February 27, 2016

5G Is a New Wave of Mobile Technology That Will Bring Drastic Change

Photo: http://ow.ly/YQbWb
On the topic of 5G, The Economist published an article that claims the "new wave of mobile technology is on its way, and will bring drastic change." The article notes that "although the previous batch, collectively called 'fourth generation,' or 4G, is still being rolled out in many countries, the telecoms industry has already started working on the next, 5G."

"The advent of 5G is likely to bring another splurge of investment, just as orders for 4G equipment are peaking," the Feb. 20, 2016 article says. "The goal is to be able to offer users no less than the 'perception of infinite capacity,' says Rahim Tafazolli, director of the 5G Innovation Centre at the University of Surrey. Rare will be the device that is not wirelessly connected, from self-driving cars and drones to the sensors, industrial machines and household appliances that together constitute the 'internet of things' (IoT)."

The article is correct to explain:
The path to a 5G wireless paradise will not be smooth. It is not only the usual telecoms suspects who will want a say in this mother of all networks. Media companies will want priority to be given to generous bandwidth, so they can stream films with ever higher resolution. Most IoT firms will not need much bandwidth, but will want their sensors to run on one set of batteries for years—so they will want the 5G standard to put a premium on low power consumption. Online-gaming firms will worry about latency: players will complain if it is too high.
It is important to point out that a lot of hype exists in this next generation of mobile technology. The article says that "when it comes to 5G, much is still up in the air: not only which band of radio spectrum and which wireless technologies will be used, but what standards makers of network gear and handsets will have to comply with." Furthermore, "Telecoms firms have reached consensus only on a set of rough 'requirements.' The most important are connection speeds of up to 10 gigabits per second and response times ('latency') of below 1 millisecond (see chart)."

Despite the hype corporate executives and political leaders worldwide are making, often prematurely or ignorantly, the article accurately notes "the momentum is real. South Korea and Japan are front-runners in wired broadband, and Olympic games are an opportunity to show the world that they intend also to stay ahead in wireless, even if that may mean having to upgrade their 5G networks to comply with a global standard once it is agreed."

China and India, the world's largest and fastest growing mobile markets, respectively, will provide significant opportunities in the deployment and subsequent commercialization of 5G. With respect to the U.S. market, "AT&T and Verizon both invested early in 4G, and would like to lead again with 5G."

The article concludes with a discussion about the evolution versus revolution development of 5G. While you can read the entire discussion in the article, as a member ITU's focus group to identify the network standardization requirements for the 5G development of International Mobile Telecommunications (IMT) for 2020 and beyond, I have listened to much discussion about the evolution versus revolution development of 5G. Regardless of the rhetoric among the technical engineers devoted to the development of 5G, many sectors will benefit from this new wave of mobile technology including cloud computing, IoT, virtual reality, and 3D content accessible through a mobile device such as a smartphone, tablet, or smart watch.

What are your thoughts about The Economist's article?

Aaron Rose serves as President and CEO of ROI3, Inc., a Seattle, Wash.-based company that empowers people in emerging economies through innovative, technology-based solutions. He is also the editor of Solutions for a Sustainable World.

February 18, 2016

Companies Are Preparing to Monetize Their Data, Says EIU Report

The Economist Intelligence Unit published a report, The Business of Data, on Jan. 12, 2016 that claims companies are actively preparing to monetize their data. Sponsored by NTT Communications, a Tokyo, Japan-based telecommunication services company, "The EIU report examines how companies are positioning themselves to benefit directly from the wave of opportunities offered by fast-evolving data technologies. It is based on a cross-industry survey of 476 executives based largely in North America, Europe and Asia on their companies' data plans and practices, as well as insights from the leaders of organizations at the forefront of the emerging data industry."

The report's Executive Summary presents the following key findings:
  • More companies want to profit from their data. While many companies have been gathering data for a long time, a greater proportion of them are now preparing to monetize it. Regardless of geography, sector or annual revenues, our survey makes it clear that most companies now perceive data as a strategic resource. Almost 60% of survey respondents say their organisations are already generating revenue from the data they own and will continue to do so, with the rate slightly higher in Asia (63%) than in North America and Europe (58% and 56%, respectively);
  • Investment in new technologies will grow. The survey shows that big data has had a major impact on the operational structure of businesses, with 43% of survey respondents saying it has prompted them to use new technologies. This finding is consistent with other research, which shows companies significantly boosting investment in big data solutions and services such as cloud storage, data centers, and security. IDC, a technology research firm, estimates that this market will grow at a compound annual rate of 23% through 2019 to reach almost US$50bn;
  • Data is becoming vital to decision-making. A large majority (83%) of those polled say that their firms have used data to make existing products or services more profitable, and over two-thirds (69%) feel that there is a case for starting a new business unit dedicated to developing data-related products or services. Data is increasingly being seen as the raw material that supports and informs a company’s efforts to meet key performance indicators and the expectations of its customers; and
  • Consumer privacy and data security remain concerns. Safeguarding customer privacy remains a key concern as companies seek to profit more from their data. On the positive side, 86% of survey respondents say that their customers trust them with their personal data, and 82% insist their firms are selective in gathering, storing and analyzing customer data. However, only 34% of executives say that their firms are "very effective" at being transparent with customers about how they use their data and 9% admit to being "somewhat" or "totally ineffective," indicating regulators will remain vigilant in this area.
Naka Kondo, the editor of the report, said in EIU's press release:
Differences have emerged in the way companies, regulators and individuals are preparing for a world where data are increasingly seen as a commodity in their own right. The data literacy of individuals and of regulators will be crucial in defining the value, risk and benefits of data. Data considerations should be of prime strategic importance in the next three years, especially for companies looking to capture future opportunities in an expanding and changing market.
I agree with the report's conclusion that "the brave new world of big data is here to stay" and "many companies are poised to gather, analyze, use and trade in a larger and more diverse array of data in the years ahead regardless of regulatory or security complexities."

What are the strategies that allow companies to navigate this rapidly changing landscape and succeed at the business of data?

Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

February 11, 2016

App Store Consumer Spend to Exceed $100 Billion in 2020, Says App Annie

"Apps have become the primary way we engage with media, brands and ultimately with each other. They are the digital interface through which we live, work and play," App Annie explains in a new report that looks into the future of the mobile app economy.

According to the San Francisco, Calif.-based business intelligence company and analyst firm, "the strategic importance of the app market spans well beyond gaming and media industries. Now all companies need to view themselves as app publishers irrespective of their mobile strategy. Apps drive engagement and brand loyalty and can be monetized directly through app stores, advertising, commerce or any combination of the above."

The report presents five key findings:
  1. Global mobile app store gross revenue will grow to $51 billion in 2016 and exceed $101 billion in 2020. Growth will be largely driven by two factors: strong app adoption in developing economies across the globe and mobile apps' ability to capture greater wallet share in mature economies;
  2. Global mobile app store downloads will reach 284 billion in 2020, as the global installed base more than doubles between 2015 and 2020. Much of the growth will be driven by smartphone adoption in emerging markets;
  3. Mature markets like the United States are in the midst of a shift from a download growth phase to one that is characterized by strong growth in app usage and resulting revenue expansion;
  4. The iOS App Store will retain gross revenue leadership until 2017, at which point the combination of Google Play and third-party Android store revenue will surpass it due to the wider proliferation of Android devices; and
  5. While games revenue will dominate through the forecast period, revenue for apps excluding games will exceed 2015 levels more than 4x by 2020, accounting for over 25% of all app store spend. Time spent in apps from categories like Social, Shopping and Transportation strongly suggests that advertising and commerce will form a significant proportion of economic activity in the app ecosystem beyond the $101 billion we are projecting in store sales.
Elaborating on the first key finding above, the report says:
As apps deliver more value to users and device penetration rises, we forecast consumer spend on app stores (gross app revenue) to grow by 24% to $50.9 billion in 2016 and reach $101.1 billion in 2020. And even beyond the store revenue for mobile apps included in this report, there will be explosive growth in mobile commerce and advertising revenue. There will also be a growing contribution from apps as they expand into new platforms, namely wearables, TVs, virtual and augmented reality (VR and AR), home Internet of Things (IoT) and automotive.
Emerging markets will produce significant revenue from apps. For example, according to an App Annie blog post regarding its report, "China will surpass the U.S. in terms of total revenue from app stores by the first half of 2016, having surpassed it in downloads in early 2015."

Furthermore, "Revenue in the Americas and EMEA will nearly double over the next five years from 2016 levels, but both will be outpaced by the growth in APAC. We forecast that APAC will grow to $57.5 billion in 2020 with China driving more than half the revenue in the region by the end of the forecast period."

A final point worth mentioning from the report: "Mexico, Brazil, Turkey, Indonesia, China and especially India are poised for some of the strongest growth over the next five years. In the years ahead, billions of new smartphone owners in these emerging markets will join the app ecosystem. This opens up a huge opportunity for developers to target unmet needs and create whole new markets."

Aaron Rose serves as President and CEO of ROI3, Inc., a Seattle, Wash.-based company that empowers people in emerging economies through innovative, technology-based solutions. He is also the editor of Solutions for a Sustainable World.

February 4, 2016

Focus on the Long-Term and Resist Short-Termism Afflicting Corporate Behavior

Photo of Larry Fink: BlackRock
Laurence (Larry) Fink, Chairman and Chief Executive Officer of BlackRock, a New York, N.Y.-based investment firm, sent his annual Corporate Governance Letter to chief executives at S&P 500 companies and large European corporations. Mr. Fink's letter encourages corporate leaders to focus on creating long-term strategies and resist "the powerful forces of short-termism afflicting corporate behavior." While you can read the letter in its entirety, there are a few points worth discussing in this post.

The lack of transparency and openness on Wall Street has long been a concern of mine during my professional career. I am pleased to read Mr. Fink's message "that companies have an obligation to be open and transparent about their growth plans so that shareholders can evaluate them and companies' progress in executing on those plans." Mr. Fink continues to say: "We are asking that every CEO lay out for shareholders each year a strategic framework for long-term value creation. Additionally, because boards have a critical role to play in strategic planning, we believe CEOs should explicitly affirm that their boards have reviewed those plans."

I spend a significant amount of my time reading reports issued by publicly-traded companies as required by the U.S. Securities and Exchange Commission and I am routinely disappointed these companies do not address management's vision and future plans. Therefore, I find encouragement in Mr. Fink's words:
Annual shareholder letters and other communications to shareholders are too often backwards-looking and don’t do enough to articulate management’s vision and plans for the future. This perspective on the future, however, is what investors and all stakeholders truly need, including, for example, how the company is navigating the competitive landscape, how it is innovating, how it is adapting to technological disruption or geopolitical events, where it is investing and how it is developing its talent. As part of this effort, companies should work to develop financial metrics, suitable for each company and industry, that support a framework for long-term growth. Components of long-term compensation should be linked to these metrics. 
Mr. Fink also addresses how environmental and social factors are impacting corporate long-term plans:
These issues offer both risks and opportunities, but for too long, companies have not considered them core to their business – even when the world’s political leaders are increasingly focused on them, as demonstrated by the Paris Climate Accord. Over the long-term, environmental, social and governance (ESG) issues – ranging from climate change to diversity to board effectiveness – have real and quantifiable financial impacts.
"At companies where ESG issues are handled well, they are often a signal of operational excellence."

It is too easy to blame companies for being too focused on the short-term; "investors, the media, and public officials have a role to play," according to Mr. Fink. "In Washington (and other capitals), long-term is often defined as simply the next election cycle, an attitude that is eroding the economic foundations of our country" and "public officials must adopt policies that will support long-term value creation."

Lastly, "Companies, for their part, must recognize that while advocating for more infrastructure or comprehensive tax reform may not bear fruit in the next quarter or two, the absence of effective long-term policies in these areas undermines the economic ecosystem in which companies function – and with it, their chances for long-term growth."

What are your thoughts about Mr. Fink's letter?

Aaron Rose serves as President and CEO of ROI3, Inc., a Seattle, Wash.-based company that empowers people in emerging economies through innovative, technology-based solutions. He is also the editor of Solutions for a Sustainable World.