Mobile Network Operators (MNOs) face a dilemma: they fund the networks and subsidize many of the devices that power the digital landscape, and yet they are mostly marginal players in new digital ecosystems such as social networks, search, app-stores, apps, video distribution, cloud-services and personal storage. Ironically, the very smartphones that are so central to MNO strategies threaten to accelerate this marginalization.

Digital titans have made mobile their primary battleground. Facebook’s weakness in mobile hurt its IPO, and as its mobile revenue has exploded, so has its stock valuation improved. Apple, Google, Amazon, and Microsoft are all increasingly anchored around mobile. Although the mobile battleground is varied, the primary front is in mobile applications (apps), both native and mobile web.

The battle for positioning is ruthless, hypercompetitive and ultimately arbitrated by users – even Apple had to bow to user preference for Google’s Map for iOS over its own version. Despite more than one million apps available and over 100 billion downloaded across the various stores, most users regularly use only 10-15 apps, and the top 100 apps drive 90 percent of revenue and usage. 

In this context, MNOs have fallen behind in their share of mobile user attention. Until the smartphone explosion, MNOs commanded virtually 100 percent of user attention, whether via voice or SMS or through pre-loaded (“on-deck”) content. By contrast, MNO’s presence today in the app space is at best marginal.  We are not aware of a single MNO app in the top 100 enterprise apps in the US, and globally most MNO apps languish far down in the charts. Even with core services such as messaging, third-party apps such as WhatsApp are gaining against MNO services, and voice is likely to face a similar fate as third party voice apps deliver equal or even superior experiences in 2013. 

MNOs have an imperative to become leaders in apps or they will face long-term consumer irrelevance as the app economy surges forward.  Estimates from NPD and Flurry bear this out: between 2010 and 2012, daily voice usage in the US has declined from 35 minutes to 20 minutes, while daily app/mobile web usage has surged from 133 minutes to 197 minutes. 

This is not to suggest that MNOs should seek to reclaim the content and gaming spaces where they are competitively disadvantaged. Instead, MNOs need to harness the multiple ways in which they already interact with users today – via TV, radio, newspaper, stores, online, SMS, email, call center, IVR, chat, and social networks – and integrate them into a smartphone-mediated experience.  This is what we call the “Gateway App Strategy.”

This Gateway App Strategy is based on three premises: Convenience, Capability, and Superiority

1. Convenience

Today, 30-50 percent of interactions between smartphone customers and MNOs are handled via a smartphone, even though this is motivated by convenience (as mobile devices substitute landlines and computers) more than by design. For example, estimates from Nuance and Critical Path suggest that more than 30 percent of calls to customer care are made via the mobile phone and more than 30 percent of MNO emails are opened on the phone.  By definition, 100 percent of MNO SMS are delivered by phone.  

2. Capability

Every interaction between a customer and an MNO can technically be intermediated in part or in whole via a smartphone, preferably via a Gateway App. For example, smartphones can enable a chat session or voice call with a service representative, schedule a store visit based on proximity or user preferences, or channel social network interaction via Twitter or Facebook. 

3. Superiority

A well-designed app experience can employ the processing power, usability and contextual awareness of the smartphone effectively enough to become the preferred mode of interaction across any channel. Just like Google, Facebook or LinkedIn’s apps are becoming the preferred mode of interaction with those brands, so should the Gateway App. 

MNOs possess compelling assets to leapfrog from app laggard to app leader. Moreover the migration can more than fund itself through significant savings in areas such as customer care calls. An operator with ten million subscribers could save between $30M and $100M a year in customer care call reduction alone by fully deploying a Gateway App strategy. After several decades of user experience fragmentation, in which users and operators communicate across an ever-growing number of disconnected channels, the Gateway App offers the first opportunity for a truly integrated experience.

Senior management needs to steel itself to overcome the many barriers to success, and lead their organizations to face the challenge of becoming “mobile-centered”. Without minimizing other priorities, the failure to properly participate in the mobile experience land-grab will consign the Mobile Network Operator to an ever-dwindling role in an app-centered economy.