The Mobile Industry Is Ignoring the Rules of Consolidation
In 2002, the Harvard Business Review published an article by Graeme K. Deans, Fritz Kroeger, and Stefan Zeisel detailing the “Consolidation Curve.” The paper shows what every industry goes through and, in theory, predicts what companies should be doing to prepare for the future. And yet, even taking into consideration the thousands of companies researched for this paper, thinking about where the mobile industry falls on this curve is very difficult.
To summarize, there are four stages that industries go through as they reach maturity. In chronological order, they are the “Opening,” “Scale,” “Focus,” and “Balance and Alliance” stages.
Each of these stages has distinct characteristics. The Opening stage has new technology, the Scale stage features consolidation of smaller companies, the Focus stage features control over the supply chain, and the Balance and Alliance stage features big mergers and acquisitions of the dominant players.
As far as the mobile industry goes, we could be in the middle of any one of these stages, residing at any point along the Curve. Cell phones have been around for well over a decade, but modern smartphones have only been here for the last five years or so. At the same time, companies like Google are recent entrants to the consumer electronics, while companies like Apple and Samsung are long-standing in the consumer electronics industry.
According to multiple people that we spoke to about this, the confusion at the top of the industry cascades downward, as there's no clear "right" strategy. Google acts like this is stage one, Apple functions as if there was no such thing as stages, and Samsung acts like this is stage four. The industry is all over the place, which leads to market confusion.
To underline why this matters, think of how businesses operate in these different stages. Stage one, companies should work on smaller acquisitions, new technology, and growing market share. Stage four companies are to work on supply chains, market dominance, and major acquisitions, partnerships and mergers. There’s a world of difference there.
At the same time, as companies are disagreeing on which stage we’re in, Apple stands apart from the chaos. It seemingly lives in-between the Scale and Focus stages. The company is consolidating its market share and crowding out smaller competitors, but at the same time, it continually works to dominate the supply chain with a near-monopoly on flash memory.
Then there are the companies like HP/Palm and Microsoft/Nokia, which operates as if we’re in the later stages of the market. They’ve begun consolidating the bigger companies, which is the key factor of the final stage of the Curve.
What this scattershot disparity means for the industry is that companies need to prepare for every stage. Since the position on the Curve is unclear, companies are fighting in an ever-changing and unpredictable market. It’s good for innovation, but for company safety, not so much. That being said, it does seem like we’re closer to Stages one and two than we are to Stages three and four.
Again, the best example for this is Apple, which pushes new technology, while at the same time spending hundreds of millions of dollars on supply chain investments and acquisitions. The other big companies need to reevaluate where they’re standing. They need to fight like it’s the early stages with new technology, and stand tall like it’s the late stages. Ignoring either end of the spectrum could prove disastrous. To see what that looks like, see: RIM.