Fortune favours the brave

As the 1990s came around, UK entrepreneur Charles Dunstone had recently started selling ‘car phones’ from his flat in London’s Marylebone. Two decades later and Carphone Warehouse is one of the UK’s great success stories, established as a major high street brand with overseas expansion in place through Europe to the USA.

But Dunstone, who remains co-founder and CEO of Carphone Warehouse, is humble about the firm’s origins and maintains that “generally what happens in the mobile business is anything that wasn’t anticipated.

“To understand the mobile industry you have to understand the history of it,” he says. “I didn’t really have any insight when I first started out in the business, I was really just stumbling around trying to make a living.” And if Dunstone is saying that his success was sheer fluke, he shares a similar attitude to other ‘accidentally’ successful players in the business.

“All through the history of mobile, everyone has failed to understand its potential and then they’ve failed to capitalise on it,” he says. “Yet the mobile business has succeeded in spite of the incompetence of the people running it.”

Going back to the early days of Carphone Warehouse and the arrival of his first business opportunity, Dunstone highlights Vodafone predecessor Racal, one of the UK’s first mobile licensees. “When the first mobile licences were awarded, Racal said it anticipated that one day there would be around 600,000 mobile phone users in the UK. Even the government thought they were being recklessly optimistic.” Today that number is close to 80 million, at nearly 130 per cent penetration.

The next thing to astonish was the success of SMS. It’s an oft-quoted story that the original spec for GSM was designed by engineers who thought it would be useful for the networks to be able to communicate with their customers. SMS fit the bill in this instance. “But one of the senior guys at Nokia revealed to me that when they first made a GSM phone they could not conceive of why anyone would ever use SMS,” Dunstone says. “But the engineers couldn’t decide whether the inclusion of the technology was optional, or a mandatory part of the spec, so they included it anyway just to be safe. So text messaging is 100 per cent accidental.

It’s unbelievable that SMS is so light in usage of the network, yet operators can charge so much for it. SMS was the start point for data pricing.” And again, the industry failed to capitalise on it until much later. “The success of the Blackberry is a great reflection of this. People couldn’t use data until a company came along and said ‘look here’s a device that lets you do email really well from a handheld’.” Yet Dunstone finds that this model is becoming increasingly challenged. He likens devices that are good at one thing to the Wang of the PC market. When the PC first arrived on the scent it couldn’t do word processing, so Wang filled the gap with an electronic word processor. As the PC evolved users moved away from devices that did just one thing really well and gravitated towards multi purpose gadgets.

“There’s been a transformation in the last three to four years. Fundamentally the incumbent players in the market have squandered their opportunity to such an extent that there’s a whole new tier of people that are now the most influential in the market. It’s the people who develop the operating systems, not those who operate the networks or provide the hardware,” says Dunstone, citing the impact of Apple and Google. “It’s a sad reflection on everyone else that it’s taken these new entrants to come in and show everyone else how to sell mobile data.”

The use of the mobile as a payment mechanism is a battle Dunstone believes the operators should be able to win as they are used to thousands of micro transactions. “But Apple has shown that if you can let people spend money so easily that they barely notice they’re doing it, they can pick your pocket £1 at a time. Whoever can consolidate on some kind of one click transaction, whether it’s Amazon or Apple or whoever is winning an enormous prize.”

And he believes more change is to come: “Fundamentally, mobile-only platforms feel like they’ve had their day. Today people want to use their phone to get to the service they want and the days of the mobile operator being able to force people to do things their way has been very much discredited.

“Users of smartphones are not just users of phones, they are users of every other type of technology too. We’ve found that 52 per cent of people calling into a call centre are already browsing the site of the company they are calling on another screen. So you have to understand that when someone’s talking to you they’re also checking your site and your competitors’ sites at the same time. And we all have inconsistencies in the way we present information via different channels. You have to have a homogenous service offering across all the different channels,” he says.

“Mobile is complementary to the desktop internet experience and it’s commonly used by savvy and high tech users. You get very targeted responses from people because they are not just browsing, they are looking for something specific. So conversions over the mobile more valuable than those from desktop. The only way to succeed in this industry is via experimentation—and fortune favours the brave.”