Disruption is a natural part of all product and technology life cycles. This presentation touches on the general nature of disruptions and more specifically, on the recent mobile phone/smartphone disruption. This presentation was first held at the Tolpagorni Market Insight Conference in Stockholm, November 2014.

1. Björn Ekelund
THE
SMARTPHONE
DISRUPTION

2. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 2

3. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 3
 Initially lower performance than “traditional”
solutions but offers OTHER values
 Grows in OTHER markets while improving in
“traditional” performance
 Eventually displaces the “traditional” solutions
DISRUPTIVE INNOVATION

4. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 4
1889-2014 – 125 YEARS

5. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 5
1914-2014 – 100 YEARS

6. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 6
1994-2014 – 20 YEARS

7. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 7
MACRO DISRUPTION
micro disruption

8. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 8
“MACRO” DISRUPTION
› The steam engine
› The alphabet
› Paper
› Penicillin
› The telephone
› Radio
› Electricity
MAJOR IMPACT ON LIFE AND SOCIETY

9. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 9
› Mobile Phones
– 2G, 3G, 4G
– Solid state disks
– Open source software
– Surface acoustic wave filters
– Envelope tracking
– …
› Cars
– Non asbestos break pads
– Electronic fuel injection
– Digital image processing
– Turbocharging
– …
“micro” disruption
MAJOR IMPACT ON A BUSINESS OR INDUSTRY

10. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 10
COMPLEX PRODUCT
VALUE CHAIN

11. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 11
“DOMINANT DESIGN”

12. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 12
Sometimes a mystery
Always obvious in hindsight
Creative destruction
Drama
CAUSE AND EFFECT

13. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 13
PREDICTING DISRUPTION?

14. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 14
“WEAK SIGNALS”

15. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 15
“TRIGGERS”
New
ecosystems
New business
models
New
technology
New
economics
Social
change
Policy
“Architecture”

16. CASE:
THE MOBILE PHONE

17. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 17
› New business models
– Asymmetric business models
– Open source software
– App ecosystem
– Non-physical content products
› Technology advances
– Touch screen technology
– Processor technology
– User interface design
A DRAMA INVOLVING:

18. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 18
1990’S VALUE CHAIN
Nokia
Brand
Software
OS
Device
integration
Radio
modem
Silicon
Brand
Software
OS
Device
integration
Radio
modem
Silicon
Brand
Software
OS
Device
integration
Radio
modem
Silicon
Qualcomm
Brand
Software
OS
Device
integration
Radio
modem
Silicon
Ericsson Siemens
Brand
Software
OS
Device
integration
Radio
modem
Silicon
Motorola

19. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 19
NO SOFTWARE LAST
FOREVER
Source: Strategy Analytics December 2012

20. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 20
2008: 60% OF THE MARKET

21. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 21
NOT A WEAK SIGNAL
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2008 2009 2010 2011 2012 2013 2014 2015 2016
Core Wireless SC TAM M$
ULC Smartphone Connected Devices Grey Market
Core Wireless SC TAM
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2008 2009 2010 2011 2012 2013 2014 2015 2016
Core Wireless SC TAM M$
ULC Entry Smartphone Connected Devices Grey Market
2010 2015 CAGR
291M 718M 20%
Market estimate 2011
Source: Strategy Analytics, April 2011

22. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 22
Property Feature
phone
Smartphone
Coverage Great Poor
Battery life Great Poor
Small size Great Poor
Apps Poor Great
User interface Poor Great
Content Poor Great
CHRISTIANSEN’S
DEFINITON
ARROGANT INCUMBENTS DID NOT SEE THE THREAT

23. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 23
TRIGGER
END USER APPEAL CUTS THROUGH ANY VALUE CHAIN

24. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 24
2009 ”Symbian is the future”
2009 HTC commits to Android
2010 Samsung commits to Android
Sony Ericsson commits to Android
2011 Nokia commits to Windows
Blackberry in freefall
THE DISRUPTION

25. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 25
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Januari 2009 Januari 2011
Android
iOS
Windows
BBOS
Symbian
Andra
DISRUPTION IN NUMBERS

26. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 26
CYCLIC DISRUPTION
90’s 00’s 10’s 20’s

27. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 27
To play in a market
with commercial ambitions
-
elsewhere
ASSYMETRIC BUSINESS
MODELS

28. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 28
“CHRISTENSEN’S LAW OF
CONSERVATION”
“When attractive profits disappear at one
stage in the value chain because a
product becomes modular and
commoditized, the opportunity to earn
attractive profits with proprietary
products will usually emerge at an
adjacent stage.”
Professor Clayton Christensen
“The Innovator’s Solution”, 2003

29. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 29
REDISTRIBUTION OF VALUE
Silicon Chipset OS Software Device Service Apps
Silicon
Chipset
OS Software
Device
Service
Apps

30. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 30
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Q2 2008 Q2 2010
70% Licensed OS 60% Free OS
Smartphone OS market share
Source: Gartner
MOBILE SOFTWARE
BUSINESS DISRUPTION

31. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 31
“Trolls”
“Product as a service”
“Trojans”
“Freemium”
ASYMMETRIC BUSINESS
MODELS

32. Björn Ekelund | Public | © Ericsson AB 2014 | 2014-11-12 | Page 32
› Regardless of size and success, no one is safe
› Disruption can be predicted but few have the guts to act
› End user appeal beats everything
› If management incentives is based on performance less
than 24 months out, an organization is typically not set to
handle a disruption
SUMMARY