“2010 will be the year of LBS”. Well it’s about the end of November and we can start changing the song to “2011 will be the year of LBS”. And as if Location wasn’t enough we added Indoor LBS to the mix. Everybody speaks about Indoor Navigation, and most of them refer to a completely different concept

The business opportunities

Most of the Interactive Maps apps are primarily themed for Malls.

From the marketing perspective and looking at the “mall potential users” we see that only 17% of the population has a smartphone, and close to 31% of mobile internet services users are female. That means only 5.27% of the population are females using mobile internet services. From the total of female smartphone users only around 21.5% use some kind of location services. That leaves us with target market of 1.1% of the mobile phone owners. Mall demographics show that females outnumber males 2:1, and in most cases they shop in places that are familiar to them. That means that about 1 out of 100 customers entering a mall is a POTENTIAL user, and if you consider that these apps are only available for certain phones, the target market is even smaller. Can you imagine a customer that visits the same mall every week, turns on the wi-fi to navigate to a store he/she knows?

From a mall application I would expect more. I would like to be able to enter a specific product, and have the app connected to the stores’ actual inventories. Look for prices, show me the places where I can have it now, and even offer alternatives. It’s not about finding a store; it is about helping the users to find their way to the products they want.

At this point of time, Indoor Navigation shouldn’t be the focus. Positioning interactive maps as such is a much better strategy, as the users receive what they have been told, and a small commercial ecosystem can be built around that concept.

Interactive maps can better serve other indoor venues. A clear example is trade shows, where there is a larger concentration of Smartphone users, there is a need to locate places in a venue that is totally unfamiliar, and the opportunities for advertising are larger.

The Boy Who Cried “Navigation”

I was recently putting in order my library and I found a very old book with Aesop fables. It was one of my favorites as a kid. Here is an adapted version of one of them:

“…There once was a developer boy who sat on his Mac, sipping a latte and watching the village customers pass by. To grab their attention he took a great breath and sang out, “Indoor Navigation! Indoor Navigation! We have Indoor Navigation!” The villagers came running and installed the app. But when they arrived to the mall, they found there were interactive maps only. Later, other developer girl sang out again, “Indoor Navigation! Indoor Navigation! We have Indoor Navigation!” To her delight, she watched the villagers installing the app again. When the villagers, familiarized with their TomToms and Garmins, saw they have turn by turn directions but not the same customer experience sternly said, “Save your happy song for when there is really navigation, like in our cars!” Later, a third one released an app that worked exactly like the GPS in our cars. Excited, he leaped to his feet and sang out as loudly as he could, “Indoor Navigation! Indoor Navigation! We have Indoor Navigation!” But the villagers thought they will not receive what they expect, and so they didn’t install the app at all. The End.”

Let me be clear at this point. I have seen amazing apps coming to the market during the last year, with huge investment, lot of work behind, and some of them with a real value proposition. My point is that we need to create a common language that will allows us approach the market without confusing the users and the customers, and in a way “killing the golden goose” (as Aesop would say)

Can we agree on the definitions?

What do I expect to receive from a basic Indoor Navigation app? 1) An app that automatically identifies where I am and shows me an updated layout 2) After determining my destination the device will find the best route 3) While moving towards my destination the map will show my movements without my intervention 4) If I take the wrong route, the device will notify me and create a new path 5) The device will notify me when I arrived to destination.

If your car GPS device would require from you to input where are you, move the map manually, figure out if you are in the right path, guess if you arrive to destination, etc. we would agree that by today’s standards, we will not call that navigation. So why call that user experience “navigation” indoors?

The best way to describe what we have today is “Interactive Maps”. Interactive maps include all the features you can find in apps today. Search and discover, turn by turn directions, locate products and services, identify facilities, ATMs, and other POIs. Look for an exhibitor in a trade show. Find your gate in the airport, and the eateries in your way there. Trigger promotions to consumers when they enter the vicinity of a store, and many more. In a stretch you can call it “Indoor Location Services”, just don’t call it “Navigation”.

Crossing the chasm to real indoor navigation

Are we ready today to provide indoor navigation? Technically maybe. Practically?… I doubt it. For real indoor navigation, as defined above, you must have certain hardware infrastructure. In order to approach a mass market, there will be a need to create a hardware infrastructure for each site, which will most probably be based on Bluetooth.
You need to identify the right venues, analyze if users will have a compelling reason and benefit from the use of indoor navigation, and create a business model that will maximize the profits.
The third component is accuracy. If I’m looking for an exhibitor in a tradeshow, I need at least 10 foot accuracy.
The most viable way to make this happen is having companies like Google, Motorola, Cisco, Nokia, etc. take the lead on developing and providing the required infrastructure. Companies like AT&T, Verizon, etc. may take the installation and maintenance of the infrastructure. There resides the real market opportunity. When this happens, the interactive map applications will get an additional layer of relevancy. Most probably at that point of time the companies that develop, install, and maintain that infrastructure will claim the larger share of the benefits

Last Aesop reference

If Location Based Marketing is in its infancy, Indoor Navigation is in the gestation stage. We don’t know what it will look like, or who the leading players will be. We know not what the standards will be or who will determine them. What I know is that today we have high-quality interactive maps and we can enjoy them in many places. Those apps, while presented and sold correctly, can provide a very good income stream.
At the end of the day, to make Indoor Navigation possible and profitable, we need to create an environment with a compelling reason for users to adopt this technology i.e. users that receive a real benefit; it should 1. Be targeted to a mass market; 2. Provide a product that is comparable to our standards for outdoor navigation, and without a doubt 3. Be based on some kind of external infrastructure. Those that claim you don’t need any of these may fall in the category of “sour grapes” (and that was my last Aesop reference).

Is Indoor navigation a viable business? What are the main business factors that will determine the broad adoption and success of indoor navigation solutions?

A few months ago I wrote an introduction about the opportunities in indoor navigation. Please read the comments as every single one adds an additional piece to the puzzle. My question today focuses more on the business perspective and less on the technical solutions. Who can make it happen? What can we learn from the evolution of Location Based Services in general and Personal Navigation in particular?

Inferences from the LBS industry

If you look at the automobile industry, you will find a defined ecosystem with clear roles and niches. There are auto makers, spare parts manufacturers, dealers, authorized shops, independent mechanics, parts distributors, etc. There are also customers that know exactly what they want. You, the customer, can actually enter any dealer and leave driving.

While comparing the LBS industry with the Auto industry, my impression is that in the LBS industry you have many Auto Parts manufactures, but no Auto Makers. If you want to provide a service (drive anything), you need to buy parts and preassembled kits to build your own car and hope that every piece is compatible with the other. Moreover, when you need a “LBS mechanic”, they usually know how to fix specific parts for specific models. Does a LBS ecosystem actually exist?

“…While comparing the LBS industry with the Auto industry, my impression is that in the LBS industry you have many Auto Parts manufactures, but no Auto Makers…”

James Moore introduced the concept of business ecosystem in 1993. In his book “The Death of Competition” (1997-p26) he defines ecosystem as:

“…An economic community supported by a foundation of interacting organizations and individuals—the organisms of the business world. This economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organizations also include suppliers, lead producers, competitors, and other stakeholders. Over time, they co-evolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments and to find mutually supportive roles…”

Can we include the LBS industry into this definition? Are there any organizations that foster the “LBS world inner laws of nature”? Are there any central companies that the community look as leaders and is aligned to? Are those companies leading us to a shared vision? Is there any shared vision?

“…Are there any [LBS] central companies that the community look as leaders and is aligned to? … Is there any shared vision?…”

In his 1993 paper “Predators and Prey – A new Ecology of Competition” published at the Harvard Business Review, Moore identifies 4 distinct stages for an ecosystem: birth, expansion, leadership, and self-renewal or death. During the birth of an ecosystem the companies try to figure out what customers want, the value proposition, and how to deliver it. After so many years the new LBS industry is in the dawn of the birth stage, trying to figure out the differences between users and customers, how to create cooperation channels and dreaming about certain standards that can unify the community to the second stage (expansion) where suppliers and partners work together to achieve a mass market profitable for all.

Indoor Navigation – The Big Bang

The indoor navigation is – literally – an uncharted territory. There are a few companies that started to produce small components, filling localized and specific needs.

In order to materialize as a profitable business a leader must emerge. This leader will set the roots of the indoor navigation ecosystem, provide the platform technological direction and create the conditions where developers, providers, consultants, contractors, customers and others can gain some benefit.

Going back to Moore, there are two conditions for an ecosystem to expand “(1) a business concept that a large number of customers will value; and (2) the potential to scale up the concept to reach this broad market”. I’m convinced that condition number 1 already exists. The challenge is to identify the organization with the capability and willingness to scale up the concept to a mass market.

There are many companies in the market capable to implement core technologies, foster innovation, attract partners to cooperate and support the right birth and growth of the indoor navigation ecosystem. The only question remains, as usual, where is the money? What are the business models that will support the ecosystem? This is the topic for a third article; and if you consider your company as a viable candidate to lead this new business opportunity I’ll be glad to exchange some ideas with you.

@schapsis Indoor Navigation: The new Gold rush? Part-2 – Ecosystem and opportunities. www.bdnooz.com http://ht.ly/1Q6EP

Comparing D LBS & D Auto industry, my impression is: D LBS industry have many AutoParts manufactures, but no Auto Makers http://ht.ly/1Q6EP

Are there any LBS companies that the community look as leaders and is aligned to? Is there any shared vision? http://ht.ly/1Q6EP

Is Indoor navigation a viable business? What R D main biz factrs that will determine D adoption of indoor navigation? http://ht.ly/1Q6EP

The navigation ecosystem is changing rapidly. I’ve mentioned in previous posts the consequences of the commoditization of GPS devices. During the last two weeks, I had the opportunity to read many articles about how the navigation market is changing.

This is a time of WAR.

The New York Times published in October Stops and Starts of GPS Apps “… those portable devices [GARMIN TOMTOM etc] are under attack from a new source: the smartphone, and particularly Apple’s iPhone. The newest version of the iPhone’s operating system supports turn-by-turn navigation …  According to a report from the iSuppli research firm, GPS applications for smartphones are about to explode, growing from 2.5 percent of users today to 10.5 percent in 2013. And half of those will be iPhone owners…”

Even Forbes Magazine refers to this trend in warfare terms Google’s Navigation Bombshell “…Location-based service providers suspect the search giant is working on a free navigation app… Google, which generally gives its software away for free and recoups its investment through advertising, would likely sell ads within the navigation application rather than charge users… In early October, Google decided to use this data for its U.S. maps, ending a licensing agreement with map provider Tele Atlas…The shift is telling because companies like Tele Atlas require partners (such as Google) to pay fees for each person who uses their data…”

Having Google in the market with free navigation applications redefines the battle. Companies will need to be really brave to fight this giant. Without any doubt Google gave a completely new meaning to “The Land of the FREE and the home of the Brave”…

If War is what we are speaking about, Sun Tzu teaches us three valuable lessons. The first is that “…in war, numbers alone confer no advantage…”.  The second is that “…as flowing water avoids the heights and hastens to the lowlands, so an army avoids strength and strikes weakness…”, and the third is that “… those skilled in war subdue the enemy’s army without battle …. They conquer by strategy…”

If this is about strategy, this is my game!

Avoiding the competitor’s strengths and striking at their weaknesses

All (accurate) navigation systems are based on GPS data. If the weakness of GPS receivers is that they need a clear view to the sky to successfully determine location, the strategy is to attack the indoor world. Additionally, the GPS accuracy lies between 50 to 500 feet, the strategy then is to find customers that need higher accuracy (~10 feet). The third, but not the last weakness, is the need for maps. As we saw before, Google has generated large amount of map data, and in general the market is dominated by TeleAtlas and Navteq. The strategy is to navigate to “uncharted territories”.

Redefining the Battleground – Embracing indoor navigation.

A few weeks ago I was approached by an inventor with a (published) patent. The general idea calls for an indoor navigation system that uses no GPS data. His idea is very good and to my judgment relatively easy to implement.

The system automatically detects a signal directly from sensors, without requiring the communication with a central system, data plans, or even cellular communication. These sensors are small pocketsize Bluetooth transceivers. There is no need for pairing as every Bluetooth device’s tag has a unique ID. This ID can be used for locating the tag.

Indoor navigation – A winning strategy that redefines the navigation ecosystem?

There is infinite number of indoor navigation applications. The most intuitive one is a person walking into a mall that wishes to locate a specific store, or a particular aisle in a department store or even a specific item on a shelf! From here, you can apply the same principle to a customer looking for a specific conference room, a particular booth in a tradeshow, a ride in an amusement park, or a known piece of art in a museum. If not for the convenience, do it to save a tree. No more printed maps. Go Green!!!

The advantage of using Bluetooth is that this technology is ubiquitous, it’s implemented everywhere. Additionally, is a low cost, low power technology, and when it’s relatively free of obstruction it can provide a ~2 meter error range. Furthermore, a Bluetooth infrastructure can be used for purposes like remote monitoring and control among others.

The ecosystem is completely redefined. An architect with CAD drawings is now a map provider. Every single facility is now a navigable site. Every big retailer willing to drive customers to specific products is a potential customer (they can “route” them through the sales isles if they want).  Every shopping property management firm is a customer, as well as convention centers organizations or associations like the Global Retail Executive Council.

We have an ecosystem where the traditional navigation giants are not necessarily present, and there is no defined leader (yet-11/09).

The business opportunity – define a new market

Indoor Navigation redefines Location Based Services as we know them today. The first companies to enter this market will be able to define, create, implement and license ($) new standards and applications. Imagine this: I installed an indoor navigation application in my phone/PDA and subsequently downloaded the map of the mall I usually go to. Next week I’ll visit San Francisco, and upon arrival I would like to visit a local shopping center, or use it at the convention I’ll attend. My application will be useful ONLY if the map of that SF mall or convention center is compatible with the one installed in my phone. For sure I’ll NOT install an additional application per site I visit. This is just the tip of the iceberg.

Sounds interesting? Ring a bell? Would you like to exponentiate these ideas?  Maybe invest time AND money?

Give me a call! (And leave your comments).