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 / Summer 2003 / Issue 31(originally published by Booz & Company)


Rational Exuberance: The Wireless Industry’s Killer “B”

From the ashes of an overbuilt industry rises a promising new marketplace: business-to-employee communications.

No industry suffered as much from the hope and hype of the 1990s boom as telecommunications. The dream of convergence — of video and voice and broadband Internet — led companies around the world to imagine vast new traffic and wealth emerging from Internet-enabled business-to-consumer (B2C) and business-to-business (B2B) commerce. This e-business mania led telecom companies to overbuild in the local exchange market and the long-haul fiber-optic transport market. When wireless became the “next big thing,” the private sector piled in, with European telecommunications companies alone dropping $105 billion on sought-after third-generation (3G) wireless Internet licenses.

The result has been disastrous. The telecommunications industry worldwide is mired in overcapacity, deep debt, razor-thin margins, and bankruptcies.

Was all for naught, especially in the highly touted wireless marketplace? The answer, for the moment, is no. Although it is true that mobile commerce has been slow to develop, particularly in B2C applications, our research is showing that many companies have been quick to capitalize on wireless connectivity in a market surprisingly close to home: their own work forces. More than two-thirds of the 473 firms in our recent study of companies’ wireless strategies, investments, and experiences are using the wireless Internet primarily for business-to-employee (B2E) applications to improve productivity and operational efficiency. (See “About the Research,” at the end of this article.) The surveyed sectors included banking, insurance, manufacturing, telecommunications, transportation, media, utilities, retail, health care, and government.

Many observers and analysts have anticipated continued growth in the wireless market, the industry’s recent travails notwithstanding. The Telecommunications Industry Group’s 2003 Telecommunications Market Review and Forecast predicts that wireless spending will increase from $123.4 billion in 2003 to $164.5 billion in 2006, a 10 percent compound annual growth rate. Long-term growth in mobile business may come through partnerships across industries aimed at building loyal customer relationships in B2C and B2B contexts. The budding B2E segment, however, underscores an important — but oft-forgotten — fact about business development in industries that are based on rapidly evolving technologies: Markets frequently develop naturally in unexpected places.

In this article, we explain the early “m-business” hype and the reasons for widespread disappointment with the telecommunication industry’s progress. We also describe how mobile technology is being successfully leveraged by some organizations to enhance their competitive advantage. In addition, we evaluate the propensity for industries to adopt wireless technology, identify potential opportunities, and raise guiding questions for firms considering m-business solutions. Through various examples, we provide senior executives with a sense of how to approach investments in new technologies in general and m-business in particular.

The Hype Cycle
We define m-business as the use of wireless handheld devices connected to public and private electronic networks to communicate, inform, transact, or entertain, using text, voice, and data. Following the characterization used by Ravi Kalakota and Marcia Robinson in their book M-Business: The Race to Mobility, we use the term mobile to mean fully portable, real-time access to the same information, resources, and tools that, until recently, were available only from the desktop.

All new technologies go through a hype cycle, and m-business is no different. Estimates of the growth of m-business have swung wildly during the past several years, with growth projections in a sample of 10 studies published from 1999 through 2002 having a variance as high as 100 percent. This hype was driven largely by three factors: excitement about the technology and its capability; the continuing growth of wireline e-business; and the rapid adoption of wireless devices around the world.

The combination of these three factors could have yielded a legitimate “white space” opportunity — an unmet consumer need that previously could not have been filled. M-business’s white space was assumed to be consumers’ need to access information, connect with others, and complete transactions anywhere, anytime while on the move.

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  1. Caroline Junqueira, Sajai Krishnan, and Gregor Harter, “Capturing Value in the Wireless Enterprise Market,” s+b enews, 12/19/01; Click here.
  2. Raul L. Katz, Maximilian E. Weise, and Daniel H. Yang, “Consolidation: The Wireless Way,” s+b, Fourth Quarter 2002; Click here.
  3. Venkatesh Shankar and Tony O’Driscoll, “How Wireless Networks are Reshaping the Supply Chain,” Supply Chain Management Review, July/August 2002; Click here.
  4. Venkatesh Shankar, “Wireless Internet: Growing Pains vs. Gains,” working paper, University of Maryland, 2001; Click here.
  5. Pooneh Fooladi, Ned May, and Euan Davis, Understanding Client Needs: Succeeding at Wireless Professional Services, IDC (2001); Click here.
  6. Ravi Kalakota and Marcia Robinson, M-Business: The Race to Mobility (McGraw-Hill, 2001)
  7. Falk Müller-Veerse, Mobile Commerce Report, Durlacher (November 1999); Click here.
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