The Mobile Revolution: How Mobile Technologies Drive a Trillion-Dollar Impact

The Mobile Revolution: How Mobile Technologies Drive a Trillion-Dollar Impact

          
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The Mobile Revolution: How Mobile Technologies Drive a Trillion-Dollar Impact

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  • Growth Engine for SMEs

    Because SMEs are the principal growth drivers of so many economies around the world, the research for this report included a comprehensive study of the relationship between SMEs’ adoption of mobile technology and their performance. We surveyed approximately 3,500 SME decision makers in the U.S., Germany, South Korea, Brazil, China, and India—six of the world’s largest and most diverse economies—and took an inventory of their companies’ mobile adoption levels. We focused on mobile technologies used for marketing and sales (such as mobile apps) and those used for operations (such as mobile data collection or fleet management). (See our detailed survey methodology in the appendix.)

    In many economies, SMEs are responsible for up to 65 percent of all jobs, according to the Organization for Economic Cooperation and Development. Due to the importance that SMEs have in the economy, we examined the practices that set SME mobile leaders apart, and we assessed the sizable potential opportunity for national economies through increased SME adoption of mobile technologies.

    In both developed and emerging markets, we found that mobile has been widely adopted by SMEs. Of the small businesses we surveyed, 90 percent report that their top managers use mobile devices regularly. And 50 to 70 percent of these companies pay for the cost of mobile devices and/or service costs for their employees. But while SMEs report high levels of adoption, they vary widely in their level of engagement. Whether in emerging or developed markets, SMEs that have embraced advanced, data-driven mobile capabilities have fared better than their peers.

    Leaders and Laggards

    For a subset of SMEs that we call mobile leaders, mobile has proven to be an enormous boon. These companies stay ahead of mainstream mobile adoption, riding each new advance to improve productivity and efficiency in operations, connect with new customers and markets, and compete with much larger players. Mobile leaders employ the full range of available tools, such as basic productivity tools (voice, text, and email), operational tools (real-time job tracking or mobile data analytics), and sales and marketing tools (mobile-friendly website or company apps). These mobile capabilities allow them to be more innovative and, in some cases, fundamentally transform the way they operate.

    At the other end of the spectrum there are mobile laggards. Mobile laggards generally have low levels of technology adoption and limited mobile presence. Laggard SMEs have not yet integrated well-established tools into their business models, much less explored the benefits of more sophisticated technologies, such as a mobile app or mobile data-capturing tools.

    According to our research, approximately one-third of SMEs fall into the category of mobile leaders, and these leaders are demonstrating exceptional performance relative to both followers and laggards. (See Exhibit 6.) (More precise definitions of these terms are provided in the appendix.)

    exhibit
    • Mobile technologies level the playing field, often allowing mobile leaders to grow faster than the economy as a whole.
    • Mobile leaders have grown revenue up to two times faster than laggards and have added jobs up to eight times faster over the past three years.

    Mobile leaders report much greater benefits than laggards in terms of increased revenue, efficiency gains, and innovation. This is due, in part, to the fact that mobile leaders can reach more customers and engage with them through additional channels, increasing opportunities for marketing and sales. Leaders also use devices to increase productivity, through on-the-go mobile data capture, dashboards that share real-time information, enterprise apps, and other applications that smooth operations. (See Exhibit 7.)

    exhibit

    SMEs in emerging markets have benefited enormously from mobile and have a higher percentage of leaders overall than their counterparts in developed markets.

    • In Brazil, China, and India, 25 to 30 percent of SMEs surveyed are mobile leaders, as opposed to only 14 percent in Germany.
    • Approximately 75 percent of emerging market SMEs surveyed report that mobile has helped them grow revenue, become more efficient, and be more innovative (compared with only 50 percent of SMEs in developed markets).

    Many factors contribute to the higher number of mobile leaders in emerging markets than in developed markets. For many consumers in emerging countries, mobile is their only portal to the Internet, making it more crucial for SMEs to create a strong mobile presence. Likewise, mobile is truly transformational—allowing emerging market SMEs to leapfrog an entire generation of technology and directly develop business models or operational tools for mobile platforms. Without complex legacy systems requiring integration with mobile technologies, these SMEs have an easier path to embracing mobile. Finally, mobile has served as a great leveler for SMEs, allowing smaller players to compete on an even footing with larger enterprises. Apps developed by solo entrepreneurs or small businesses can stand toe-to-toe with apps created by technology giants like Apple and Google.

    Benefits of Narrowing the SME “Mobile Divide”

    The “mobile divide” between leaders and laggards—that is, the difference in growth associated with a disparity in mobile adoption—is poised to increase going forward. According to our research, approximately 60 percent of mobile leaders report that investing in mobile is a top priority compared with only 15 percent of mobile laggards. Most SMEs report that having a mobile presence is quickly becoming a must-have to attract customers, but a significant portion of small businesses are falling behind.

    Narrowing the divide could be especially important in countries like South Korea, where SMEs have struggled to compete against large conglomerates in recent years. Because access to mobile technologies is a powerful enabler of economic and social development, it is essential that the divide between mobile leaders and laggards be narrowed.

    In the six countries evaluated, closing the mobile divide among SMEs could add 7 million jobs over the next three years—more than the total number of mobile value chain jobs in these countries. It could also increase GDP growth by 0.5 percentage points and help reduce unemployment by more than 10 percent. (See Exhibit 8.) In countries like Germany or the U.S., where high unemployment has been a problem over the past five years, closing the mobile divide could help reduce unemployment by as much as 15 to 30 percent.

    exhibit

    Given the importance and size of the SME sector, governments that fail to encourage growth among SMEs today will face job stagnation tomorrow. Governments must foster the right conditions in order to fuel the growth of the next billion-dollar enterprises. (See Ahead of the Curve, BCG report, October 2013.) For these reasons, there is a need for strong policies aimed at tackling the mobile divide head on.

    Case Studies: SMEs Seize the Mobile Advantage

    To better understand how mobile technologies spur economic growth for SMEs, it is useful to examine how mobile has changed the way small businesses and solo entrepreneurs do business. Below we provide three examples that show how small businesses are using mobile technologies to attract new customers, earn more revenue, and fetch the best prices for their goods.

    Crowdsourced Reviews: Leveling the Playing Field for Small Business. Small businesses are constantly looking for ways to set themselves apart from larger competitors. Crowdsourced referral apps like Yelp in many countries, or Siksin Hotplace in South Korea, give small businesses the chance to stand out among their peers (even if their peers have much deeper pockets) and gain customer trust.

    In the U.S., 30 percent of businesses report that a large portion of their customers come from referral apps like Yelp. According to a BCG survey of nearly 4,800 small businesses, companies that had a Yelp profile but did not advertise on the site nevertheless reported generating incremental revenues of $8,000 annually from Yelp—a kind of passive halo effect. The return is even more powerful for small businesses that actively shaped their digital presence through advertising campaigns on Yelp. The survey found that those companies achieved an average uplift in annual revenue of more than $23,000. (See “Unlocking the Digital-Marketing Potential of Small Businesses,” BCG article, March 2013.) According to Matt Halprin, vice president of business operations and strategy at Yelp, “Around 50 percent of all our searches now come from mobile devices, highlighting the importance of mobile for us.”

    Referral apps can be effective for a wide range of small businesses. One dentist we interviewed reported that in a single month more than 1,000 people visited his practice’s Yelp page. A restaurant owner in South Korea uses Siksin Hotplace to optimize his inventory, saying: “There is no turnaround time. If I realize I have too many ingredients for a day, I can offer online coupons for the night in a few minutes. And customers love to use the coupons, not only because these are good deals, but also because they know the food will be great from many reviews from nearby customers.” The transparency and immediacy of feedback, coupled with the ability to refine marketing and promotional techniques to reach nearby customers, make these mobile apps a powerful tool for SMEs.

    Mobile Payments: Moving Toward a Cashless Society. Mobile payments have unlocked enormous benefits for microbusinesses, small merchants, and solo entrepreneurs, by enabling easy point-of-service sales. Global mobile payments are expected to reach $630 billion worldwide in 2014, up from $170 billion in 2010, according to Juniper Research. Easy-to-use, low-cost mobile payment solutions (such as Square) allow small businesses to make sales anytime, anywhere. In emerging markets, with high mobile penetration but low penetration of bank accounts, online payment solutions enable many new opportunities for small businesses.

    For a taxi driver interviewed in Brazil, mobile payments have not just saved him money, they have increased his sense of security. He uses Cielo, a mobile payment solution, to handle transactions with customers. Before mobile payments, he conducted business with cash only. When he lacked correct change for customers, he sometimes lost revenue. Worse, when he had large sums of cash in his cab, he often felt vulnerable to thieves. He now carries a minimal amount of cash in order to conduct business, which facilitates easy transactions with customers and enhances his sense of well-being on the job.

    mFarming: Bringing Mobile into the Field. Mobile technologies are enabling farmers to manage their business better. In India, for example, farmers are often located too far from an urban area for fixed line connectivity, limiting access to information about pests or diseases, soil conditions, or current market prices. mKrishi, a mobile app, enables farmers to receive proactive, personalized crop advice as well as periodic, weather-specific alerts on how to protect against pests or when to harvest. Farmers using the tool have increased their productivity by 15 percent, according to mKrishi. One farmer we interviewed reported that use of mKrishi doubled his tomato yield from 800 crates per acre to about 1,600 crates per acre. Another said, “mKrishi has reduced my costs by about 50 percent.” Noted economist Jeffrey Sachs called mobile the greatest tool for poverty alleviation ever invented. As the world’s population grows, mobile farming technologies will become essential.