1.1 Aim of the Book
The rapid pace of technological evolution in the mobile phone industry is creating opportunities for new firms and entrepreneurs but also increasing uncertainty about whether and how the industry will continue to evolve in terms of both product features and consumer tests. The increasing number of start-ups in the mobile phone industry is not surprising. 1 The lack of vertical integration has lowered the barriers to entry and has amplified competition in an increasingly crowded environment, at many levels of the supply chain, and thus not only among handset vendors (e.g., Samsung , Apple , Huawei , Nokia ), but also among telecom carriers (e.g., Verizon and AT&T from the USA), component suppliers (e.g., Intel, STMicroelectronics), and content providers (e.g., operating systems vendors like Google with Android and Microsoft with Windows Mobile , as well as software and application developers).
The competition among handset vendors is one of the links in the supply chain that has probably attracted more attention recently given the impressive number of start-ups that have entered the industry, as well as the wide array of established vendors that have left the market, often quickly leapfrogged by relatively unknown players.
Over the last decade, the industry dynamics have massively changed. Until the mid-2000s, the mobile phone industry was still dominated by feature phones, i.e., phones capable of providing phone calls and basic multimedia functions, while smartphones, i.e., phones with PC-like functionalities, were relegated to a niche of business users because of their high price-point and not-easy-to-use interface. However, from the end of the 2000s, the boom of smartphone devices has progressively outclassed feature phones in all developed countries and in several emerging economies, rejuvenating an industry that was maturing. The boom of smartphones we have observed from the end of the 2000s has certainly been driven by the impressive success of Apple with its iPhone in 2007. Apple has redefined the concept of smartphone, in terms of design, technological features, and user experience, creating a ānew market spaceā where for a while only its iPhone was competing. Despite its high price-point, the iPhone soon became a high-end mobile phone for the masses and has dictated a new dominant design to which all existing and new handset vendors tended to adapt.
In the mid-2010s, nearly a decade after the beginning of the iPhone revolution, there were three trends characterizing smartphones. First, the demand growth rate for smartphones in both developed and emerging markets no longer grew at the rushing pace of the end of the 2000s, when Apple with its iPhone in 2007 revolutionized the industry. Second, Chinese brands, both established vendors like Huawei and start-up firms like Xiaomi , were rapidly capturing an increasing portion of the smartphone market. The third trend, certainly less known, shows how the smartphone industry is not particularly flourishing for new ventures. The start-ups in this industry have recorded heterogeneous growth paths: Some have become global players in a few years, but most have left the market in a heartbeat.
This book examines cases of start-ups that entered the smartphone industry following the revolution triggered by Apple with its iPhone and explains the rationale behind their business idea, the key elements of their business model , their financing cycle , and factors that helped these start-ups sustain their growth or constrained their survival.
Results of the analyses presented in this book show that start-ups in the smartphone industry that did not have expected success either were unable to offer customers a sufficiently distinctive and attractive value proposition (i.e., they launched products buyers did not want), or relied on ineffective and inefficient business models. Instead, successful smartphone start-ups were those that diverged from the accepted dimensions of competition, often relying on innovative business models, and found āunoccupied market spacesā that generated new demand not currently served by any other handset vendor.
The book is organized into various chapters, each focused on the case of a start-up in the mobile phone industry, although within each chapter we also refer to cases of other start-ups in a way related to the focal one. Chapter 2 begins with an examination of what it means to ācreate a new market spaceā and discusses the basic approaches to redefine market boundaries proposed by the extant literature. In the second part of this chapter, we discuss in more detail the case of Apple ās iPhone and how it was able to create a new market space in the mobile phone industry.
Chapter 3 examines the case of Xiaomi , a Chinese smartphone vendor founded in 2010 that in a few years became one of the top five smartphone vendors worldwide and the most valuable unlisted business in late 2014 after the fifth round of financing, with a line of low-price premium smartphones developed and commercialized by means of an innovative business model .
Chapter 4 analyzes the case of the Italian Stonex One, a business initiative born from collaboration between an Italian entrepreneur with a long experience in technology-based industries and a famous Italian disk jockey and anchor. The smartphone Stonex One was launched in 2015 by means of a remarkable marketing campaign on social networks. However, a series of strategy and execution mistakes, particularly related to the start-up ās inability to respect the high expectation created online toward the Stonex One smartphone before its launch, severely damaged the credibility of the business initiative, irreversibly constraining its growth potential.
Chapters 5 and 6 are centered on start-ups in the luxury mobile phone industry, a segment that was created by Vertu (an internal Nokia start-up ) in 2002 and became increasingly crowded in the 2000s. More specifically, Chap. 5 examines the case of Vertu and how it created a new market space by giving birth to a new product category that borrowed elements from the mobile phone industry and the luxury jewelry industry, a category that had to cope with lots of challenges during the iPhone revolution.
Chapter 6 discusses the case of SAVELLI , a Swiss-Italian start-up founded at the end of the 2000s that in 2013 introduced its first phone aimed to capture a niche previously not sufficiently explored by other competitors: wealthy and sophisticated women with a passion for jewelry. Despite SAVELLI being able to count on a board comprising managers and investors with long experience in the mobile phone and luxury industries, and despite the fact its smartphones had a design that was considered by many as really unique and capable of generating and capturing new demand, various strategic and execution mistakes, as well as unexpected changes in the macroenvironment, hindered its growth.
Finally, in Chap. 7, we summarize the most relevant arguments developed in the book, and we try to understand what we can learn from the cases.
1.2 Methodology
Cases of start-ups presented in this book have been selected on the basis of mainly four factors: (1) the novelty of start-upsā value proposition , regardless of their subsequent ability to execute it; (2) the heterogeneity of performance outcomes across cases, including cases of both successful and unsuccessful start-ups; (3) the heterogeneity of business models and value propositions across the sample start-ups; and (4) the richness of information we were able to collect about their story. In this regard, the cases of start-ups examined in this book should not be considered as representing a definitive or exhaustive survey.
In conducting our study, we took a historical perspective to gain insight into the long-term dynamics of smartphone start-upsā creation, growth, and eventual decline. A historical perspective allowed us to explore emergent patterns over the start-upsā life cycle and to explain what leads to success or failure.
We relied mainly on two means for collecting our data. First, we conducted semi-structured, one-on-one interviews with entrepreneurs and managers of the examined start-ups, as well as with managers of established handset vendors and with industry experts, from 2008 to 2017. Interviews were conducted both in person and via telephone.
Second, many secondary sources were used. For example, the Factiva and LexisNexis databases were used to search newspaper articles, mainly from business-oriented and technology-oriented media (e.g., Wall Street Journal, New York Times, Financial Times, Bloomberg Businessweek, Forbes). Other electronic documentation on the sample firms was searched on press releases, companiesā internal presentations, Web sites, and social networks. Moreover, various analyses of mobile phone vendorsā strategies and performance presented in the book were conducted by means of databases we created based on data acquired by research and advisory firms like Gartner Dataquest, Euromonitor Int...