21/11/2006
Speakers: Peter Erskine
REAPING THE REWARDS OF A DIGITAL AGE
Good morning ladies and gentlemen.
I plan this morning to focus on the digital age not so much from a business point of view – but from the point of view of our customers. What further rewards can they expect to see from this new digital age – and how precisely will they be able to reap them?
What I hope to show is that as we move forward in this exciting new world, it’s not so much a question of what the digital world can do for them – the real question now is what can’t it do?
If we get the customer experience right, we in turn will reap our own rewards.
I want to start though by taking you back in time – exactly ten years ago to the autumn of 1996 when BT Cellnet – which later of course became O2 – produced a futuristic video. It was our vision – 10 years ago – of what today’s mobile world would be like.
But before I show you some clips from it, let me quickly remind you what it was like back then.
Only one in five adults in the UK had a mobile phone so in those days you were the odd one out if you did have one. And if you did have a mobile phone you probably looked something like this
– Nokia Man. Do you remember him?
Mobile phone owners tended to be men – rather than women or children– and big pockets certainly were an advantage because the hand sets were bulky and weighed a tonne.
It also helped if you had good eye sight and a lot of patience. The displays were difficult to read, conversations were often cut short and phones had to be recharged every three hours.
And there wasn’t even a choice when it came to colour. It was black or black. Certainly not Orange!
As for the internet and email – well, hard as it is to imagine nowadays, these were the exclusive domain of serious geeks!
So, that’s how it was – let’s now look at our vision back then for the future.
The good news is that our forecasting was pretty accurate. The future has more than lived up to our expectations and this slide shows the explosive growth in the UK since that time – customers and voice minutes up ten-fold and text messaging increasing even faster.
Most of what you saw in the video has happened – GPS location-based services and even video calling are now possible on the newer 3G phones, with video streaming and mobile TV now arriving, although we’re still waiting for phones to work on the underground! And, thankfully, we’ve managed to get phone sizes down to something that is actually mobile, as opposed to portable!
The only aspect we misjudged was the whole area of customer relationship management. We’re certainly not as far advanced – or as proactive and automated - as we thought we would be by now.
The upside of this is that there is still plenty of room for improvement. Indeed, I believe that customer relationship management will provides us with some of our biggest growth opportunities in the future.
So, what has happened in the last decade since the video was taken?
In a relatively short period of time, mobile has come a long way. It has become the ultimate mass consumer product outstripping all others. There are now over 2.5 billion mobile phone customers and new customers are signing up at a rate of 1,000 per minute boosted by the take up of mobile in emerging markets such as China, India, Africa and Latin America.
The speed with which the mobile market has grown is unprecedented for any technology and there are now more mobile phones in the world than there are TVs and computers combined.
But it’s not just a numbers game. The last decade has seen huge cultural change from a business to a consumer-driven market.
In the UK, a recent YouGov survey showed how mobiles have become essential to people’s lives. 92% of mobile phone owners can’t get through a typical day without using it; 90% take it everywhere and 5% would rather lose their job than give up their mobile phone.
There is a danger, however, that as adults we’re somewhat detached from the real impetus behind mobile communications.
Our experience is alien to today’s youth but anyone who is 30 or under has grown up with mobile phones – it’s a far cry from the days of Nokia Man.
Customers are changing their behaviours and consumption patterns. Mobiles are no longer just cool – they’re the norm. If you want a social life, feel secure, enjoy access to great entertainment and have a sense of belonging – you get a mobile.
As part of this cultural change, there’s also been a shift in trust from the likes of Government and businesses to the virtual world of the internet.
People are more likely to believe what they see on a blog or a community site than what they read in a newspaper. They’re more likely to listen to holiday advice from Trip Advisers, than from their local travel agent.
This shift in trust has had a major impact on traditional businesses and led to a decline in media sales such as TV, radio and newspapers. People are consuming news and looking for information in different ways and expect it all to be free.
This is a critical point. Customer expectations. We’re no longer a technology led market. The customer is now firmly in the driving seat and the market is being led by their demands and expectations.
To reap the rewards of the digital age, therefore, we need to understand what our customers are consuming today – as well as what they’ll want to consume tomorrow.
So, let’s look more closely at what’s happening today.
Well, for a start, convergence – which we’ve all been talking about for some time – has finally become a reality. This time it’s for real because customers can see for themselves the added value convergence offers.
Industry barriers are blurring – with fixed operators trying to win back minutes from mobile and major internet players expanding their portfolios.
And we know from our experience in Germany that customers want interchangeable fixed and mobile – we pioneered the concept of one phone which seamlessly switches from a fixed environment to mobile. The advantage for the customer is that they benefit from cheaper fixed rates, but have mobility when they need it.
And in data services, what we are seeing is the coming together of the worlds of telecommunications – mobile and fixed – with the worlds of PCs, internet and entertainment.
The exciting thing from our point of view is that they’re coming together – or converging – into one space - our space – mobile space.
And it’s not surprising. It’s a great space to be in because increasingly people expect to be able do what they do in a fixed environment on the move. They want to be able to do anything, anywhere. They want to be mobile.
Thanks to digital technology they can be. Mobile has evolved from being verbal to visual, and with this change has come an explosion in the number of different ways people are using their phones.
Ten years ago you used your mobile to talk. That was it. Today kids often prefer to text rather than speak on the phone.
Cameras used to be something you got out of the cupboard just for special occasions. There’s now one in almost every pocket.
And how often have you sat next to someone on the bus, in their own little world, listening to their favourite pop group or CD? Music downloads are growing fast – there have been more than 1 billion music tracks downloaded on iTunes.
The popularity of the internet at home - Google alone has over 40 million users - means that there is now a growing demand for ‘proper internet’ on the move.
Access to the internet on mobile opens up a whole new world. O2 customers, for instance, can now shop on Ebay as they wait for the bus home from work, or look up whatever they want on the web.
Another big area of growth for mobile has been user generated content.
If you want proof of just how much customers are driving the market, here you have it. Customers are not only generating their own content – taking on the role of broadcasters and video makers – they are increasingly getting paid for it too.
YouTube – the video sharing site - has an audience of 72 million. That’s 10 million more than the population of the UK.
The number of blogs is more than doubling every six months. And social network sites are growing by the day – MySpace now has some 126 million customers, with mobile deals about to launch in the USA and Japan.
Again, if our customers are doing it at home they want to be able to do it on the move.
But it’s not just online virtual communities that customers want, they also want the benefits of physical communities.
The O2 – formerly the Millennium Dome - and the O2 Wireless Festival are the physical manifestations of the O2 community. The O2 Wireless Festival – with five nights in Hyde Park and two in Leeds – was a great success this summer.
The O2 in London opens next summer, with O2 World in Berlin following in 2008. These will provide mobile ticketing, a great customer experience and exclusive content on a massive scale.
Physical events are important because they help build customer relationships and encourage customer loyalty.
As we move forward the relationship we have with our customers will become more and more important. There are now more mobile phones in the UK than people. Future growth will depend not so much on selling new phones, but on providing customers with new and exciting ways of using their phone.
The battleground is around the customer. If businesses want to succeed in a digital world they need to understand what customers want and provide the services and applications which match those demands.
And there is nobody in a better position to do this than mobile operators. We have the advantage of having a huge number of customers and having a personal billing relationship with each and every one of them. And not only do we know who they are, but we also have location based information which tells us where they are. This gives us a practically unmatched level of customer intimacy that, of course, we absolutely must not abuse.
The future will bring new and exciting opportunities of applications anywhere, any time.
The 3G roll-out will be completed by 2010 making mobile email and access to the internet accessible to all. Mobile TV should also become the norm.
The big question is what will our customers be looking for from all this new technology?
Customers will increasingly want to be able to talk, text, email, surf, play and listen whether at home or mobile in a seamless integrated way.
They will expect to have one email account seamlessly working between their pc and mobile; music and games downloads seamlessly integrated on their mobile and pc and access to photos seamlessly on different devices. They will want their calendar, diary and contacts in one place and not to pay twice or have to set them up more than once.
My vision is a connected home offering customers a ‘joined up’ lifestyle, with the same customer experience whatever they’re doing and wherever they are.
Once customers realise the full potential of the digital world, they will find their own creative applications for the use of mobile.
This shouldn’t surprise us. Remember who really discovered the power of SMS? It wasn’t us, it was our customers.
You only have to listen to the news to realise that new applications for mobile are being discovered on a daily basis.
Let me give you some random examples.
I recently read about an advertising manager in New York who is leaving for work 10 mins later every day – thanks to her mobile. The reason? She is pre-ordering her coffee at Dunkin’ Donuts by text to save her having to queue. Her fast food has become even faster.
In Japan, mobiles have effectively become mobile wallets, and in Korea the screen quality on mobile TVs is so awesome that watching your favourite soap on the bus is as good as watching it at home.
In Russia, Turkey and some other countries credit card customers receive a SMS message as soon as there has been a big debit from their account. The service gives customers valuable piece of mind.
As we get to know our customers better and have more precise location based information, the opportunities for location based customer relationship management will grow.
Here in the UK, customers can now take out insurance with Norwich Union which allows them to pay as they go – thanks to an agreement with O2 to fit location-based equipment into cars.
We also already provides traffic alerts for drivers. Taxi companies can save you waiting time by locating the nearest taxi to you.
When you start thinking mobile, the world’s your oyster.
What about intelligent parking so you know where the free spaces are? Or video calling your plumber to see whether a visit from him is necessary, or if the problem is something you can fix yourself?
Individuals and businesses have embraced the digital age, but there is one sector which still seems to be in the dark age when it comes to mobile communications. I’m talking about national and local government.
Let me stress – before it becomes a headline – this is not a criticism of government. It is a challenge to all of us in the industry to take the initiative and show what mobile can do.
Mobile communications could transform the public sector from transport to taxation, from education to health, from security to democracy.
At O2 we’re already showing what can be done. The Hereford and Worcester Health Trust estimate that 150 lives have been saved thanks to our Airwave service that enables paramedics to send vital patients’ details from the roadside to the awaiting hospital. This allows drugs to be administered at the scene of the accident under the hospital doctor’s supervision. Valuable minutes are saved which in turn saves lives.
In a similar way, the police are using mobile to save precious minutes. If a child goes missing they can instantly circulate photographs digitally so people are alerted; while in West Yorkshire, policemen can now spend an extra 145 hours a year on the beat by using BlackBerrys to access key data on the move.
So, of course, things are happening in the public sector – but just think what other added benefits we could all be enjoying.
Texting - for example. It’s cheap, personal and available to all. Why isn’t it used more in the Health Service to confirm or make appointments?
Intelligent transport – for connected highways and connected cars – could make life easier for transport managers and travellers.
We need to work with government at every level to make changes happen.
So, from an operator’s point of view it’s not just about offering more and more for less and less, it’s about innovation and adding value to our customers’ experience and combining applications that they want.
In a converging world business partnerships are the way forward and with different business partnerships will come different business models.
We’re moving into new territory and so inevitably there will be changes in the way we operate. Up until now we’ve all done our own thing. We’ve been business rather than customer focussed. We need to become less proprietorial – less egocentric. And that means working together.
The way we raise revenue will also change. It has to.
Just look at Google, for instance. 99% of Google’s revenue comes from advertising. They don’t get a penny from their users – in fact their users aren’t their customers. Their real customers are their advertisers.
YouTube, which was started in February last year, was sold last month to Google for £900 million. Again nobody pays to visit YouTube. Its value was solely based on its advertising and sponsorship pull.
Undoubtedly advertising and sponsorship will play an important role in the future of mobile. Advertising on mobile, for instance, will enable us to offer cheaper subscriptions. Customers will have the choice of opting in to receive advertising and in return their phone subscription will be lower – or scrapped altogether.
But we need to be careful. As we all know advertising can be a big turn off for customers. We need to give customers a better experience by making the advertising relevant and of use to them.
Once again our location based information gives us a great advantage. If you’re walking down the street here in Piccadilly and fancy a pizza, wouldn’t it be useful to know where the nearest pizza is or, indeed, other special offers of interest in the neighbourhood? Personalised advertising which actually helps you, the customer, can add value to the whole customer experience.
No single event will provide more partnership opportunities in the UK than the London Olympics.
My dream is that the London Olympics is the first large scale international event which is 100% digital – from TV to Mobile, from ticketing to transport, from information to interactivity.
A digital Olympics would make it accessible to all – whether you’re in London or across the world in Sydney – before, during and after each competitive event.
It would be more entertaining than anything we’ve ever seen before – there would be cameras everywhere tracking parallel events and endless opportunities for interactive participation.
It would also leave us all with an important legacy. By investing in a digital world – whether its transport, ticketing or entertainment – we will provide a digital showcase for the world which we can all be proud of.
So, let me conclude.
The only real certainty about the future is that it will be complex. There will be more players, more competition and greater challenges.
But, despite all this, mobile will remain the place to be. The future is about applications anywhere, any time - it’s about what mobile can deliver.
Don’t take my word for it. Gartner forecasts that nearly there will be more than 3.5 billion mobile users worldwide by 2010, generating revenues of approaching
one trillion US dollars.
So as more and more people come into our space, applications will multiply and grow. My bet is that mobile will lead the way.
We have the advantages – a large customer base, a personal relationship with those customers; a good understanding of who they are and what they want; a trusted brand and permission-based location information.
We need to turn those advantages to our customers’ advantage. If we do that and they reap the rewards of the digital age, we in turn will grow from strength to strength.
I started by showing you our 10-year old vision of today’s mobile world. I want to leave you with some thoughts about what a digital future might look like 10 years from now. But, this time, rather than give you our opinion, we decided we’d ask our customers for their views. As you’ll see there is plenty of scope for growth because they’re certainly not short of ideas. For them, it’s not a question of what mobile can do, but more a question of what can’t it do?
