Doing Business in India Requires a Mobile-First Strategy
Vijay Govindarajan, Gunjan Bagla
If you want to see how mobile technology can disrupt the very basics of business models and habits established over hundreds if not thousands of years, look at what’s happening in India. A telecommunications revolution, towards fourth generation (4G) mobile services, will transform the consumer landscape over the next 5-10 years. This revolution will transform India the same way automobiles changed America 100 years ago but at ten times the speed — computers, laptops, and tablets will be marginalized as India leapfrogs to mobile 4G by 2020. The consequences are far more revolutionary than have been considered by multinational companies and entrepreneurs. In order to create value in India in the coming decade, companies must have a mobile-first strategy.
Some background: Until the mid-1980s, having telephone service in India was considered the ultimate luxury and less than 0.001% of the population possessed a phone. By July 2016, virtually every Indian had a mobile telephone and access to text messaging, primarily using 2G technology.
While it will take many months for the dust to settle and the winners to emerge, one thing is clear: India will soon have one of the largest pools of 4G users in the world. If the penetration rate reaches even half that of mobile telephony, it implies a customer base that is almost twice that of the U.S. population. Nimble companies and organizations will stand to gain by this unique opportunity.
In this environment, a new 4G only player has entered in 2016 with an initial investment of $20 billion in network and market infrastructure. Jio is a unit of Reliance Industries Ltd, whose leader, Mukesh Ambani is India’s richest man. Sending a 5 megabyte file in 2G takes 8 minutes but the same file can be transferred in 20 seconds using 4G. This is the game changer.
India’s unique economic, demographic and distribution ecosystem will lead to many winners as a result of this 4G revolution. Companies entering India should abandon PC- and laptop-based business models and instead focus on digital businesses using the mobile platform. Here are just a few possible opportunities in some of the industries that will benefit the most:
Entertainment: India’s entertainment industry produces the highest number of movies compared to any other country in the world, but rampant piracy has limited revenues to genuine producers. Digital rights and viewing habits are much easier to manage on mobile networks and revenues are likely to start expanding as more people view their entertainment on mobile devices. Much of this entertainment content in India targets millennials who are likely to consume entertainment content at hours when business loads are light.
Banking: India is a cash-based economy and most Indians don’t have active bank accounts, so setting up brick and mortar banks is a challenge. Mobile banking has been touted as a potential solution, but results so far have been limited. Over the last six years, India has issued over 1 billion biometric Aadhaar cards (unique identity cards, similar in principle to the U.S. social security card, but with fraud protection built in); earlier this year India’s retail banks collaborated with the central (or “reserve”) bank of India to release the Universal Payment Interface which provides a basis for secure mobile transactions linked to the Aadhaar identity and has security features based on iris and fingerprint images. 4G will accelerate the proliferation of active mobile banking in India with a better way to deal with such encrypted and image-based data. This move creates myriad opportunities in India’s financial services industry. The short-term crisis caused by demonetization further opens the door for new players to provide niche financial services. There is also a mega opportunity in the cyber security sector. As cashless transactions grow, so will be cashless frauds (or “cashless pick pocketing”).
Education: The use of mobile video technology in education and skill building for the millions of India’s youth is another bottom-up revolution in making. With highly affordable 4G mobile technology, it is likely that non-classroom based courses will find a platform to expand dramatically in India. These benefits could flow to legacy players such as public and private universities, corporations such as India’s NIIT and California-based Coursera, nonprofits such as the Khan Academy, or perhaps new upstarts that will rise to close the education gap using 4G enabled smartphones.
Healthcare: Telemedicine has the potential to explode in India. Physicians and hospitals in India are already using telemedicine to diagnose and triage patients. Two-way video on a 4G platform will enable urban patients to avoid traffic and rural patients to consult remote specialists while making providers more productive with their time.
Online shopping: E-commerce is growing at exponential rates in India. Amazon, Alibaba and venture capitalists have invested billions into Indian e-commerce. Over 90 % of India’s brick and mortar stores are tiny, single location shops (not part of chains or franchises). It is very likely that future top retailers in many categories will be e-commerce companies, not big-box chains. This will have a huge impact on foreign consumer product companies such as Colgate and PepsiCo eyeing the market in India as eCommerce reaches scale in India.
Sharing economy: There are significant opportunities in the emerging app-based eServices (similar to Uber and Airbnb). This segment is likely to expand even faster than e-trade in goods. Already, India has eServices for many things: kitchen cleaning, sprucing up the house, cleaning clothes, hiring a driver for your car for some hours (in Indian city traffic, it makes sense to hire someone to drive the car). With 4G, eServices space is poised for explosive growth.
Media: Since liberalization in 1991, media of all kinds has grown rapidly in India, including newspapers, magazines, radio, television, and billboards. It is likely that this growth will be muted in the next decade as Indians turn to mobile media as the largest form of consumption. Social media in India including Facebook has been largely a mobile-led phenomenon. Recently, a Fortune 100 consumer product giant shifted its sales promotion strategy in India from coupons in newspapers to offers on mobile devices. Not just B2C companies, even B2B companies such as Rolls Royce and Deere, and technology companies such as Corning and GE better abandon marketing and communication using TV and newspaper channels and instead develop robust digital marketing strategies using mobile.
These are just a few examples of industries where new business opportunities will be created in the next decade. Startups and fast moving incumbents from anywhere in the world can take advantage of this unique “perfect storm” happening in India today. In fact, any business that previously required platforms for large data processing and transfer rates, but could not do them without the use of PC, can now easily do them with 4G mobile telephony. It is another internet revolution, yet again. The bottom line: 4G revolution is a fast train which companies must get on or they’ll be left behind.