The value of partnership
Nowhere is the need for cross-industry collaboration more keenly felt than in mobile payments. As both banks and telcos begin to realize that neither can fully dominate the market alone, new models of cooperation are emerging. Last year AT&T, Verizon Wireless, T-Mobile and Discover Financial Services joined up to form ISIS in the US. At the same time, Google was busy striking up partnerships with Sprint, Citi, MasterCard and First Data to develop new services and establish dominance in the nascent market. We have since seen Starbucks become Google Wallet friendly and, more recently, the Spanish telco Telefónica announce their plans to sell their aggregated customer data to retailers to enable better targeting. Telefónica’s Digital hub also joined forces with Mozilla earlier this year, and there is wide-scale industry support from the big telco operators and device manufacturers for Mozilla’s plans to launch smartphones in 2013 that use a new fully open mobile ecosystem based on HTML5. In Australia, Telstra has recently announced a strategic partnership with Australia Post to enable customers to have access to a Digital Mailbox that will provide a variety of functions including the ability to pay bills from anywhere, anytime on mobile and all other devices. While in the UK, we have seen direct competitors forming JVs in the telecoms sector to provide a cross-carrier mobile payments platform, such as the JV from Vodafone, O2 and Everything Everywhere.
And, increasingly, the idea of cooperation in the mobile space has started to seep into other industries not traditionally known for forming opportunistic partnerships. In healthcare, for example, telecom and technology companies are starting to work in collaboration with healthcare systems to develop and launch innovative e-Health services that not only extend the reach of health services to hard-to-reach geographies, but also help health systems make better use of their resources.
The automotive industry is another sector where mobile partnerships may add incremental value and create new differentiators for manufacturers. Remote tracking, car sharing programs and ‘connected’ cars will require automotive OEMs to leverage the mobile-savvy experience of both telecom and technology providers in order to create reliable, efficient and effective solutions.
Eyes wide open
While the value of cross-industry collaboration in mobile is becoming increasingly clear, many are finding that establishing and maintaining these partnerships is rather more difficult and complex than anticipated. In part, this is a cultural challenge: most big players in the mobile field are accustomed to being the ‘gorilla’ in any partnership that they participate in and – as a result – bridle at the idea of sharing leadership with new partners. But the reality is that cross-industry cooperation will likely bring together a number of Silverbacks who will need to learn how to cohabitate in order to achieve mutual benefits.
Even in cases where dominance is not an issue, partnerships can quickly become strained and eventually disintegrate as market dynamics start to change and individual participants evolve. Indeed, today’s partner may well be tomorrow’s competitor and – with this in mind – many players are choosing to enter into bilateral partnerships on narrow terms rather than creating more complex (yet more comprehensive) grand alliances. MVNOs (Mobile Virtual Network Operators) have long been an example of this, where the operator provides a clearly defined and usually relatively narrow capability set to the brand partner, such as Virgin.
Mobile, however, does kick up a number of unique challenges that should be addressed early on in the development of any partnership. The ownership of the customer, for example, is a sticking point that can easily become contentious. When it comes to payments, both the telcos and the banks are keen to ensure that they maintain the customer relationship, for example, and this has already caused some friction between the two sectors. Similar challenges stem from the ownership, use and access of data within the partnership, particularly in the retail sector where everyone from the telco through to the retailer’s loyalty program administrator will need to harvest value from the data in some way.
Creating a long and happy relationship
Ultimately, much of the success of partnerships comes down to two basic – yet very important – steps. First, ensure there is alignment within the partnership on what each party’s objectives, roles and responsibilities are. The success of the partnership will depend on ensuring there is enough commonality between parties to make the relationships work, yet not so much overlap as to create friction in the future.
The second step is to develop strong governance and issues resolution frameworks to ensure that if and when disagreements do arise between members of the partnership, they can be solved quickly and equitably while allowing the work of the partnership to continue unfettered. An example of this is dealing with liability attribution in the case of a significant systemic fraud.
The reality is that the development of cross-industry collaborations will be inevitable for any organization seeking to grow into new sectors or offer new services through the mobile channel. No single company has the capabilities or experience to properly manage the full value chain from device through to payment clearance (nor would many want to).
The question for executives, therefore, should not be whether partnerships will need to be formed, but rather how the right partners will be selected and how the relationship will be structured to ensure that everyone – including the customer – gains value from the arrangement.
By Malcolm Alder, KPMG in Australia