mobilized: An Insider's Guide to the Business and Future of Connected Technology - S.C. Moatti (2016)

Chapter 1. The New Gold Rush

TL;DR Too Long; Didn’t Read

image People spend more time on their mobile products than on their computers, so businesses are adjusting their strategy to focus more on mobile.

image In addition, entrepreneurs are creating new types of businesses: the sharing economy.

image This shift is much bigger than technology or marketing; it’s about company culture.

image What guides the success of all mobile products—past, present, and future—is the Mobile Formula. It has three rules: the Body Rule, the Spirit Rule, and the Mind Rule.

Imagine for a moment that your phone bill is as high as your rent or mortgage. Would you be able to afford it? Would you cancel your smartphone plan? Would you move to a smaller and cheaper home so you could continue to pay for your phone?

In 2015, the Boston Consulting Group (BCG) published the results of a global survey showing that an average person puts an implied value of up to $6,000 on their smartphone, or more accurately on the apps that run on smartphones.8 In developing countries like China and India, this represents 40 percent of average income.

That’s the price some people are willing to pay for mobile apps. People care as much about their mobile products as they do where they live. It’s that significant.

Today, mobile contributes about 5 percent of gross domestic product (GDP) in the countries surveyed by BCG (and as high as 11 percent in one country: South Korea) and represents almost 8 percent of all venture capital investment. Cumulatively, it’s more than the GDP of every country in the world except for the United States and China.

Yet unlike other infrastructure investments of similar magnitude, such as energy and transportation networks, most of this investment is privately funded.

Mobile is about private wealth, not government programs.

So the mobile revolution has created a new gold rush, a Wild West environment where people are ambitious and opportunities are everywhere. I’m surprised every day to discover the extent to which it is creating unprecedented prosperity. Every business wants to and should get a meaningful piece of it.

Given this potential for profit, almost every company I speak with wants to become mobile-first. But what does that mean?

Where People Go, Business Follows

Since 2014, there have been more mobile devices in the world than desktop computers, and people spend more time browsing the Internet on their smartphones than on their desktops. So companies simply cannot ignore mobile as a channel to reach their consumers. But to be effective, mobile marketing requires dedicated mobile products such as smartphone apps. Let me explain.

Marketers who work at companies that do not have a mobile product have limited options to reach consumers on mobile. They can advertise on mobile, of course. In 2015, every other dollar spent on digital advertising was spent on mobile. They can also reach their consumers through mobile social networks like Facebook, Instagram, and Twitter, and mobile messengers like WhatsApp, Line, and WeChat. But without a mobile product, that’s about all a mobile marketer can do. Their options are limited.

On the other hand, marketers who work at companies that have a mobile product such as a mobile-friendly website (also called a responsive website) have many more ways to reach their consumers. They can improve their ranking in search results on Google, which recently started to favor mobile-friendly websites in its search algorithm. They can create contextual offers, which are personalized to a user’s time and place.

But that’s still very limited, because when 9 out of 10 people spend their time in smartphone apps instead of in a mobile browser, a mobile website has significantly less reach than a smartphone app. On top of that, people who use a company’s mobile app are generally better, more loyal customers than people who use its website.

Having a smartphone app allows marketers to take full advantage of what makes mobile unique and powerful as a way to reach people. They can, for instance, use free mobile distribution and promotion channels like app stores. They can send push notifications—messages sent (“pushed”) to users without being specifically requested by users. They can negotiate with carriers to have their smartphone app preloaded so it will be widely distributed and promoted. They can use so-called multi-touch attribution tools that precisely measure the effectiveness of their campaigns across multiple channels.

“With mobile, we’re moving from Mad Men to Math Men,” says Sigal Bareket, founder and CEO of mobile performance advertising leader Taptica. “Everything is measurable and as a result, almost everything is predictable.”

In the Mad Men era, it was almost impossible to track the effectiveness of advertising campaigns. Marketers were deemed “creative,” which was a way to say that campaigns were sometimes successful, sometimes not, and that nobody really understood why.

Mobile marketers no longer rely on the hope that creative geniuses will whisper the right thing in the ears of people who look like they could become customers. Instead, they buy ROI (return on investment). They spend marketing dollars only if and when they get customers.

This emerging mobile performance advertising industry is helping mobile companies reach consumers in unprecedented ways. And because mobile products know a lot about their users, marketers are able to learn a lot about their customers and how to reach them. For instance, they can find out which ad in which app was the most popular among men aged 35–44 in New York City. That’s a pretty valuable piece of information if this group represents your target customers, don’t you think?

To illustrate what I’m saying, let’s look at a hypothetical T-shirt company called TC. We’ll see that while TC has limited options to reach its customers on mobile without a mobile product, having a mobile product gives TC a competitive advantage.

If TC doesn’t have a mobile product, its alternatives on mobile are few: it can advertise, or get its customers to, say, share selfies on Instagram when they’re wearing their T-shirts. But that’s about it.

If it has a mobile website, TC no longer misses a sale because a shopper wanted to compare prices back home on the computer before buying. It also ranks higher on search results of people who look for T-shirts. It can show special offers to people who are in or near a mall where their T-shirts are sold. That’s better, but still limited.

If it has a smartphone app, TC can get visibility for its brand and promotions through mobile app stores. It can send its customers push notifications to let them know about new arrivals or special offers. It can track all the steps a shopper goes through when buying: Did they look up a retail store once they knew which T-shirt they liked, or did they come to the store first? Did they compare prices? All of that, TC couldn’t do before. But it gets even better: all of that, TC can do for free. It doesn’t cost the company any advertising dollars.

As we see, having a mobile product provides lots of benefits for TC, including better targeting, more personalized promotions, stronger loyalty, and increased sales. It’s a marketer’s dream come true.

But having a smartphone app means that mobile is no longer only a marketing channel—it’s also a product. That comes with sizeable cost implications. Let’s examine this.

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Launching a product on mobile isn’t launching just one mobile product: it’s launching an app for iPhone, an app for Android, and often a responsive website, an app for tablets, and an app for other mobile products like a smart-watch. According to mobile analytics firm Flurry, smartphone apps represent a $100 billion industry that’s supported by $2 trillion in infrastructure investment.9

Because of that, many companies feel that mobile is a burden. A big cost with no return. Another one of those expensive IT projects. They hate the idea that they might need to hire mobile engineers. Mobile engineers are highly skilled and very rare, so they demand high salaries. These businesses don’t think building a smartphone app is cool, let alone valuable. They know they must build one; they’re just not sure why. On their profit and loss statements, they put smartphone apps in the loss section.

Meanwhile, they set out to cram their complex website to fit a small screen. Often, it’s a painful exercise and the results aren’t effective: poor user experience, crowded app stores, limited customer or business value.

During the dot-com era, many companies felt just the same about the Internet: it was a burden. Back then, many of them hurried to build websites that mirrored their paper catalogs.

If you’re old enough, you probably remember some of these rigid websites. They had bare-bones site maps that looked like a table of contents. Clicking on a link would open a static web page with a lengthy product description, and sometimes a couple of pictures. And that was it. Visitors to the website couldn’t read reviews, or go from one product to another to see what others had purchased, or compare prices, let alone buy online. So few of them came back to the site. It became a self-fulfilling prophecy that websites cost more than they yielded and that all they did was add new line items to already too fat IT budgets.

I’ll let you in on a secret: if you use the same approach, you’ll get the same results. It took over a decade for businesses to figure out the value of the Internet, from e-commerce services to search directories. If companies tackle mobile the same way they tackled the Internet, by building apps that look like websites, it’s also going to take them years to find value in mobile. And they’ll be left wondering: Do the benefits really outweigh the cost?

Let’s go back to our earlier example, the T-shirt company TC. What would happen if it refused to build a mobile product and decided to ignore the mobile revolution? People obviously wouldn’t stop buying clothes the way they stopped buying print photos or VCRs. So for a while, things would continue as they were.

Meanwhile, a lot of small companies would use mobile to try and meet the needs of consumers in ways TC wasn’t. They might innovate in interesting ways. For instance, many smartphone apps today let people overlay T-shirts on a picture of themselves rather than having to try them on physically at a store. These apps made headlines recently because it’s so much more efficient to shop for clothes this way. Other apps let people design their own T-shirt by drawing on the touch screen, using a variety of templates. People love to personalize clothes because they find it fun and unique. Soon enough, these custom T-shirts could be produced at people’s home, using a 3-D printer.

This trend is known as smart apparel, and as these companies grow, they will find more and more ways for people to try on, design, and make their own T-shirts on the go. And it’s all because they are utilizing mobile products that improve constantly and quickly to meet these new consumer expectations. If TC still ignores the mobile revolution by then, its business could be in jeopardy.

When we refuse to adapt, we become isolated, strategic thinking stagnates, and businesses go bankrupt.

Take Yahoo, the former search giant. The company was born in the early days of the Internet and quickly established itself as a leader in the emerging online advertising industry. Its search technology was a game changer. Its portals were extremely popular destinations. Its mobile offering, Yahoo Go, was by far the best one out there.

At the time, advertising was still in the Mad Men era. Advertisers paid ad agencies extraordinary amounts of money to come up with cool banners.

“We make our money from people being shown ads,” said Yahoo founder Jerry Yang.10

Instead of disrupting that ecosystem with its search technology, something Google would do soon after, Yahoo embraced it and set out to become one of these old-school media companies. Inexplicably, the board was convinced that people would never get tired of ad banners. They thought search was a fad that would go away by itself and as a result, the company turned its back on the very thing that had made it successful in the first place.

As early as the 2007, people already felt that Yahoo wasn’t keeping up. The company had four CEOs in one year. It reacted years later, by partnering with Internet giants like Google and Alibaba and by bringing on Google’s heralded executive, Marissa Mayer, as CEO.

By then, the battle for search had been long lost to Google. The new battle was mobile. Mayer acted quickly, aggressively bringing in mobile talent through over 30 acquisitions. Unfortunately, it was also too late. Yahoo had lost its edge.

As I’m writing this in late 2015, Yahoo has put itself up for sale. The company refused to adapt. It wasn’t able to recognize that behaviors had changed.

Denial is someone else’s opportunity. In fact, the mobile revolution has created completely new types of businesses—darlings like ridesharing service Uber and local delivery service Postmates, which are part of the dynamic new sharing economy. These businesses could not exist without mobile, and they are worth exploring in some depth.

The New Entrepreneurs of the Sharing Economy

“The sharing economy is a peer-based movement that empowers individuals to get what they need from each other,” says sharing economy expert Jeremiah Owyang.11 “[It] stretches across many aspects of our lives and businesses.” It’s usually thought of as a way for some people to make extra cash by renting out an asset they already own, such as their home or car.

Sharing companies have exploded with the mobile revolution. Today, two out of three people participate in the sharing economy, either by sharing/renting out their own assets, or by renting the assets of others.12

Consider Postmates. It connects people with local couriers who purchase and deliver goods from any restaurant or store in a city. Postmates could not exist without mobile. Its couriers are constantly on the go and their itinerary is calculated, optimized, and delivered in real time. For instance, its system can predict how long it takes a restaurant to get a to-go meal ready. It takes this information into account when sending a courier so that they don’t need to wait around to pick it up.

After a few trials in San Francisco and other cities, Postmates is expanding to 30+ metros in the US. It has done millions of deliveries. Its founder and CEO, Bastian Lehmann, calls the company the anti-Amazon.13

“Amazon comes along and builds a warehouse outside a city,” he says. “We like to say the city’s our warehouse. We try to understand the inventory available [and build] a fleet of delivery people that distribute this inventory.”

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As the sharing economy matures, it has become more professionalized.14 Several entrepreneurs are setting themselves up as middlemen—what I call the power sharer, the power operator, and the power organizer—and they are creating social mobility and financial wealth.

The power sharer optimizes asset selection and utilization. In large cities, where there is lots of demand for services, they buy assets in order to rent them to participants in the sharing economy. Consider Breeze, a car-leasing service. For a membership fee and a weekly fee, they’ll lease you a car you can use to fuel your own sharing economy employment, whether it’s as a courier for Postmates, a driver for Lyft, or a shopper for Instacart (or all three). And unlike a traditional lease, you can cancel your car with just two weeks’ notice.

The power operator empowers freelancers of the sharing economy with crucial tools. Many sharing economy services cater to a very large pool of people. Often, they have no idea how to run a business, nor the time or desire to learn. For instance, say you move for a job and decide that rather than selling your apartment, you’ll rent it on Airbnb or HomeAway, the vacation rental marketplaces. If you really wanted to ramp up, you’d need tools to run your operation efficiently: the ability to screen all the applicants, make sure the apartment is cleaned between each guest, and so on. A company like Pillow will do that in exchange for a commission on rent generated via Airbnb.

The power organizer organizes community and builds trust. One current downside of the sharing economy is that each participant has to learn on their own what works and what doesn’t. There’s no manager talking about identifying the most profitable opportunities, no union talking about safety. There’s a need for communities in which sharers exchange knowledge. Power organizer Peers.org provides a platform to organize, curate, educate, and moderate participants in the sharing economy.

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Power sharers, operators, and organizers plug into a key component of the sharing economy: its flexibility.

The jobs of the sharing economy are very flexible. Postmates couriers and Uber drivers can pretty much work whenever they want and wherever current regulations allow. By making their services available whenever and wherever they’re needed, the three power optimizers have become a “force multiplier” of the sharing economy, allowing the ground troops of the movement to better achieve their lifestyle and financial goals.

But here’s the catch: today, most sharing economy gigs are about earning a supplemental income rather than a living wage. Ride-sharers for instance, don’t think of themselves as drivers, but rather as musicians, artists, or stay-at-home moms who seek additional income to support their passions. And that needs to change if the sharing phenomenon is ever going to live up to its promise as a game-changing employment model.

I believe the jobs created by the entrepreneurs of the sharing economy will ultimately pay well. In fact, I see sharing as the new Fordism,15 the term used to describe the economic engine of mass production and mass consumption that dominated the twentieth century. The sharing economy is to the services industry what Fordism is to manufacturing. Let me explain. In Fordism, products are ordinary, everyday items (cars, refrigerators); similarly in the sharing economy, services are ordinary (taxi rides, grocery delivery). In Fordism, products are assembled mostly by low-skilled workers in a standard, replicable manner; similarly in the sharing economy, services are performed mostly by low-skilled workers in a replicable manner.

Unlike Fordism, where workers were paid higher wages so they could afford to purchase the products they made, the sharing economy today underpays its workers. For instance, nearly three out of five ridesharing drivers earn less than $10,000 annually in driving income, so most are using it as a second or third job.16

Because their wages are too low, sharing workers generally can’t afford the services they perform. As it is, it’s hard to see how the sharing economy can sustain itself over the long term. But I believe this will soon change: sharing companies will need to raise their wages not only to attract the best workers in an increasingly competitive environment but to allow those workers to be their own customers. This is what will give birth to a new middle class.

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So we’ve looked at the benefits of the mobile revolution, and how mobile products can transform the art and science of marketing to today’s consumers. And we’ve seen how mobile has given birth to a dynamic new phenomenon: the sharing economy.

We’ve established that mobile is not just a new marketing channel, or a cool app, or an appendix. It’s not a side dish; it’s the main dish. It’s the entrée. It’s much more than simply hiring the right people to develop mobile products tailored toward an established product or service.

But if a company is new to this game (as many still are), how should it tackle mobile?

This is where culture comes in.

Becoming Mobile-First Is a Cultural Transformation

You may remember articles from a few years ago with headlines such as “Facebook Doesn’t [Get] Mobile and That Spells Disaster.”17 At the time, the company thought that mobile was about technology, so it trained all its engineers in the new programming languages required to build smartphone apps.

“Technically, it was easy,” says engineering executive and Silicon Valley veteran Jocelyn Goldfein, who led Facebook’s mobile-first transition.18

The company set up a weeklong boot camp for all its engineers to help them learn mobile programming languages. But this approach didn’t work. In fact, the stock went from $40 to $20 per share.

“The hard part was the change in culture,” Goldfein admitted. “The only value we could all get behind is the experience of the user.”

Before the mobile-first transition, one of Facebook’s core values was “move fast and break things.” Well, breaking a website can usually be fixed within a few hours, but breaking a smartphone app takes weeks to repair. Why? Because unlike websites, smartphone apps go through thorough quality controls before Apple or Google will release them. This can take weeks and once they’re out, they go through another vetting process when they are reviewed and ranked by users.

Imagine the impact, on both users and the parent company, of an app that could be broken quickly and remain broken for weeks. There would be negative reviews, disengagement, lost sales, and more. When people discover they’ve invested time in a mobile product that doesn’t work, they feel that their time is not being valued and they vent their frustration by no longer using the product.

It wasn’t until it realized that transitioning to mobile is about culture more so than technology that Facebook truly became mobile-first. Only then did its stock go from $20 all the way to $80 per share.

To adapt to mobile, Facebook had to change its core value to “move fast” . . . but no more breaking things.

The company accelerated the culture change by making a number of talent acquisitions (including me) in order to bring in people with experience launching mobile products. And it made some major strategic acquisitions, including Instagram and WhatsApp. Now, Facebook has a portfolio of mobile products: Facebook, Instagram, WhatsApp, Oculus Rift, and more on the way.

This doesn’t just apply to Facebook or Silicon Valley. It applies across the board. Whether businesses already have a mobile presence today or are just starting with mobile, whether they are part of the sharing economy or not, the single best way for them to succeed in mobile is to adapt their entire culture to become mobile.

This transformation is an opportunity for a business to rethink the way it serves its customers, to reinvent itself.19 It means thinking about their company as a mobile service with a giant back office that does all the other things they do now. This isn’t saying that they should get rid of their manufacturing plant or stores. This is saying that today’s customers associate their company with their mobile service, not their plant or stores. It doesn’t matter if they’re a T-shirt company, car manufacturer, insurance provider, or department store. By becoming mobile-first, their former core focus will follow. And profitably.

Becoming mobile-first isn’t just about technology. Harnessing the technology is important, of course, but it can be incredibly dense, technical, and hard to grasp for anyone but the most dedicated of technologists.

The truth is much simpler. It’s about knowing what makes us human. That’s what defines a culture, right?

Becoming mobile-first is about letting people be people both inside and outside organizations. It’s about us as individuals. It’s unlearning everything we learned from the industrial revolution about mass production and scale.

If you can understand this, you can understand the key to effective mobile products.

The Mobile Formula Follows Human-First Principles

Let’s not think about mobile for a moment. Let’s think about our lives. What do we love? What do we hate? What do we need help with?

Mind, body, spirit is a universal trilogy to help us consider these questions. Together, they encapsulate what it means to be human.

How does this relate to mobile? Let’s consider each component of the trilogy, in a slightly different order.

image Body: We are guided and motivated by beauty in all pursuits—whether in a mate, in our dwellings or environments, in esthetics, and in the arts. Great mobile products replicate this beauty and use it to attract us. We appreciate beauty in two ways: aesthetically and by utility. An athlete’s body is physically attractive, but the muscles, structure, and build all contribute to purpose and utility. It’s the same with mobile. There were lots of music programs and software before iTunes, but none of them were as attractive and none were so simple and easy to use.

image Spirit: We all seek meaning for ourselves and our communities. Our spirit defines us and marks us as individuals. At the same time, we are each not just individuals; we are a part of larger groups. The best mobile products recognize this duality. They give us meaning as individuals by adapting to our wants, needs, and preferences in such a way that they become extensions of our spirit. Conversely, they recognize that our spirits work in the same space as other spirits, and with that there needs to be adequate accounting for manners, privacy, and other social norms.

image Mind: Key to our development as humans and our ongoing survival, both individually and collectively, is our ability to learn and adapt. Adaptability, said Darwin himself, is a matter of survival. The best mobile products not only help us learn but also learn with us. We learn over the course of our life through trial and error, through experience, through modifications and growth. Similarly, mobile products learn and adapt over time by reacting to and for their users.

These three human-first principles are at the core of great mobile products. Because they are extensions of ourselves, we expect from them what we wish for ourselves. We want them to look beautiful, to focus on the things that matter, and to constantly adapt to our environment. An attractive body, spiritual maturity, and a masterful mind.

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The mind-body-spirit trilogy is the basis for the Mobile Formula, the three rules that guide all mobile products—past, present, and future:

image The Body Rule tells us how to create beautiful mobile products.

image The Spirit Rule explains how to make sure mobile products focus on the things that matter to us.

image The Mind Rule describes how mobile products effectively adapt to and survive in the constantly evolving mobile landscape.

These rules apply whether companies have already transitioned to mobile and seek to grow usage and revenue, or whether they are just getting started and looking for a blueprint to launch and create a positive user experience.

The Mobile Formula at a Glance

The rules of the Mobile Formula are grounded in the three essential elements within us: body, spirit, and mind.

The Body Rule

All successful mobile products are beautiful, but how to define their beauty? In mobile, beauty comes from two things: efficiency and what I call “wow.”

Because of the small size of mobile products, nothing can be wasted. Mobile designers need to be efficient. They distill tasks and flows to their essence.

The visceral feeling we get when we see a beautiful mobile product skips our consciousness. Their beauty confounds us. Mobile designers need to build products that wow us in this way.

The Spirit Rule

One of the most disruptive aspects of mobile products is that they are with us always. To be successful, they need to understand what matters to us and help us get it. This comes through personalization and community.

The more mobile products know about us, the more personalized they become. They understand what matters to us as individuals with unique feelings and emotions. So people come to rely on them extensively and often become emotionally attached to them.

Mobile also helps us focus on what matters in our communities, where social rules and rituals are needed.

The Mind Rule

Mobile products must also constantly adapt. They become successful by learning both fast and slow.

On mobile, user behaviors and technology change at an incredibly rapid pace. Mobile companies understand that the more people use their product, the better it gets. They need to learn fast to adapt to changing expectations and conditions.

On the other hand, they also need to learn slow. They have no choice but to reinvent themselves over the long haul by reaching new users, launching new products, or inventing new business models.

We’ll spend the next few chapters examining the rules of the Mobile Formula and how mobile-first pioneers apply them today. Then, we’ll take a look at the Mobile Formula in the context of past, present, and future mobile products.

Remember and Share

image Today, every company knows that it needs to become mobile-first. The mobile revolution has created a new gold rush. It’s fueled by the fact that people spend more time on their mobile products than on their computers.

image Increasingly, marketing departments are focusing their time and budget on mobile. But without a mobile product, their options are limited. Technology needs to be involved and as a result, many companies see mobile as a burden—yet another dreary IT project.

image For existing businesses, becoming mobile-first is really about changing company culture. Businesses that can’t adapt will not survive. Their failure will be someone else’s opportunity.

image The mobile revolution is giving birth to an entirely new economy, called the sharing economy.

image What guides the success of all mobile products—past, present, and future—is the Mobile Formula. It is based on human-first principles because mobile products are new extensions of ourselves. What we expect from them is what we wish for ourselves: an attractive body, having it all together emotionally, and getting smarter about the things that count. So, the Mobile Formula has three rules: the Body Rule, the Spirit Rule, and the Mind Rule.

image The Body Rule: the best mobile products are physically and functionally beautiful.

image The Spirit Rule: the best mobile products focus on what matters to us.

image The Mind Rule: the best mobile products learn as we use them.