issue 1 - Roland Berger

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p business culture 10 years after Completely underestimated Short Message Service (SMS) was developed 10 years ago and has become—almost by accident—a multi-billion-dollar business. Even though new SMS services are cropping up weekly for kids and teens, the medium still has unrealized potential. : Think back: Nelson Mandela became the first black president of South Africa; Israel’s Prime Minister Yitzhak Rabin and Palestinian leader Yasser Arafat signed an autonomy agreement in Cairo and received the Nobel Peace Prize for it; between Norway’s North Cape and Sicily, the European Economic Area was created; and in Uruguay agreement was reached on the creation of the World Trade Organization. In 1994 concepts like flexibility and mobility were leaving their mark on an already globalized economy. And it was not just highspeed trains like the British-French Eurostar—traveling through the newly opened Channel Tunnel—that were connecting people more quickly. For digital communications were also gearing up for a giant AT THE 1994 CEBIT, THE REAL SENSATION WAS ALMOST ENTIRELY OVERLOOKED BY EXPERTS AND VISITORS leap forward. In the United States the World Wide Web, with help from the revolutionary Netscape Navigator browser, was starting along its path to success, and in Germany ISDN was beginning to take off. Around the world, the telecommunications and entertainment industries were becoming interlinked. It was no longer a question of whether we wanted an information society, rather of what it should look like. While at Harvard, Cambridge and MIT the traditional field of computer science was starting to get to grips with the new discipline of “mobile communications,” Mannesmann Mobilfunk GmbH of Germany was establishing the world’s first professorship in it at the University of Dresden. And at CeBIT, the world’s largest computer trade fair, a few companies were already speaking of limitless mobility— and much more importantly, of the huge margins that would be available for businesses offering continuous connectivity. The reason for all the optimism was that, in 1994, the cell phone was standing at the threshold of its worldwide breakthrough. Among all the hype, the real sensation of the 1994 CeBIT went almost entirely unnoticed: the D1 Alpha Service by DeTeMobil. With pagers looking like the technology of the future, experts paid little attention to this first commercial precursor of the Short Message Service (SMS) technology of today. Even 56 think: act
a global average of 30 billion sms messages are sent every month business culture f DeTeMobil, which evolved into T-Mobile, failed to take its own development seriously. During the test phase the service was offered free of charge for almost a year. That is hard to believe when one considers that today mobile communications providers make billions from SMS—with the trend rising. In only 10 years, cell phones and SMS have dramatically changed business communications. Among business associates and partners, giving someone your cell phone number is a sign of trust, of “I’ll be there when you need me.” The cell phone—and with it SMS messaging—have become essential management tools. Whether important documents relating to a contract need to be forwarded, a phone conference coordinated or a small gift sent to a customer, today all it takes is a short message and everything is taken care of. Cell phones are also becoming more and more important for intra-company communications. Now service and sales employees are almost exclusively connected to their head office via mobile phones. Teams can be managed via SMS and can be fed all the available information on a client. SMS enables users to solve technical problems, request sales aids or order replacement parts on-site, significantly reducing response times and increasing customer satisfaction. They present potential for optimization that far too few companies are currently taking advantage of. An innovation developed by <strong>Roland</strong> <strong>Berger</strong> Strategy Consultants demonstrates what a modern employee communications tool can look like. The consulting company updates its consultants via a mobile news channel every two weeks on company-related information. Employees get a subject overview via SMS together with a telephone number they can use to retrieve the news. All they have to do is make the call, get authorization and listen to the report. Just as fundamental as the changes in the business world are those taking place in the private sphere. People who cannot be reached or have turned off their cell phone are cut off from their friends and associates. Communication has also changed. Stressful, awkward phone conversations are often bypassed with an SMS, the dialog reduced to brief, telegram-like phrases. BBC Online recently asked whether SMS shorthand has become mightier than the written word. People responded from around the world with literary quotations, such as “w8ing 4 go.” (“Waiting for Godot”) and “2b/-2b” (“to be or not to be”), shortened hymns, such as “Gd $ th Qun” (“God save the Queen”), and lines of prayer, such as “dad@hvn” (“Our Father who art in heaven”). Teenagers have a particular fondness for communicating cryptically via SMS. While philologists have been speculating on the likely consequences of this, the advertising industry has long recognized it as an opportunity. With 14 to 30 year-olds so difficult to reach via traditional print and advertising media, the cell phone has proven a powerful marketing tool and sales channel. SMS—three letters that changed the world. The massive hit with teens is also a valuable business communications tool. Machines, too, are starting to communicate via SMS, a phenomenon heralded by the soda machines at the 2000 Expo, which could send updates on their contents and refill status. Coca-Cola in Belgium, for example, increased sales of its 200 milliliter bottles in cafés by 8 percent during a 2003 SMS campaign. Even Gossard, the women’s underwear manufacturer, received 75,000 euros worth of orders via SMS when it introduced a new range in Great Britain—those interested had merely to send in the code word “G4me.” Thanks to the international acceptance of GSM technology and numerous roaming agreements, users can send SMS messages and make mobile calls in more than 40 countries spread over all continents. Market penetration figures offer confirmation of the huge growth potential still to be tapped. Penetration has visibly increased since 1997, but is still only 24 percent worldwide. Western Europe is at the top, with 83 percent and 400 million registered cell phone numbers, ahead of North America with 60 percent and 200 million connections. In terms of sheer quantity, the Asia-Pacific region has the greatest number of cell phones. Put another way, 500 million customers there represent a market penetration of only 30 percent. Experts estimate that in 2004, 1.4 billion cell phones will send more than 360 billion SMS messages. Interestingly, Sweden already has more cell phones than inhabitants, with 8.8 million people owning 9.1 million phones. With technology having paved the way for even niftier features, no end to the boom is in sight. Users can now send photos between cell phones via the Multimedia Messaging Service (MMS). And the arrival of new messages is increasingly announced with a few seconds of a pop hit or famous piece of classical music, with customers over the past year spending $3.5 billion worldwide on customized ringtones. However, there is one thing that has not changed in mobile communications over the past decade: whether your mobile phone rings with a chirp or the first few bars of Beethoven’s Ninth, there are times when it would be great to be able to just switch the thing off. think: act 57
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