To some observers, today’s mobile sector resembles a form of controlled chaos where even the most conservative incumbents of the past are embracing the need for a more open, competitive environment. The reason for this lies in the volatility that continues to erupt around the pillars of disruption that define the open mobile era: rapid development of mobile Web technology, insatiable consumer demand for mobile Web and data services, and an evolving policy debate that may finally introduce a more equitable market.
As with all creative destruction, this is good news for some and doomsday for others. Network carriers in particular are scrambling to compete with the new wave of mobile upstarts that have turned Silicon Valley into Smartphone Valley in less than 3 years. Insight from Deloitte’s new Open Mobile survey point to the formidable challenges incumbents face in trying to capture growth in an era where the old rules simply don’t apply.
The incumbents’ travails seem centered on how to sustain market leadership without relying on traditional revenue streams. Voice revenues have declined, but data revenues have soared and now account for a significant portion of the total revenue for the wireless industry. This trend is set to accelerate over the short term and provide new revenue opportunities for anyone agile enough to act. The big question is where will these opportunities reside? According to our research, vertical industries adjacent to mobile – especially healthcare and life sciences – are poised to experience the most profound mobile business model growth.
Mobile health, or mHealth as it’s commonly known, is emerging as a significant growth opportunity for companies looking to capitalize on machine-to-machine (M2M) technology in wireless healthcare. By 2016, the worldwide market for machine-to-machine connections is predicted to grow at a compounded annual growth rate of 27 percent, and global connections are forecast to reach 365 million. Much of this growth will come from services designed around the “Internet of things,” but other reasons apply. In particular, the declining cost of mobile devices and infrastructure coupled with an increased deployment of networks are providing the opportunity for mobile incumbents to apply existing infrastructure in new markets.
Healthcare seems like the obvious choice in this regard. Analyst forecasts estimate the potential value of the mHealth market will be $4.6 billion by 2014. The driving forces behind this expected uptick are numerous. Mounting pressure to cut burgeoning costs in the U.S. healthcare system is a government mandated objective; in particular, preventable readmissions cost an estimated $12–17 billion per year. On top of this lies the problem of an aging population, exacerbated by the size of the baby boomer demographic. Americans aged 60 or older represented 18 percent of the U.S. population in 2009; , this segment is expected to grow to 27 percent by 2050.
Wireless healthcare solutions offer a way to deal with these pressing issues and more. Improving disease management, despite an increasing incidence of chronic diseases, is particularly attractive, considering 7 out of 10 deaths among Americans each year are from chronic diseases. Heart disease, cancer and stroke combined account for more than 50 percent of all deaths each year. In 2005 alone, 133 million Americans — almost 1 out of every 2 adults — had at least one chronic illness. These sobering statistics have big implications. Costs associated with chronic disease management accounts for more than four-fifths of the total healthcare expenditure, which totaled $2 trillion annually in 2009, and they are expected to increase on average 6.1 percent per year over the projection period 2009–2019. Ouch. Adding more fuel to the fire is a chronic shortfall of physicians. The Association of American Medical Colleges estimates a shortage of 90,000 doctors nationwide by 2021. The impact of this dwindling resource pool will be amplified and felt even more in specialist areas such as geriatrics. The rising baby boomer population can then expect to face the considerable challenge of getting quality healthcare on a timely and consistent basis.
Despite these concerns, all may not be lost in fighting the double whammy of rising demand and decreasing supply. Advances in wireless remote patient monitoring (RPM) are expected to have a big impact across targeted disease areas where chronic conditions are a leading cause of the readmissions problem. RPM can equip healthcare providers with timely information about patients’ health, while improving speed and accuracy of diagnosis. Wearable body sensors and remote monitoring can keep chronic patients out of hospitals and improve their quality of life while significantly reducing admission expenses. If, as expected, more trials are successful and adoption of such RPM technology becomes suitably widespread, savings are expected to reach $197 billion over the next 25 years.
With these challenges and opportunities firmly front and center of the prospective mHealth industry, many mobile incumbents are struggling to make a significant play. Organizational capabilities, or lack of, are often the root cause of the uncertainty. Deloitte’s findings suggest that platform development, ecosystem building and alliance management are the core capabilities required for boosting competitiveness in the Open Mobile era. This resonates strongly in the mHealth industry where many believe future growth rests on the proliferation of open platforms across multiple facets of the value chain. Winners in this market will have to learn to astutely mobilize new ecosystems, build trust with new partners in the innovation process, and develop differentiated mobile technology platforms to generate value.
For those quick off the mark, this is already happening. Savvy incumbents and new entrants alike are already collaborating. New networks are forming, allowing disparate resources to combine in key knowledge areas, spurring the growth of wireless technology across the sector. A good example of this is the Open mHealth Consortium, which has established a flourishing ecosystem of multiple players across the mobile, software, and healthcare industries to implement a roadmap for mHealth technology development. Other more familiar players such as Qualcomm are orchestrating platform and ecosystem strategies in the most promising growth areas. For mobile incumbents, unlocking value in this nascent market will require sustained collaboration across traditional boundaries. This will be critical to integrate mobile solutions across monitoring, wellness, and reminder services, which together represent the core of the mHealth opportunity.