1. Industry convergence and the transformation of the mobile communications system of innovation ITS 15th Biennial Conference Berlin, September 7, 2004 Elmar Gerum, Philipps-University Marburg Insa Sjurts, Hamburg Media School Nils Stieglitz, Phillips-University Marburg

2. 2 Sectoral systems of innovation Supply conditions Technological opportunities Cumulativeness of capabilities Sources of innovation Transferability of knowledge Appropriability conditions Demand conditions Existing demand Potential demand Emerging demand Strategies of incumbent + new firms Creation and diffusion of innovations

3. 3 Industry convergence: a taxonomy Based on Stieglitz (2003)

4. 4 The coming of the mobile Internet Product complementarity –mobile communications –Internet services  Internet service vendors as new source of innovations  Transformation of value net Standard-setting as key driver –Access technologies –Communication protocols –Proprietary vs. open standards Interdependence of innovative activities in the value net  Towards a data-centric system? Mobile terminal devices Internet data services Standards

5. 5 The transformation of the value net Network Operators Telco Equipment Terminal device vendors Internet data services Customers (segments)

6. 6 Strategic responses Europe: WAP standard –Technology push approach to selection of technological opportunities –Telco equipment vendors as key source of innovation –Strategic alliance between technology producers –Low appropriability conditions (open standard), revenues from handsets –Low cumulativeness for technology users (incompatible to HTML) –Low-powered incentives for other actors in the value net Japan: i-mode standard –Demand pull approach to selection –Network operator NTT DoCoMo as focal firm –Strategic alliances to coordinate innovations in handsets and services –High appropriability conditions (proprietary standard) –High cumulativeness for technology users –High-powered incentives to create network externalities

7. 7 Smart phones Smart phones as hybrid products –Cell phone features (esp. voice) –PDA features (esp. PIM) Indirect market entry by incumbents –Nokia –palmOne –Microsoft Industry ambiguity –New suppliers, competitors, customers –Competition from separate products Cross-industry alliances to share capabilities PDA industry Cell phone industry Smart phone

8. 8 Conclusions Mobile communications industry undergoing transformation Industry convergence key concept to understand industry dynamics and business strategies –(Industry convergence by technology integration) –Industry convergence by product complementarity –Industry convergence by product substitution Cross-industry strategic alliances primary response to industry convergence. Purpose differs according to convergence type: –Resource-sharing –Coordination

9. 9 Thank you! Nils Stieglitz Department of Economics & Business Administration Philipps-University Marburg Universitaetsstr. 24 35037 Marburg Germany stieglitz@wiwi.uni-marburg.de