unnecessary bureaucracy and reporting. For-profit start-ups do not have to chase elusive metrics of success such as improvements in well being. Entrants that seek a double bottom line can instead focus on more streamlined measures such as "increase in income or "jobs created as well as profit. Finally, continued operations of most charities are based on donated dollars rather than the self-sustaining revenue of for-profit businesses. The scalability of charities and aid programs tend to be linear with donated dollars while for-profits can invest in future growth without dependence on external resources.

Meanwhile, in the for-profit world, the buzz about selling to BOP markets and successful examples of such ventures are becoming more commonplace.
C.K. Prahalad's 2004 book, The Fortune at the Bottom of the Pyramid, promoted the idea of targeting products and services to the 5 billion people who live on less than two dollars per day.
Inspired by the Grameen Bank microcredit model, Grameen Phone created a business in which cellular phone access is sold to rural consumers by local entrepreneurs who make a profit by renting out small quantities of access to community members. Unilever famously reached rural non-consumers in India by selling small sachets of soap and other products through local, independent agents to customers who would not be able to afford a larger-sized quantity of product.

Given the large opportunities for both profit and impact, one might wonder why for-profits havent been interested or able to serve these markets in the past. I think the jobs-to-be-done lens can shed some light on the reasons for-profits have not gained more traction in the BOP in the past and how they can approach these markets successfully.

Companies need to recognize the distinct barriers to consumption and product "hiring criteria that exist for consumers in these markets. The lack of wealth, skill, time, and access present in the lives of those at the BOP serve as barriers to consumption. These barriers and the distinct set of "jobs to be done that these consumers have relative to consumers in Western markets mean that products and services may be evaluated along different performance dimensions by BOP consumers. New products that offer lower prices or greater access to information/communication may be of particular interest in these markets, even if performance along traditional measures is diminished.

By understanding these barriers and hiring criteria, and by taking to heart the concept of "good enough, some solar companies are finding that BOP customers constitute an ideal foothold market. Solar technologies that offer only a few hours of energy per day at a lower price are attractive to BOP customers who are overshot by the always-on, expensive power supply options marketed to wealthier consumers who have a different set of performance criteria. As these technologies develop in markets that are unattractive to incumbents serving the high-margin Western markets, they will inevitably improve in function and capacity to move up market. This phenomenon is not limited to emerging technology areas like solar is there any doubt that the operational and technological innovations involved in creating the one-lakh car wont be applied to Tatas future higher-end products?

One last point: in the competition for talented employees, for-profit start-ups have another edge over charities and governments. They meet the job-to-be-done of "doing well in addition to "doing good of those bright minds the organizations seek to attract.

On March 17, technology research firm IDC and information technology publication The Industry Standard, announced a partnership centered on the latters prediction market. Specifically, the two companies will create a joint service, sold by IDC, matching the data generated by the prediction market with the insights of IDCs analysts. This new service appears to be one of the first applications of a prediction market to technology trend and market forecasting by a research firm. Could a prediction market forecast information technology markets more accurately than a technology research analyst? How might the principles of disruptive innovation apply here? Is this an attempt by IDC to disrupt itself?

The Industry Standard, famous for a quick rise to prominence during the dot-com boom and then a similarly quick decline into bankruptcy at the end of the boom, re-launched in early February in a web-only form built around the core of a prediction market. Prediction markets are much like the stock market participants can buy and sell shares or place bets on whatever the market has securitized (in the case of prediction markets, most often future events and outcomes).

Theoretically, as participants use their tacit knowledge and experience to bet for or against a specific outcome, the probability of that outcome actually coming true will rise and fall. By introducing a far greater number of inputs (scale) and a greater diversity of those inputs (scope) into the prediction process, these types of markets have shown to be more accurate, over the course of repeated trials, in forecasting outcomes than individuals or even groups of experts.

Following in the footsteps of technology prediction markets including Yahoo Tech Buzz and The PopSci Predictions Exchange, The Industry Standards market allows participants to place virtual currency bets on future technology-related events. Current predictions in the market include "Googles stock price will be below $500 per share by end of Q1, "Google to buy Digg, "Dell gets acquired by a Chinese manufacturer looking to get a foothold in the US, and "MySpace takes on iTunes with music store.

Unlike regular voting, participants can bet as much virtual money as they want on their predictions. When an outcome is achieved, participants who bet on that outcome when odds were low, for example, receive a greater payback than those who bet on that outcome when the odds were high. Participants who bet on an alternative outcome, lose the virtual money they placed on that bet. The names of the most successful participants, and their Net Worth are posted on the sites leaderboard.

Technology research firms such as IDC, Gartner, and Yankee Group are known for producing forecasts of revenue generation or unit sales. These forecasts are developed through the aggregation of inputs information from vendors and channels, macroeconomic conditions, customer surveys, technological trajectories, and so forth. Ultimately, however, there is only so much information that analysts can gather together and that, combined with intuition, experience, and a little secret sauce is used to generate the forecasts.

There are many ways in which prediction markets can fail to deliver accurate results. Assuming that a prediction market was constructed carefully and that it has the necessary quantity and diversity of participants, however, might it be able to aggregate a wider range of information than a technology research analyst could gather? Could a prediction market prove to be more accurate than a group of analysts? Could technology research firms turn the process of forecasting technology trends over to prediction markets and focus solely on analysis and interpretation?

Further, the principles of disruptive innovation teach that incumbents, if able, should co-opt or replicate the entrants innovation or business model to stave off disruption. Prediction markets are a potentially powerful low-cost, yet high quality tool for forecasting. Could an organization use a prediction market to harness collective intelligence to disrupt technology research firms? Might this new service offering be an attempt by IDC to protect itself from such an entrant?

Solar power is taking off around the world. Capacity and installations are growing between 30-40% a year, supply can hardly keep up with demand, venture investment is reaching Internet bubble levels ($264m in 2006), and IPOs are popping with furious abandon. And yet, solar still barely registers in the sum total of global energy production it represented some .04% of the energy mix in 2005. Can such breathless growth be sustainable? Will, and when, will solar become significant on a local, regional, national, global scale? We have long argued that a disruptive approach would hold the most promise for the development of solar technologies and business models at scale. Compared to conventional power sources, solar is inherently disruptive it excels on certain underappreciated dimensions of performance (it is distributed and emission-free) while being considerably less good than coal, gas and oil when it comes to traditional metrics like price and energy density. To maximize their chances for disruptive success, companies could, for example, initially target regions with underdeveloped infrastructure where solar would compete against nonconsumption of electricity rather than ubiquitous and cheap grid power. They could pursue low cost solar technologies that attain price-competitiveness without the help of government subsidies. Or, they could focus on applications that require portable power where recharging is a pain. One such promising niche application was previewed at the annual CeBIT fair in Germany the other day. A Chinese mobile devices company called Hi-Tech Wealth is releasing a solar-powered cell phone that will get 25 minutes of talk time from 40 minutes of charging in the sun. The phone will also be able to draw on indoor light, and will, theoretically, be entirely self-sufficient on standby mode so it will never have to be turned off. This is interesting for at least three reasons: 1) Niche applications for portable micro power are great breeding grounds for solar technologies and business models. Batteries are worlds most expensive form of energy and recharging cell phones, laptops, and mp3 players can be a hassle. As far as electricity needs go, this is relatively low hanging fruit. 2) It is not surprising that this phone is coming from China, which has less developed power and communications infrastructure than much of the western world. There is much greater need for self-sufficient mobile communication devices there, and thus much greater incentive for innovation. 3) Wireless charging capability can be a powerful new feature for cell phones, generally. Mobile device manufacturers seem to be caught in an endless race to pack as many features as they can into phones; Motorolas RAZR made such a splash a few years back because it differentiated on another dimension of performance form and style, rather than features. Differentiating in this way might be a new avenue to success, especially in the developing world. The emergence of the cell phone decentralized communications, unlocking all sorts of new consumption. It liberated consumers from the wires that tied them to their homes and officesexcept for that pesky charger (and personally, my phone charger always seems to be either underfoot or lost at the exact moment I need it). Solar-powered cell phones promise to relegate that last wire to the dustbin of history. See: http://www.trustedreviews.com/mobile-phones/news/2007/03/20/CeBIT-2007-Self-Suffient-Solar-Mobile-Unveiled/p1