The Mobile Revolution: The World In The Palm Of Your Hands

1. AMSTERDAM
BANGALORE
BOSTON
HONG KONG
SILICON VALLEY
The Mobile Revolution:
The World In The Palm Of Your Hands
June 6–10, 2011
C O N F I D E N T I A L: Sydney
© Copyright 2001–2011
Milestone Group Inc. All Rights Reserved.

2. Strategy consultant, investor, speaker, deal junkie,
board advisor, pundit, business voyeur, corporate
shrink and all-around accelerant/catalyst
2001–Present Milestone Group (Silicon Valley based, global reach)
 Strategy/operations consulting across tech, media and telco (TMT)
 Obsessive focus on everything related to revenue growth
 Small investment fund, M&A advisory
1998–2000 Protégé Group (Silicon Valley & London)
 VC investment model with services component
 Made 20+ tech investments during Bubble 1.0; got out unscathed
1991–1997 CSC Index (London, Amsterdam, Sydney)
 Pioneers of business reengineering, F500 companies, various verticals,
CEO and executive level strategy consulting
 Clients included Volvo, Union Bank of Switzerland, Bhs,
AstraZeneca, Shell, Novartis, Norsk Hydro, SITA, NRMA, CBA,
Mastercard/EuroPay, Telenor, Scottish Power, IRS, Occidental
Petroleum
1987–1990 Symantec (Silicon Valley, Amsterdam)
 Business development, M&A and international roles
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3. SMH today : 197 students in one room
''Everyone thinks we've got a barn with 200 ferals running around and teachers
screaming,'' Mr Whitby said. But what the Herald saw - and heard - last week at St
Monica's Primary at North Parramatta was a mega classroom in which 197
students worked in different-sized groups at a range of tasks at the same time,
seemingly without disturbing each other.
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4. Globally, there are now more mobile phones in use
than toothbrushes …
5 Billion Worldwide 4.2 Billion Worldwide
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5. Technology cycles – wealth creation/destruction
New companies often win big in new cycles
Mainframe Mini Personal Desktop Internet Mobile Internet
Computing Computing Computing Computing Computing
1960s 1960s 1980s 1990s 2010s
Winners Winners Winners Winners Winners
IBM DEC Microsoft Google
NCR Data General Cisco Amazon
Control Data HP Intel eBay
Sperry
Honeywell
Burroughs
Honeywell
Prime
Computervision
Wang Labs
Apple
IBM
Oracle
EMC
Dell
HP
Compaq
Yahoo!
AOL
Tencent
Alibaba
Baidu
Rakuten
?
Note: Winners from 1950s to 1980s based on Fortune 500 rankings (revenue based), desktop Internet
winners based on wealth created from 1995 to respective peak market capitalizations.
Source: Factset, Fortune, Morgan Stanley research.
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6. Silicon Valley is rapidly disrupting the
mobile ecosystem globally – five assertions
Five Assertions:
1. The mobile device is the next compute platform
2. In technology, ‘value’ historically migrates from hardware to software
3. Silicon Valley is very good at scaling software based businesses and
has a superior support ecosystem of talent, ideas, risk taking,
ambition, agility and money to scale new technology based
businesses fast
4. Companies in any industry compete as much with traditional industry
participants as they do with software-based disruptors
5. All industries globally thus need to have a thoughtful ‘650 Strategy’
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7. Apple iPhone + iTouch + iPad Ramp –
The likes of which we haven’t seen before
iPhone + iTouch vs. NTT docomo i-mode vs. AOL vs. Netscape Users
First 20 Quarters Since Launch
Note: *AOL subscribers data not available before CQ3:94; Netwcape users limited to US only. Morgan Stanley Research estimates
65MM+ netbooks have shipped in first 11 quarters since launch (10/07). Source: Company Reports, Morgan Stanley Research. Data as of CQ3.10.
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8. Silicon Valley: home to 72 years of technology
innovation
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9. Silicon Valley is now undeniably the center of the
mobile ecosystem globally
Smart Mobile IC Mobile Mobile Social
Phones Technology Payments Advertising Networking
Mobile Mobile Network/Customer Network Wireless
Backend Operators Management Infrastructure Test Equipment
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10. Mobile operating systems – attackers (Apple and
Google) driving market excitement and momentum
Global Unit Shipment Share of Smartphones by Operating System,
Symbian (Nokia)/Blackberry (RIM)/iOS (Apple)/Android (Google)/Others, 1Q06–3Q10
Note: *iOS excludes iPod Touch and iPad shipments as they are not smartphones. Others include Windows Mobile, Palm OS & WebOS, Linux
and other proprietary smartphone OSes. Call outs on the left side represent market shares in CQ1:06; call outs on the right side represent
market shares in CQ3:10. Source: Gartner.
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11. CONFIDENTIAL © Copyright 2001–2011 Milestone Group Inc. All Rights Reserved. 10

12. Apple is the most extraordinarily different company
ever created
1. Go Into Your Cave – “tech industry is an echo chamber”
2. OK To Be King – the story of the iDVD
3. Transcend Orthodoxy – results, not dogmatic
4. Just Say No – hold back features
5. Serve Your Customer, No Really – a personal story
6. Everything Is Marketing – brand trumps, think religion
7. Kill The Past – not fanboy hallucinations
8. Turn Feedback Into Inspiration – inspiration, not feedback
9. Don’t Invent, Reinvent – Kings of the remix
10. Play By Our Own Clock – long range focus
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13. Mobile devices are the new thin client
4G Networks
Services in Cloud
The NEW THIN CLIENT
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14. The Cloud is becoming more and more intelligent, and
mobile devices will be the remote control
Vic Gundotra, VP Google Engineering:
The web has won and users of mobile
phones will get their information and
entertainment from browsers in future.
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15. What is the future of app(lets)?
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16. Japan social networking trends show how quickly
mobile can overtake desktop internet access
Mixi mobile page views = 84% vs. 17% four years ago
Mixi’s (Japan’s Leading Social Network) Monthly Page Views, Mobile vs. PC, CQ2:06–CQ3:10
Note: Mixi is one of Japan’s leading social networking sites on PC and mobile with 22MM registered users as of 10/31/10. It monetizes mobile
usage via sales of avatars, customized homepages and other premium services.
Source: Company reports. Morgan Stanley Research.
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17. Facebook/Apple/Google = platforms of
different types … each with rapid innovation
Apple
Facebook iPhone/iTouch/iPad
620MM users 120MM users
Social +51% Y/Y +111% Y/Y
Mobile
Networking 550K+ Apps 300K+ Apps
500MM+ Downloads 6.5B+ Downloads
940MM users
+11% Y/Y
Google cQ3: CPCs +2% Q/Q Search
Paid Clicks +16% Y/Y
Source: PC World, comScore (global user data for Facebook and Google as of 9/10), Facebook, Apple, Google (as of CQ3).
CONFIDENTIAL © Copyright 2001–2011 Milestone Group Inc. All Rights Reserved. 16

18. Mobile revolutionizing commerce –
with constant product improvements
Location-Based Services
Enable real-time physical retail/service opportunities
Transparent Pricing
Instant local + online price comparison could disrupt retailers
Discounts
Invitation-only time-based selective sales gaining traction
Immediate Gratification
OTA (over-the-air) instant digital product + content delivery
Location-Based Services Transparent Pricing Discounts Immediate Gratification
Priceline.com iPhone App ShopSavvy Android App Gilt iPhone App iTunes Store on iPhone
Finds hotel deals Comparison shopping Designer handbags Music/video/apps
in your area among online + local stores up to 70% off delivered wirelessly
Source: Company Reports, Morgan Stanley Research.
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19. Cellular bandwidth scarcity is likely to exacerbate in
the medium to long term
Global mobile data usage
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20. Mobile connections
4,000 100
3,333 83
Mobile 2,667 67 Market
connections Penetration
in Asia 2,000 50 (%)
(million)
1,333 33
667 17
0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015
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21. Devices will improve upon multiple axes
Screen resolution Storage Processor speed
Multiple
Screen visibility Weight
processes
Battery longevity User interface Interconnectivity
Battery power Resilience Security
Improvements will enable new device form factors.
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22. Falling ASPs will enable device accumulation
2009A 2014E
Units Average Market Units Average Market
(million) Selling Price Size (million) Selling Price Size
Smartphones 170 $200 $34B 700 $150 $105B
Tablets 1 $600 $2B 70 $300 $28B
Netbooks 30 $350 $11B 40 $250 $10B
Notebooks 162 $750 $122B 150 $600 $90B
Desktops 137 $620 $85B 125 $500 $63B
TOTAL 500 $504 $254B 1085 $306 $296B
Sources: actuals: IDC, Gartner; forecast: Deloitte Touche Tohmatsu Limited, 2010
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23. The type of network used will vary by medium, with
video only being used occasionally
on cellular mobile
Voice
E-Mail
Cellular Mobile Text browsing
Low-res photos
Short low-res video
Low bandwidth audio
Hi res photos
Rich browsing
Wi-Fi Large emails
Video
High bandwidth audio
Short range
Photos
Video
Device Synchronization
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24. Networks: summary
1. Mobile network capacity is likely to become increasingly congested
2. 4G, 5G will enable networks to offer ever faster network download
and upload speeds
3. The ability to expand network capacity will be constrained by cost,
spectrum, planning permission
4. Consumers will acquire an increasing number of devices whose
utility is a function of their ability to be connected
5. Cellular networks are likely to be increasingly blended with Wi-Fi
networks and short range communications technologies
6. Multiple network standards are likely to co-exist. An operator will
offer a blend of 10+ network technologies
7. 20% of individuals will represent 80% of network usage.
8. Peak download speeds of 1 Gbit/s will be available to 20% of homes.
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25. Content: perspectives
 Consumers are likely to be interested in the same types of
content as they consume today.
 Consumers are always going to want to: communicate, be
entertained, be noticed, work, transact, be educated, discover, be
guided. Mobile will address this as far as the technology is
economically able to do so.
 The fidelity of the mobile media experience (sound quality, screen
resolution, refresh rate, # of dimensions, range of content
available) will steadily increase.
 The portable video experience will never equate to the television
experience, as screen size (and hence visual impact) can never be
miniaturised.
 Mobile media consumption is likely to mirror that on other media
devices, from car radios to television sets.
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26. Embedded Mobile & IoT
Consumer
Electronics Healthcare Government Automotive Utilities
A WORLD OF CONNECTIONS …
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27. Mobile connectivity drives new ways to do lots of things
faster/better/cheaper from the palm of your hand
 More Connected – Real-time connectivity/24x7/in palm of hand
 More Affordable – Wi-Fi nearly ubiquitous in many developed
markets … for many/3G tiered pricing lowers adoption barrier …
 Faster – Near-zero latency for boot-up/search/connect/pay …
 Easier to Use – User interface revolution + location awareness
provide something for nearly everyone …
 Fun to Use – Social/casual gaming/reward-driven marketing …
 Access Nearly Everything – Music/video/documents/’stuff’ in
cloud …
 Longer Battery Life – Hours of continuous usage …
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28. ‘Disruptive innovation’ – Clayton Christensen
Christensen studied why great companies with smart management and
substantial resources consistently lost to ‘disruptors,’ companies with simpler,
cheaper, and inferior products.
Two Ways Disruptive Innovation Can Happen
Low-End Segment Strategy Non-Consumption Strategy
Disruptors introduce a product that is at the Disruptors introduce a product that was
low end of the market and that is neither unavailable to consumers before, effectively
profitable for the incumbents nor in demand competing with non-consumption.
from the incumbents’ customers …
This becomes a problem as the disruptors
improve their offering and move up market,
eventually encroaching on the core business of
the incumbent, and doing so with a lower cost
structure.
Amazon.com/Netflix/PayPal … iPhone/iPad/Facebook …
Source: “Untangling Skill and Luck: How to Think About Outcomes – Past, Present and Future” (7/15/2010).
Michael Mauboussin, Legg Mason Capital Management
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29. Unusually high level of innovation –
from new attackers
 Facebook – Real-Time Communication/Social Graph/Credits
 Zynga – Social Gaming/Virtual Goods/Offers (Reward-Driven
Marketing)
 Twitter – One-to-Many Real-Time Broadcast
 Open Table/Yelp/Foursquare/Shopkick – Location-Aware Mobile
Services
 Gilt/One Kings Lane/Rue La La – Time-Based ‘Flash’ Sales
 Groupon – Social Group Buying
 Tapulous/Digital Chocolate/Booyah/Ngmoco :) – Social/Mobile
Gaming
 Pandora/Spotify – Personalized Music
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30. Unusually high level of innovation –
from incumbents
 Apple – iPad/iPhone/iTouch/iTunes/Multi-Touch Input/
 Google – Android/Chrome/YouTube/Display Advertising/Web
Apps/Instant + Voice Search
 Amazon.com – Kindle/EGM (Electronics & General Merchandise)
Sales/Mobile Apps/AWS (Amazon Web Services
 Tencent – Virtual Goods
 Nintendo/Sony/Microsoft – Motion Sensors (natural gaming
input)
 PayPal – Mobile + Digital Goods payments
 Netflix – Streaming Content
 Salesforce.com – Chatter (real-time enterprise collaboration
platform)
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31. New Innovation Comes in Many Forms
Category Type Description of Type Business Example
FINANCE 1. Business Model How you make money Openwave provided secure internet gateways for mobile operators through a
managed service instead of by selling network infrastructure.
2. Networks and How you join forces with other Salesforce.com has created AppExchange, a partner development ecosystem where
Alliances companies for mutual benefit hundreds of third-party developers further extent Salesforce.com functionality and
have a new channel to market.
PROCESS 3. Enabling process How you support the company’s Google can deliver it’s innovative search and ad-related technologies to it’s
core processes and workers customers because it has extremely stringent hiring policies and very enlightened
employment benefits
4. Core processes How you create and add value iPASS began as a billing platform for Enterprise customers and evolved into a
to your offerings Roaming clearinghouse and Wi-Fi aggregator for its Operator’s.
OFFERINGS 5. Product How you design your core Apple products (in both it’s original and newest form) took the market by storm,
performance offerings combining multiple dimensions of product performance.
6. Product system How you link and/or provide a Microsoft Office “bundles a variety of specific products (Word, Excel, PowerPoint,
platform for multiple products etc) into a system designed to deliver productivity in the workplace.
7. Service How you provide value to Facebook continues to lead all major social networking sites in customer satisfaction
customers and consumers beyond ratings due to its hyper-accurate understanding of its customers, and its open
and around your product platform for new apps that address their desires.
DELIVERY 8. Channel How you get your offerings to Virgin Mobile revolutionized Pre-Paid Cellular by negotiating end-cap display space
market with big-box retail (like Target), 2 mos. before Christmas.
9. Brand How you communicate your Intel organized the largest coup in the history of brand building with Intel Inside,
offerings making their CPU a mandatory a component in the PC ecosystem, one that spans 94%
of the market, from consumers to corporations.
10. Customer How your customers feel when Electronic Arts is the No. 1 Mobile Game Publisher globally as a result of the positive
experience they interact with our company Customer Experience of both the end-users and the clarity and quality of delivery
and it’s offerings they established with the Mobile Operator community.
Source: Doblin
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32. C O N F II D E N T II A L
CONF DENT AL © Copyright 2001–2011 Milestone GroupGroup Inc. All Rights Reserved.
© Copyright 2001–2009. Milestone Inc. All Rights Reserved. 31
31

33. Think Mobile Augmented Reality Is Somewhere Far
Off in The Future?
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34. Think People Will Always Carry Two Phones, One For
Work and One For Personal?
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35. Think the Keyboard Is Here to Stay?
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36. Think Mobile Payments Won’t Happen For Awhile?
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37. There are only three fundamental business strategies
for any company to pursue
Compete on Differentiation
Value Disciplines - We Provide the Best
Framework Products
Our products have the greatest
LEADERSHIP
 There are three generic performance impact or
PRODUCT
business strategies for experiential impact for our
any business, regardless customers
of size or industry –
Product Leadership,
Operational Excellence
or Customer Intimacy
Value
 Pick one discipline and
be world-class at it;
develop your entire
business model and
business process around
it; that is how world-
class value is delivered
and sustained Compete on Cost – Nobody Compete on Focus – We
 You cannot be world- Provides Customers With Provide the Best Total
Lower Total Cost Solution to Meet Your Unique
class in two
The combination of our prices, Needs
product reliability and hassle- We help you define your problem,
free service is unbeatable identify the best solution and take
charge of implementing it
The Discipline of Market Leaders, Michael Treacy and Fred Wiersema, copyright 1995
CONFIDENTIAL © Copyright 2001–2011 Milestone Group Inc. All Rights Reserved. 36

38. Structure follows strategy
Definition of Value Delivery of Value
e.g., ‘Deciding which race to run …’ e.g., ‘Deciding how best to run the race …’
Best
Product
Management
Systems
LEADERSHIP
FOSTERS DEMANDS
PRODUCT
REINFORCES
ENABLES
Values, Beliefs Core Business Organization,
& Behaviors Processes REQUIRES Roles & Skills
Value
SUPPORTS
ENABLES SUPPORTS
Information
Technology
Best Best
Price Experience
The key is to know how customers perceive value
and to translate this into the design of the business system
CONFIDENTIAL © Copyright 2001–2011 Milestone Group Inc. All Rights Reserved. 37

39. Different business strategies result in very different
‘operating models’
Product Leadership Operational Excellence Customer Intimacy
Organization  Ad hoc, organic and cellular  Limited empowerment on  Empowerment close to point
Structure and  High skills abound in loose- front line of customer contact
knit structures  High skills at the core of the  High skills at boundary of the
Skills organization organization
Core Process  Product development  End-to-end supply chain  Customer knowledge and service,
Performance time-to-market, and market optimization marketplace management
communications  Emphasize efficiency and  Emphasize flexibility and
 Emphasize product reliability responsiveness
breakthroughs
Performance  Individuals’ innovative  Compensation tied to cost  Customer equity measures are
Measures and capacities are rewarded and quality rewarded (e.g., lifetime value)
 Risk and exposure management  Command and control, SOPs  Customer satisfaction and share
Systems  Quality management measured and rewarded
Company  Concept, future-driven  Process, product-driven  Customer-driven
Culture  Experimentation and  Conformance, ‘one size fits  Variation and ‘have it your way’
‘out-of-the-box’ mindset all’ mindset mindset
Information  Person-to-person  Integrated, low-cost  Granular customer databases
Technology communication systems transaction systems linking internal and external
 Technologies enabling  The system is the process information
Platform cooperation  Strong analytical tools
CONFIDENTIAL © Copyright 2001–2011 Milestone Group Inc. All Rights Reserved. 38

40. 10 big mobile disruptors / opportunities for any
company to think through
1. Mobile Payments
2. Augmented (Everything)
3. Time shifting, Place Shifting
4. Internet of Things & Embedded
5. Generation C
6. Socialization
7. Gamification
8. Video
9. Cloud/Virtualization
10. Big Data and Analytics
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42. Keep connected….
Mark A. Zawacki
Managing Partner & Founder
Milestone Group
maz@milestone-group.com
Mobile: + 1 (650) 391 8484
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