The i-mode Wireless Ecosystem
The i-mode Wireless Ecosystem Takeshi Natsuno 2003 John Wiley & Sons, Ltd ISBN: 0-470-85908-3
The i-mode Wireless Ecosystem Takeshi Natsuno Managing Director, i-mode Strategy NTT DoCoMo, Inc. Japan
Translated by Ruth South McCreery The Word Works, Ltd. Yokohama, Japan
a` la i-mode by Takeshi Natsuno, Copyright 2002 by Takeshi Natsuno, originally published in Japan by Nikkei BP Planning Inc. Copyright 2003
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About the Author
Takeshi Natsuno Managing Director, i-mode Strategy NTT DoCoMo, Inc. Takeshi Natsuno is directly responsible for all of strategy i-mode, the world’s largest wireless Internet service, with more than 34 million subscribers. After he graduated from Waseda University, he first joined a leading company in the Japanese energy industry. After gaining extensive experience in real estate development projects there, he entered the Wharton School at the University of Pennsylvania and earned an MBA. Before he joined NTT DoCoMo in 1997 to launch the widely i-mode service, he was an executive vice president at an Internet start-up company from 1996 to 1997. He is well known as the founder of i-mode and was selected as one of the 25 most influential e-business leaders worldwide by Business Week in 2001. He has also written i-mode Strategy, the predecessor to this volume (John Wiley & Sons Ltd, 2003).
Many of the product and company names mentioned in this book are trademarks or registered trademarks. The symbols and have, however, been omitted in the text.
Contents
About the Author
v
Preface to the English Edition
xi
Introduction
xiii
1 A Value-Generating Ecosystem 1.1 From Concept to Reality 1.2 An Ecosystem Model that Generates High Added Value 1.3 DoCoMo’s Role in the Ecosystem 1.4 The User Experience is Critical 1.5 A Lubricant: The De Facto Standard 1.6 Another Lubricant: The Experience of Success 1.7 Why not so Successful Overseas? 1.8 A Value Chain not Found Elsewhere 1.9 A Suggestion for Multichannel Television 1.10 The Ecosystem Idea: An Infrastructure-Type Business Essential 1.11 i-mode: The Potential Grows Postscript: Learning from Failure
24 26 29
2 The 2.1 2.2 2.3 2.4
33 33 35 39 42
i-mode Effect Creating a Market, Changing Society The Digital Content Market Develops Distributing Content: A ¥100 Billion Business Advanced Mobile Phone Technologies
1 1 3 5 7 11 14 17 19 22
viii
2.5 2.6 2.7 2.8
The i-mode Wireless Ecosystem
Manufacturers Combining Forces Initial Public Offerings (IPOs) and New Subsidiaries Boosting Internet Usage in Japan Dating Sites, Spam: The Tribulations of Success Postscript: Comebacks
3 Ever-Evolving Mobile Phones 3.1 The Drive for Individuation 3.2 The Charm of Customization 3.3 Java Opens out Mobile Phone Uses 3.4 Setting Mobile Phone Specifications – a la i-mode 3.5 The Next Evolutionary Step: Born through Positive Feedback 3.6 Reading in Cards by Infrared Postscript: Java – Success out of Disaster
50 51 56 57 61 65 65 68 71 76 78 80 82
4 Connection with the Real and the Realistic 4.1 From the Street 4.2 High Tech? Not Necessarily 4.3 Printing Service: Step by Step 4.4 Proven Advantages: Our Tie-Up with Coca-Cola 4.5 Sega: New Games Using Mobile Phones 4.6 D2C Builds a Mobile Advertising Market Postscript: Look-Alikes? PlayStation and i-mode
87 87 90 94 96 102 106 109
5 i-mode and the Battle for Net Supremacy 5.1 Real Use Begins Now 5.2 Untouched Territory for the Internet 5.3 Where i-mode is Going Next. . . 5.4 Progress on the Vertical Dimension Spurs Horizontal Progress 5.5 AOL Targets Aggregation 5.6 And Microsoft too 5.7 Those Who Provide the Circuits: A Hard Life, with No Added Value 5.8 The Theory of Horizontal Specialization: In Our Interest? 5.9 Similar, but Different: AOL and Ordinary ISPs 5.10 Is there an Opportunity for Manufacturers?
113 114 116 120 124 125 126 130 132 133 135
Contents
5.11 Fractal Structures: The Internet and the Real World 5.12 Business Opportunities through Links to the Real World Postscript: Justice and Generosity in the IT World?
ix
137 140 144
6 i-mode for the World 6.1 From Japan to a Global-Scale Ecosystem 6.2 Why Take i-mode Overseas? 6.3 The Nursery School Model 6.4 Difficulties in Achieving Consensus 6.5 The First Step, Customized Straps 6.6 Early Results of i-mode’s Overseas Expansion Postscript: Marrying off a Beloved Daughter
149 149 151 153 155 156 158 161
Afterword
165
Further Reading
167
Index
169
Preface to the English Edition
i-mode continues to evolve. We are working nonstop to develop attractive new services that will make our subscribers’ lives more convenient and enjoyable. For example, in February 2003, we forged an alliance with Macromedia, the developers of Macromedia Flash, the multimedia-authoring tool widely used to add excitement to wired-Internet Websites. Our plan is for i-mode phones that ship from mid-2003 on to have Flash Reader installed, for access to Flash graphics. Compared with older technologies (animated GIFs, for example), Flash delivers a greater variety of animated effects more smoothly. It will also benefit our subscribers by compressing what would have been multiple data files into one. Efficiency, good looks, and 3D: Flash will facilitate the creation of a new wealth of content, delighting subscribers and developers alike. Almost all recent i-mode phone models also have infrared ports, for wireless short-distance telecommunication. By combining that feature with Java and Sure Sockets Layer (SSL), a protocol for transmitting documents securely over the Internet, we can enable our subscribers to make small payments using their mobile phones. Now subscribers can buy, say, CocaCola from vending machines without ransacking their pockets for coins. The infrared port also enables the phone to be used as a remote control for a television or video player. In this book, I describe one such use, in karaoke on demand. The singer does a search for the song he wants to perform, downloads its tune number, and then, when it’s his turn to sing, transmits that number to the karaoke machine.
xii
The i-mode Wireless Ecosystem
While those who give priority to technology over utility are still talking about the wonders that wireless technologies such as Bluetooth and contactless Integrated Circuit (IC) cards will bring, i-mode’s infrared interface is already delivering a real success story: a convenient new service that fuses the cyber and real worlds. Never mind that infrared is a more primitive technology; real success stories come first, and then technology will catch up. As technology evolves, we will see more and more applications bridging the cyber and real worlds. Meanwhile, i-mode has begun to spread globally. When I was writing the Japanese version of this book, i-mode services had already begun in Germany, the Netherlands, and Taiwan. In the second half of 2002, they were joined by services in Belgium and France. And Samsung, the Korean electronics giant, has joined the ranks of manufacturers developing i-mode phones. As I explain in this book, the driver behind i-mode’s growth is its vigorous ecosystem. The i-mode ecosystem brings together skills, creativity, and resources in a vast range of fields and industries, in everything from content creation to phone manufacturing and service provision. I look forward to new synergies in the i-mode ecosystem as i-mode expands overseas. Ecosystem thinking is not unique to the mobile phone industry; it is applicable to all industries, indeed, all societies. As I explained in i-mode Strategy, the predecessor to this book, emergence, self-organization, positive feedback, and increasing returns – the four key elements in complex systems theory – have energized the i-mode ecosystem. I will be delighted if either of my books help you use complex systems and ecosystem thinking to energize your own business. Takeshi Natsuno
Introduction
On May 15, 2002, I was having dinner with senior executives of France’s third largest mobile telecommunications provider, Bouygues Telecom, who had decided to launch the i-mode service for their subscribers. We were dining at Tastevin in Tokyo’s Minami Aoyama, a restaurant that is my personal hideout, my secret meeting place. You might not guess from its modest location, but the restaurant is spacious, its wine cellar large, the cooking delicious, the private dining rooms pleasant – and it has eight sommeliers! Watching my guests murmur ‘tres bien’ again and again over the food and wine, I was struck by more than their enjoyment. I found myself appreciating the deft, shrewd genius of Japan. Among the relatively few restaurants I know well, two Cantonese establishments – Shimpei in Tokyo and Kuramata in Osaka – are excellent examples of the Japanese quality I was thinking of. Both are so outstanding, they move one to experience awe over the wonders of non-Japanese food in Japan. Japan has many superb foreign restaurants, and many of them go beyond replicating the flavors of the country in which their cuisine originated. By starting with an imported recipe, rearranging it, adding new spices, cooking methods, and ingredients, they give it a subtly Japanese spin, creating original and wonderful flavors. They are deftly creating utterly new value. That goes for i-mode, too. The technologies behind mobile phone systems are multinational. The Internet technologies are, in large part, from the United States; in fact, the routers and servers i-mode uses were made
xiv
The i-mode Wireless Ecosystem
there. Much of our business plan and basic marketing theory was based on ideas from the West. We selected elements from throughout the world, combined and rearranged them, added some ideas of our own, and created utterly new value – in the form of the mobile Internet. A restaurant’s value does not, of course, depend only on the food it serves. The attractiveness of its interior, the service, the customer base, the tone and manner of the restaurant – together, they form a single living being. Its cuisine may originate in Tokyo or Toulouse, but what matters to those dining there is how the combined influences of the restaurant owner, chef, staff, interior designer, and customers act together to determine the outcome. That is true of i-mode as well. Mobile and Internet technologies alone did not make it a success. Content providers, manufacturers, DoCoMo, and our subscribers all interact, influencing each other to create this new service; they are all part of the value chain. In my earlier book (i-mode Strategy, John Wiley & Sons, 2003), I used the concept of complexity to explain the strategy behind i-mode. Now, a year and a half later, I have written about what sorts of markets i-mode, now a big player in the Internet world, has created, and what our vision for its future development is. This new book is intended not to be just another Internet business book but to be full of ideas that will be applicable to all aspects of the information technology industry. I hope my readers find it useful. At Tastevin, Mr. Fujita, one of the sommeliers, approached our table, smiling as usual. ‘Is the European version of i-mode going to be tres chic? Hmm, looks like the phone is a little larger.’ The picture of curiosity, he went on ‘But that reminds me: What functions have you loaded on the 504? If I buy it, which version is best? The N? The P? What about the SO? Have you got any other tricks left to add to the 505?’ He was followed by the senior sommelier, Mr. Kuroda, who also runs his own wine auction site. ‘You’re giving these gentlemen from France our cooking and a Napa Valley Cabernet? The day we can use i-mode in Paris can’t be far off.’ He had touched on something quite profound. i-mode was about to spread its wings in distant climes. I was about to see my life’s work, my
Introduction
xv
objective – making the world more convenient and more fun – realized on a global scale. Yes, I was determined to do it. Silently toasting that decision, I picked up my glass of a very special Dominus and drank it down. Takeshi Natsuno
Chapter 1
A Value-Generating Ecosystem . . . the complex whole may exhibit properties that are not readily explained by understanding the parts. Stuart A. Kauffman. At Home in the Universe: The Search for Laws of Complexity (Oxford University Press, Oxford, 1995), pp. vii–viii.
1.1 From Concept to Reality February 22, 2002: three years after the launch of i-mode, we celebrated its third birthday with a party at a Tokyo hotel. By then, the number of i-mode subscribers had soared from zero to over 30 million (Figure 1.1). In a mere three years, 30 million i-mode subscribers . . . compare that with the 18 years it took non-Internet-capable mobile phones to reach the 30-million-subscriber mark in Japan. Or consider that, as of February 2001, eight years after the start of commercial Internet service in Japan, only 32,600,000 persons had Internet accounts – including those accessing the Net via i-mode and other mobile phone services, according to the Internet White Paper 2001 (Internet Association of Japan, published by Impress). Compared either with mobile phones prior to i-mode or with the wired Internet, i-mode spread at a rate that was truly extraordinary. The i-mode party drew about 1,500 guests: DoCoMo people involved in the project, plus manufacturers of mobile phones, content providers, The i-mode Wireless Ecosystem Takeshi Natsuno 2003 John Wiley & Sons, Ltd ISBN: 0-470-85908-3
2
The i-mode Wireless Ecosystem (Unit:1 million) 32 Over 30 million (Dec. 25)
30
Over 25 million (July 1)
25
Over 20 million (March 4)
i-mode subscribers
20
Over 15 million (Nov. 22)
15
Over 10 million (Aug. 6)
10
Over 7 million (May 26)
5
Over 5 million (March 15)
Over 3 million (Dec. 23) Over 1 million (Aug. 8)
0 Feb. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. 1999
2000
2001 2002 (Source : DoCoMo)
Figure 1.1 Explosive i-mode subscriber growth.
server manufacturers . . . the guests came from a wide variety of worlds. It is unlikely, in fact, that they would ever have been in the same room together if they had not all been involved in i-mode. The highly diverse and multitalented group present was, I believe, precisely why i-mode was able to captivate so many subscribers in so brief
A Value-Generating Ecosystem
3
a period of time. DoCoMo could not have done it alone. We could not even have manufactured all those handsets by ourselves. And what about the content that draws people to i-mode? We would have been utterly unable to create the tens of thousands of services and types of content now available to i-mode subscribers.1 The party participants, a small sample of the many persons who helped make i-mode possible, gave us a keen sense of the source of i-mode’s vigor.
1.2 An Ecosystem Model that Generates High Added Value ‘Why has i-mode grown so big, so fast?’ is a question I have been asked repeatedly ever since the number of i-mode subscribers started surging six months after we started the service. The answer I have begun using lately involves an ecosystem model. An ecosystem is a world of plants and animals – herbivores, carnivores, insects, and plants of all sorts – competing against each other, coexisting, and prospering together. Normally, the ecosystem is in balance, but if something stimulates one constituent to grow stronger or weaker, the system can become extremely unstable. In a worst-case situation, the entire ecosystem may die out. We might liken i-mode to an ecosystem. The guests at our February 22 party – mobile phone manufacturers, content providers, DoCoMo, server manufacturers, and i-mode subscribers – are all life forms taking part in the i-mode ecosystem and thus in relationships with each other. Among them, the relationships between subscribers and content providers are especially important. From the subscriber’s point of view, it is the content that gives the service we call i-mode its value: if we offer entertaining or useful content, subscribers will use i-mode. That engenders a positive feedback loop in which a wealth of content produces more subscribers and a rise in subscribers increases the variety of content available. To bring subscribers and attractive content together, however, requires the technological underpinnings for the system, easy-to-understand marketing, and a good business model. Unless we can ensure that it is simple 1 According to Oh! New?, an i-mode directory and search service provided by Digital Street, the number of sites providing information for i-mode topped 54,000 in June 2002.
4
The i-mode Wireless Ecosystem
to create content, inform subscribers about the huge volume of content available in an easy-to-understand format, and generate the income stream for the business to survive, there is no way that high-quality content would be created. And even if we did have excellent content, the flow of new content from the content providers would dry up if we were not able to put it in the hands of subscribers and derive income from doing so. These relationships can be seen as a value chain. Mobile phones with sophisticated features but that are easy to operate; a telecommunications network to link those phones; gateway servers connecting the network to the Internet; portals that enable subscribers to find the content they want easily; and a business model that supports the distribution of that content: a value chain that delivers great user satisfaction is formed through the interactions of these platform and content elements (Figure 1.2). As a concrete example of the value chain, consider ringtone melody services.2 To deliver a choice of ringtones to subscribers requires more than a content provider’s making the melodies available on its server. Manufacturers have to produce mobile phones designed to play back melodies, and a telecommunications provider has to set up a network to distribute them. Only then is it possible for a subscriber to choose the opening bars of Beethoven’s Fifth or of ‘Domo Arigato, Mr. Roboto’ to personalize his/her phone. The value chain
Content
Portals (business model)
Gateways
Networks
Handsets
Mutual relationships
Figure 1.2 The i-mode value chain. 2 These services were launched when the second-generation i-mode phones, the 502i series, went on sale.
A Value-Generating Ecosystem Mobile phone manufacturer Develops mobile phones
Examines specifications
5 Telecommunications provider
Content provider
Examines specifications Constructs servers
Develops content
Fee collection & authorization
Figure 1.3 The ringtone melody service value chain.
For the business to be successful, moreover, there must be a way to inform the subscriber about it in an easy-to-understand way, a portal function to lead the subscriber to the server with the service, and a billing mechanism for collecting a usage fee from the subscriber (Figure 1.3). Content, phones, networks, servers, portals, marketing, and a billing system: If any of these components were missing, a ringtone melody service could not exist. This, of course, is true as well of other i-mode services, such as the popular cartoon-character download services. Please note, however, that not every content provider or manufacturer who has been part of the i-mode ecosystem has been successful. Competition is rife between the carnivores, the herbivores, and the plants. Some will be unable to adapt to changing circumstances and die out. But it is precisely because the competition is so fierce that a vigorous ecosystem composed of strong, tough species is born.
1.3 DoCoMo’s Role in the Ecosystem What role does DoCoMo play in the i-mode ecosystem? We are a player, not a dominant force. If we were, for example, a carnivore that devoured all the herbivores, or a herbivore that ate all the plant life, the ecosystem
6
The i-mode Wireless Ecosystem
balance would be lost, and we too would fall into ruin. Rather than ruling, our role is to grow the ecosystem as a whole to the fullest extent possible. By growing a variety of plants, we can make it possible to support a variety of herbivores, which will then attract carnivores. With a variety of plants and animals attracted to the system, the system as a whole thrives. Generating positive feedback is what it is all about. For example, within the i-mode ecosystem, content and servers have a symbiotic relationship. The more content that is provided over the imode network, the more need there is for servers. Why, then, do we not see a content provider and a server manufacturer teaming up to set up their own new service? They might, but it would not work. That is because their success is dependent on the existence of other constituents of the ecosystem. They would need to have phone manufacturers design mobile phones capable of receiving the new content. They would also need marketing, to tell people where the content they want can be found and where to check out new content. It is this coordinating function, keeping all the constituents working together, that is DoCoMo’s role in the ecosystem. Serving as coordinator
CAFÉ DoCoMo 03-1234-5678 Coupon available 11:30-14:00, 18:00-23:00 Closed Sundays Ginza Bldg, IF, 15-1-2 Ginza, Chuo-ku
Business model Marketing
Subscriber
Servers (billing system)
Content provider
Network Clients (mobile phones)
Marunouchi police station
DoCoMo Hibiya Hotel
Figure 1.4 Model of the i-mode ecosystem (business model), focused on subscribers and content.
A Value-Generating Ecosystem
7
does not generate any immediate return on our investment. But as the ecosystem as a whole grows, so does the possibility of increasing returns for us. As the range of subscribers increases, content grows richer and more varied, and as both content and subscriber numbers rise, communication between them also increases. Ultimately, then, our income from packet and voice communications grows. An ecosystem model is often depicted as a pyramid, but i-mode is better depicted by a model centered on subscribers and content (Figure 1.4). The bedrock of the system is positive feedback between content and subscribers: the rich supply of content attracts subscribers, and the growing number of subscribers leads to the creation of more content, in a virtuous circle that, at every iteration, keeps the system growing. The role DoCoMo plays in this ecosystem is to provide the business model, marketing, servers (billing system), network, and clients (mobile phones) that mediate between the subscribers and the content. By skillfully combining those links, we have increased the number of subscribers and the variety of content.
1.4 The User Experience Is Critical The elements making up an ecosystem evolve in response to environmental change, but one species in an ecosystem rarely shoots ahead of the others. The usual course of evolution is for living beings to evolve at the same pace at which their environment changes. We believed that evolutionary pattern would also apply to the mobile phone service environment: to popularize a new service, phones, content, and subscribers would all need to progress together, step-by-step. It was our role at DoCoMo to coordinate the pace of that forward progress. For example, the 501i series (Figure 1.5), the first generation of imode–capable phones, had a specialized browser for mobile phone use built in, making it possible to access content on the Internet. With the plan for those phones in hand, we set to work, motivating content providers to create content for i-mode use. Before launching i-mode service, we had, naturally enough, no subscribers, but we did have content providers: on the launch date, we had over 60 companies ready to provide content. The second-generation 502i series (Figure 1.6) had an additional feature: ringing tones service, the ability to download ringtone melodies. We, of course, talked karaoke-on-demand companies into offering a range of ringtones.
8
Figure 1.5 Model 501i.
The i-mode Wireless Ecosystem
Figure 1.6 Model 502i.
Figure 1.7 Model 503i.
Next came the Java3 -capable 503i series (Figure 1.7), mobile phones that can download Java programs. Until that series shipped, all the applications available on mobile phones were built in at the factory, but Java made it possible to add and update programs, just as on a personal computer. When we explained what the 503i would be able to do, independent software companies were galvanized into writing games, wallpaper, software for business applications, and a variety of other Java applications for i-mode. Thus, as mobile phone features improved, we were able to expand the types of services offered. It was DoCoMo that served as the middleman in this step-by-step approach to evolutionary advances in phones and content. 3 Java is a programming language developed by Sun Microsystems. Using Java, programmers can develop platform-independent applications.
A Value-Generating Ecosystem
9
A further, and extremely important, point is that subscribers must be comfortable with using new phones and services. Both phone manufacturers and content providers tend to be very eager to add new features because they believe that phones and services with new features are more likely to sell. Subscribers, however, tend to be conservative and quite resistant to innovation. Thus, subscribers and service and equipment providers have opposite inclinations. It is DoCoMo’s role to bridge the gap between them. That means thinking about how to facilitate most people’s being receptive to something new. It means coming up with an approach that will encourage subscribers to, in effect, evolve along with the other parts of the ecosystem. The Java-capable 503i series of phones, which went on sale in January 2001, is a good example. The biggest new feature of these phones was their ability to download Java programs over wireless networks, so that people could add the latest games and other programs to them. The 503i series can do more than download programs. It also offers address book and scheduling functions; it is, in fact, quite a powerful device with features rivaling those of a basic portable digital assistant (PDA). Actually, several PDAs with much the same features as the 503i were on the market, but they had not won acceptance except among the handful of technophiles who like complex new electronic toys. PDA models had trouble breaking out of the low five digits in sales. A PDA that sold more than 100,000 was rated a runaway hit.4 Sales of the 503i series, however, topped 13 million as of March 2002 – despite consumer resistance to new features! That is, more than a third of all i-mode subscribers were using the new models. Not technology buffs but a broad range of people were purchasing – and using – phones with sophisticated features. Even high school kids, for whom technologies such as Java might as well be the man in the moon, were receptive to downloading programs on a daily basis. Suppose, a few years ago, we had said to those kids, ‘Mobile phones have programs installed in them. Until now, it had not been possible to replace or add programs, but from now on you can download new programs via a wireless network. The programs are written in Java, an 4 DoCoMo has also marketed a variety of PDAs, but sales were not as strong as expected. Until the launch of i-mode, our hit product was the Pocket Board, a PDA with a keyboard that functions exclusively as an e-mailer. Cumulative sales for all models topped one million. But that is an order of magnitude smaller than mobile phone models’ sales.
10
The i-mode Wireless Ecosystem
ultra new programming language . . .’ Would they have warmed to the idea? Not on your life. It was not a dry recitation of features but experience that made them highly receptive to downloading programs. They were already familiar with the idea of downloading, which they had enjoyed with our earlier models (Figure 1.8). They were accustomed to picking a new ringtone to download each month, using their choice of melodies to differentiate between incoming phone calls and e-mail, or between callers. Downloading programs seemed no different: to our customers, the procedure seemed virtually the same. To specialists, such as the engineers at our phone manufacturers, there is a big difference between downloading a file, such as a ringtone, and a program. But most of our subscribers experience both processes as pretty much the same. The only difference they might be aware of is that after they download a Java program and launch it, they see the Java logo. Designing the user experience – making it possible for people to use something without really thinking about it, as an ordinary part of everyday life – is critical here. There are, for example, many routes to get from home to work, but most people habitually use only one. The possible ways to arrange the top of one’s desktop are infinite, but we usually leave Too much of a leap
Conventional mobile phone (prior to 501i)
502i
501i
503i 0100101 0001010 1110010
Download wallpaper
Download ringtones
Download programs
Gradually familiarizing people (designing the user experience)
Evolving a mobile phone into a portable computer
The immediate goal
Figure 1.8 Consumers won’t accept sweeping change.
A Value-Generating Ecosystem
11
it as it is. Changing it would be unsettling. A product that requires users to break up their established patterns in order to use it, to take a huge leap into a new experience, is a hard sell. Our step-by-step approach overcame that obstacle by accustoming people to new more advanced ways of using phones gradually, with innovations introduced in small doses. Step-by-step change was easy to absorb without tearing up established routines. Using this approach, however, requires taking the long view in designing the user experience.
1.5 A Lubricant: The De Facto Standard DoCoMo’s role in this ecosystem, as I said, is to grow the ecosystem as a whole to the fullest extent possible. How do we do that? To answer this question, let us switch metaphors briefly and liken each part of the i-mode ecosystem to a gear. No matter how precisely machined and gleaming an individual gear may be, if it cannot work with the others, the mechanism as a whole stalls. DoCoMo is in charge of adjusting and coordinating the gears so that they do mesh and the mechanism works. Getting a large mechanism moving requires a lubricant, to reduce friction between the gears so that they can work together smoothly. One such lubricant is the selection of appropriate technologies. Making the wrong choice is, conversely, like throwing grit into the works: it brings the mechanism to a halt, just when it has begun to move, instead of helping all the gears to rotate smoothly together. For i-mode, the critical decision in the selection process was to use de facto standard technologies. The first time a gear is turned, it requires the greatest application of force. The lubricant that eased that first, reluctant, rotation was our choice of HTML,5 the de facto standard language of the Internet, for encoding i-mode Web pages. All Websites on the Internet are, when you come down to it, written using HTML. If we adopted HTML as well, we thought, content providers could create sites for i-mode without much difficulty. Prior to the launch of i-mode, almost every major corporation was involved in providing information and new services using the Internet, 5 HTML, or Hypertext Markup Language, is the language used to create Websites on the Internet; it can create pages combining graphics, voice, and film clips as well as text. HTML was developed by Tim Berners-Lee, a computer scientist, while working at CERN, the European Laboratory for Particle Physics in Geneva, Switzerland.
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The i-mode Wireless Ecosystem
with creating new businesses on the Internet as their clarion call. But almost all of those companies had found the results disappointing. To enter the world of e-business, they had had to hire more employees with specialized skills and invest in dedicated servers and other equipment. But the returns, in terms of increased revenues or improved name recognition for their products, were anemic. To those frustrated companies, we said, ‘i-mode gives you the opportunity to make use of your existing assets and realize a new source of revenue.’ One well-known episode from that early period, when we were just getting the i-mode gears in motion, concerned Bandai, the big game maker. In 1995, Bandai had simultaneously released its Pippin game machine, which had Internet connectivity, and started its own network service. The new machine and Internet service failed, however, to draw hordes of customers, and, with sales of the Pippin going nowhere, Bandai took it off the market and decided to get out of the network service business as well. The problem was what to do with all the servers it had purchased. Bandai was stuck with far more servers than it could possibly use inhouse. Thus, when we took the i-mode proposal to them, the Bandai people, realizing they could find a good use for all those servers, quickly got on board. The deciding factor for them, however, was our selection of HTML as the markup language for i-mode. That meant that they could not only use their servers as is but could also put their existing staff, trained in HTML, to work on writing i-mode content. Because Bandai already had the equipment and the skills, almost as soon as DoCoMo presented the concept, they were ready to launch a service for i-mode users. Immediately after i-mode was launched, Bandai began offering its Itsudemo Kyarappa (Kyarappa Anytime) service, which distributes cartoon character images via i-mode. In fact, Kyarappa Anytime became the motive force behind the early spread of i-mode and remains the chief drawing card for Bandai’s i-mode content services (Figure 1.9). Their i-mode operation is now so robust, I am told, that the original imode content team at Bandai is thinking of spinning off their operation, now known as Bandai Networks, and making an initial public offering. Back in 1999, when i-mode started, many were in the same boat as Bandai: they had started up an Internet-based business, but it was not generating the income they had hoped for. The reason their plans were
A Value-Generating Ecosystem
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L o v e
M a d l y
y o u
Figure 1.9 A cartoon character San-X+Green Camel.
from
Bandai
Networks’
Kyarappa
Anytime.
not working is obvious: the number of personal computer users, and thus Internet users, did not grow as quickly as they expected. One company’s efforts, no matter how well placed, could not boost the percentage of the population with computers and Internet access overnight. While usage growth was sluggish, the providers of Internet-based services were faced with fixed costs, for creating content and maintaining servers, for example, that weighed heavily on their bottom lines. Not surprisingly, many of the fledgling e-business operations were not breaking even. Because the number of potential customers was not increasing, e-businesses were unable to recoup their initial investments or even generate the income to cover their running costs. That was the plaint of almost everyone involved in Internet-based businesses. While the scale of their ventures varied, companies that had given offering Internet services a try all had their own tales similar to Bandai’s failure with Pippin. To the people in charge of those Internet-based services, the situation was a headache and a half. But to DoCoMo, trying to start up i-mode, it was an opportunity. Since i-mode services used HTML, DoCoMo could lure those companies into preparing i-mode content quite painlessly, without our developing new technologies or having to provide them with extensive support.
14
The i-mode Wireless Ecosystem
Just as we made overtures to Bandai, we called on other leading companies in every industry, including banks, securities companies, and newspapers. Our message was always the same: you can provide your service to mobile phone subscribers, based on the content you already have. Many companies climbed right on board. That is why, although we launched i-mode with zero subscribers, we started with over 60 content providers. Our adoption of HTML greatly lowered the bar for introducing services. What would have happened had we not adopted HTML but chosen another language, such as Wireless Markup Language (WML),6 proposed for mobile phone use by a consortium of companies overseas? Learning a new markup language, like learning English or French, takes time and effort. Had we adopted WML, potential content providers would have had to shoulder retraining costs for their HTML programmers or, to get their services up and running swiftly, find vendors with WML expertise. Either way, it would have meant risking additional costs. As is the case of the translation and interpretation field, the rarer the language, the higher the fees. Very few vendors are conversant with littleused markup languages because they are not commercial propositions. But, thanks to our choice of HTML, services designed for i-mode avoided those extra costs. Providing an i-mode service was simply an extension of the Internet technologies that providers had already mastered. Almost none of the companies offering i-mode services found that they needed to find new vendors to prepare their i-mode content.
1.6 Another Lubricant: The Experience of Success Once some of the gears were in motion, our next question was how to get a bigger system turning faster. The best lubricant for that step turned out to be success. Learning of a successful experience motivates others to try it for themselves. For example, hearing that someone has managed to lose weight with a new diet, other people wanting to shed a few pounds will give it a try. When we learn that a colleague at work has made money by investing in the stock market, our own interest in stocks surges. Note that in both 6 WML is the language specified for use with the Wireless Application Protocol, or WAP, which was developed for wireless data transmission. The leading mobile phone manufacturers in Europe and the United States were the prime movers in promoting it.
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cases the key is someone’s achieving success through a given activity. Success, not the activity itself, was crucial. Success stories motivate. In the business context, the experience of success makes a decisive difference. Several companies, for example, observed Bandai’s success with Kyarappa Anytime on i-mode and started similar services. If Bandai could succeed by providing images of characters to which it held the rights, they thought, why couldn’t they profit from their own libraries of images as well? When we asked potential content providers if they would be interested in providing some sort of digital service to mobile phone subscribers, without giving specific suggestions, they were likely to have a hard time imagining what sort of service would be a hit with our subscribers. I would be surprised if a majority of the content providers who heard our explanation of i-mode and were interested in the idea were not still scratching their heads over what sort of services would actually take off and whether subscribers would really pay money to use them. It takes hearing about a success to erase that kind of anxiety. In fact, it only takes one: if we could point to one success story, we could attract other companies eager to imitate it. Later entrants do, of course, have to develop their own special angles and bells and whistles, going beyond the offerings from the company that broke the ice. That means, in turn, that the pioneer cannot afford to rest on its laurels. As the competitors refine and improve their services, overall quality rises. Thus, in almost no time, companies distributing cartoon character images shifted from black-and-white to color; ringtone melodies evolved from 3 to 4 and even to 16 chords. The choice of an off-the-shelf technology, HTML, made a difference not only in the initial stages when we were trying to get the system moving but also in generating a large movement quickly. A company may see another achieving a success and want to imitate it, but if that requires using an unfamiliar new technology, gearing up even for a follower’s role might take too long. If the technology is already familiar, however, a company can begin offering its own services immediately. Conversely, if following the leader takes too much preparation, a boom is unlikely to start rolling. In any field, those who will accept the risk, try something utterly new, and make a success of it are few. There are, however, many who will develop new wrinkles on an existing success and help a market grow. That is why the experience of success is an essential lubricant for getting
16
The i-mode Wireless Ecosystem
a major movement – something worthy of being called a social phenomenon – underway. We actually had an example of the experience of success as lubricant at DoCoMo itself. When i-mode service began, i-mode-capable phones carried a higher price tag than other mobiles. We asked the managers responsible for pricing at our regional companies why and were told, ‘Well, the i-mode phones are more sophisticated and can do more, so shouldn’t they be priced higher?’ In our Gateway Business division,7 which had planned i-mode, we were well aware that if i-mode-capable phones did not become popular, the entire project was dead in the water. Too few i-mode phones would mean a too small a user base for i-mode services to grow – a repeat of what had happened with the wired Internet in Japan. Thus, we in the Gateway Business division wanted DoCoMo to adopt aggressive measures to popularize i-mode phones. We could not implement such measures by fiat, however. DoCoMo’s nine regional companies operate independently, each making its own decisions about marketing, advertising strategy, procurement of mobile phones, and pricing. Most of the regional companies, unfortunately, did not assign a high priority to marketing mobile phones with new functions when they did not know whether i-mode would be a success or not. It was DoCoMo Kansai that decided to break away and adopt a different strategy. They developed positive sales promotion measures for i-mode, including making sure that it was possible to use i-mode at the stores selling DoCoMo phones as well as paying a larger sales incentive for each sale of an i-mode phone. We asked why and learned that they were convinced that i-mode would fly and had decided to take a little risk on it. The scenario our Kansai company had in mind was that subscribers who wanted i-mode would not only use it for e-mail and for accessing information services but would also use their mobile phones more frequently. If they could lock in those heavy users, they would be immediately able to recover the larger sales incentive payments from increased voice communications revenue. Thus, they decided to act. DoCoMo was facing heavier competition in the Kansai than in other regions and thus wanted to make hay by advertising features that competing mobile phone providers could not. But even given that extra motivation, it still took considerable courage to make the decision that they 7 The Gateway Business Division was promoted to the i-mode Business Division in July 2001, in recognition of the expansion of i-mode.
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made, and we decided to give DoCoMo Kansai all the support and encouragement we could. If they could produce a success story for i-mode, it would, we were sure, spread nationwide in a flash. Thus, the Gateway Business division applied all its resources to helping DoCoMo Kansai pull off a success. We made the trip from Tokyo for meetings explaining the new product not only with DoCoMo employees but also with the sales staff of DoCoMo Kansai sales agents. We pitched in to help them develop effective sales tools and generally gave all the support we could. DoCoMo Kansai’s plan worked beautifully: i-mode won overwhelming support in the Kansai, and DoCoMo attracted new subscribers in droves. The rest was easy. The other regional companies, learning of DoCoMo Kansai’s success, all began putting serious muscle behind promoting imode sales. The Gateway Business division did not have to give them as much support because they learned from what DoCoMo Kansai had done and developed sales promotions suited to their regions. Thus, one reason for i-mode’s success was that decision by the DoCoMo Kansai management. They were the trendsetters.
1.7 Why not so Successful Overseas? ‘Why is the mobile Internet not being received well overseas?’ That is the second most frequent asked question I hear, right after, ‘Why has i-mode grown so rapidly?’ And the questioners are correct: services similar to i-mode were launched in Europe and the United States at about the same time that we started i-mode, but they have gone nowhere. Some mobile communication providers have even offered Java-capable phones as well as a variety of information services, but none has been a big hit. If i-mode had not existed, however, those services in other countries might not have been regarded as failures. The industry would probably have concluded that demand for mobile Internet services was just not very great. But because i-mode has become so popular in Japan, the sluggish response to similar services elsewhere has been startling. When I participate in panel discussions about the mobile Internet at events overseas, I hear all sorts of analyses about why the Japanese experience has been different. I find it deeply interesting that almost all those analyses are far off the mark.
18
The i-mode Wireless Ecosystem
One participant, for example, propounded a theory based on unique aspects of the Japanese character. His argument was that distinctive features of the Japanese cultural context predispose Japanese to be especially fond of small, high-tech handsets and cartoon characters. Another argued that the mobile Internet, using mobile phones, took off in Japan because the personal-computer-based wired Internet had achieved a low penetration rate there. Neither is, in my view, a very compelling explanation. Their proponents appear to me to be straining to cook up reasons why it had not been possible to create a similar market elsewhere. Nor are these examples the first time that Japanese uniqueness has been brought up to explain mobile phone trends. Prior to i-mode, between 1997 and 1999, Japanese mobile phones were shedding bulk and weight with every new model. A manager at a European phone manufacturer asserted that such compact mobile phones would be popular only in Japan, because Japanese have dainty hands and can operate tiny keys. Europeans and Americans, with their clumsy big hands, would never go for phones of that size. The European manufacturers, however, having launched equally small mobile phones in Japan, took them to the North American and European markets as well (Figure 1.10).8 The fact is that the models now being sold in those markets, where people mainly use their mobile phones for voice communication, are smaller than those selling in Japan – and are selling like hotcakes. Those ham-handed Europeans and Americans are snapping them up. What customers want in mobile phones does not differ substantially throughout the advanced industrial world.
Figure 1.10 The Nokia 8210, weighing 79 g. 8
For example, the Nokia 8210 weighs 79 g.
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Preferences in terms of mobile Internet services are also, I think, not very different between Japan and the Western nations. Look at the cartoon character issue, for example. There are characters of American origin, such as Disney’s Mickey Mouse, already available on i-mode, while Japan’s Pokemon characters have become wildly popular in other countries. If the answer does not lie in the Japanese national character, what about the other argument, based on Japan’s low rate of wired Internet access? A closer look at the figures robs it of all plausibility. While the percentage of households with wired Internet access is lower in Japan than in the United States or northern Europe, it is not very different from the Western figure when southern Europe, Britain, and France are included. Seeking an explanation in a low Japanese Internet access rate is thus a bit of a stretch.
1.8 A Value Chain not Found Elsewhere If, however, we apply the value chain and ecosystem models to the question of why the mobile Internet is not taking off overseas, we begin to find the answers. Basically, while the various elements that would make up a mobile Internet ecosystem exist in the major markets overseas, just as they do in Japan, the ecosystem is not performing well as a value chain. Content, mobile phones, servers, networks, portals, a business model, marketing . . . a good look at the elements that make up the mobile Internet will not show that Japan has overwhelming strengths in any of them. In fact, other countries are clearly stronger than Japan in some (Figure 1.11). The United States and northern Europe are well ahead of Japan in Internet usage, and the United States has powerful cartoon characters loved throughout the world, such as the Disney characters. Europe has influential manufacturers of mobile phones, including Nokia and Ericsson. In terms of server technology, there are no major differences worldwide. What, then, is the difference behind the success or failure of the mobile Internet? The decisive difference is that neither the United States nor Europe has had a telecommunications provider like DoCoMo with the will to grow a new business and service based on a comprehensive view of the ecosystem as a whole. To those in Japan, it may come as a surprise to learn that telecommunications providers in the West have extremely little influence and tend not to undertake risks for forward-looking investments. They are deathly averse to the kinds of risks that DoCoMo takes, such as placing a bulk
20
The i-mode Wireless Ecosystem Excellent content
Content
Suitable marketing methods
Marketing
Suitable business model
Business platform
Suitable gateways
Gateway servers
Suitable network
Network
Suitable user interface
Phone Mobile phone subscriber
(Source : DoCoMo)
Figure 1.11 Elements making up the mobile Internet.
order for mobile phones made to new specifications based on projections that subscriber numbers will reach a certain level, then working to develop a broad range of content providers. What did happen in the West? The mobile phone manufacturers and content providers were not in step. The phone manufacturers complained about the lack of content and the content providers about the lack of suitable phones. Instead of a thriving ecosystem, it degenerated into recriminations over who was responsible for not getting the new service off the ground. At the end of the day, it is the subscribers who suffer. The technology exists for them to do their banking wherever they are, to reserve tickets, and to enjoy a host of other mobile Internet services – but they cannot. While some mobile Internet services in other countries do provide valuable content, the system is structured so that subscribers have a hard time learning about those services. Instead of telecommunications providers, it has been manufacturers with large market shares, such as Nokia, that have been in the position of coordinating the ecosystem. Unfortunately, they have not used their power to the fullest. It apparently did not occur to them to nurture the other elements in the ecosystem. It would be false to claim that Nokia and the other major manufacturers have done nothing to encourage the spread of the mobile Internet. They
A Value-Generating Ecosystem
21
have prepared content, such as ringtones, themselves, and have helped out foundering telecommunications providers with funding. Neither move, however, was sufficient to create a major trend. In the end, most of their efforts were aimed, it appears, at maximizing their own revenues, not at building a healthy value chain. One example is the WAP,9 which is said to have been developed as the optimal protocol for mobile communications. WAP was indeed developed for wireless communications, but its developers’ intentions also seemed to include selling WAP servers and WAP browsers (Figure 1.12). That vision’s decisive flaw is its lack of the perspective of the content provider. It seems not to have occurred to anyone in the WAP consortium that learning a new markup language and installing new servers would be a burden. Obviously enough, at the start of a mobile Internet service, there are zero subscribers. Because content providers’ initial revenues are necessarily limited by that subscriber base, the fewer barriers to their participation before the service starts, the better. But the Western manufacturers adopted a new protocol for wireless data transmission and a new markup language, WAP servers
Mobile communications manufacturers provide
Mobile data transmission network
Mobile phones (WAP clients)
Internet servers
Building an independent network
Internet (wired data transmission network)
Personal computers
Figure 1.12 The mobile data transmission system as conceived by the WAP consortium. 9 WAP is a protocol developed for data communications on mobile phones. The WAP Forum, with Nokia, Ericsson, and Motorola as its main players, was set up to promote the use of WAP.
22
The i-mode Wireless Ecosystem
raising the barriers instead of tearing them down. If there were more content available, more mobile Internet-capable phones would be sold, and the WAP members, who were mobile phone manufacturers, would be blessed with considerable replacement demand. But instead of a value chain, they set up a barrier chain. The upshot was, it appears, that because they were too focused on sales of WAP-related products, they nipped a chance to increase sales of their mobile phones in the bud.
1.9 A Suggestion for Multichannel Television i-mode is an infrastructure-type business, in which various companies offer all sorts of services over the network that DoCoMo owns. There are many such infrastructure businesses. Apply the value chain and ecosystem model to them, however, and the difference between those that steadily win new customers and those that do not is clear. For example, what about digital television,10 a technology now much in the news? It is a classic infrastructure business, quite similar to ours, with a network (the airwaves over which it is broadcast), content (the programs), and servers that store the programs. Because digital satellite television offers features that conventional terrestrial broadcast television cannot – more channels and interactivity – hopes for this medium have run high. So far, however, digital TV has yet to take off. Sales of the equipment to receive digital satellite broadcasts have stayed below the 100,000 sets per month level. Digital satellite television is barely there on the radar screen. If we consider digital satellite television in terms of the Internet and the i-mode value chain model, we immediately see that the lack of a wide choice of content may be the problem. Digital television has a huge conduit for delivering content and televisions with superb displays to receive it, but its content lacks variety. What programs can be seen on digital satellite television? In many cases, they are rebroadcasts of conventional television programs, or new programming that could scarcely be described as more exciting than conventional shows. It is hardly surprising, then, that viewers have not rushed to sign up in the numbers expected. The positive feedback loop in which 10 According to statistics provided by the Japan Electronics and Information Technology Industries Association (JEITA), monthly shipments of digital broadcast satellite receivers have topped 100,000 units only in December 2000.
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the rich variety of content attracts subscribers and the growing number of subscribers attracts more content development is not in place. Historically, the types of content (that is, the programs) available on television have been limited because the number of channels was restricted. Now, with far more channels available, the content shortfall is overwhelming. A mechanism needs to be found through which many people will participate in program development, to create a large variety of content. Because a small group of television stations and production companies dominates program development, it seems that the system will be unlikely to change to encourage that wider participation. The money and work that a television station or production company puts into producing just one program are almost unimaginable. The video tape used to record one 45-minute program, for example, often runs 8 hours long: 8 hours of talent and equipment dedicated to the recording process alone. Given the investment involved, it is hardly surprising that the supply of content does not expand rapidly. Furthermore, even if more channels are available, total advertising revenues are limited. That restricts what can be spent on producing content. The alternative, inducing viewers to pay for the programs they watch, has not proved easy to implement. Thus, it is necessary to produce new content at the lowest possible cost. But if cost-cutting means a sudden decline in program quality, or even an appearance of a decline, the result could be fatal, since digital television makes flaws more obvious, thanks to the larger volume of data transmitted. How, then, can digital television get out of its dilemma? The answer lies in rethinking what broadcasting is. In the telecommunications industry of which DoCoMo is a part, the rise of the Internet assured a profusion of content that solved that dilemma for us. But before the Internet, we faced the same quandary that having hundreds of channels of digital television poses. Before the Internet, the telecommunications industry had envisioned a future in which a multimedia society would use its circuits to send and receive a variety of information. Movies, news, sports, live programming: the notion was of a society in which people could view a variety of multimedia information whenever they wished. That, however, has remained only a dream. Thinking about it now, it appears that telecommunication providers then were thinking that while the film distribution companies and others would provide most of the information to be distributed, the telecoms would themselves process it into a form that could be distributed over their networks and would own
24
The i-mode Wireless Ecosystem
the content themselves. Until only a few years before public access to the Internet became possible, it had not occurred to people that those using the information services might themselves create and distribute content. Indeed, at the time, it was only huge companies, on the scale of telecoms, that could create, warehouse, and distribute content. But dramatic advances in digital technologies and the rise of Internet technologies have made it simple for anyone to create and distribute content. In the Internet age, with the capacity to create information and distribute it becoming more accessible, many media companies are having to rethink their business models. But those that are able to understand the characteristics of the Internet and other new media and respond adroitly can, I believe, set off huge new trends, trends on the order of i-mode. The ability to do so may, however, be limited to media companies with widespread influence.
1.10 The Ecosystem Idea: An Infrastructure-Type Business Essential The ecosystem and value chain ideas do not apply only to the wireless communications industry or media industry. They can be put to good use in a wide variety of fields. Urban development, for example: whether the ecosystem and value chain concepts operate can spell success or failure. In the city as ecosystem, stores are equivalent to mobile Internet content, while infrastructure such as railroads, roads, gas, electricity, and water supplies are their networks. An urban planner does not himself create and own stores or the infrastructure. He leaves that to specialists in those fields. The role of the planner is to adopt the perspective of someone living in the city, use the system, and ensure that the content is rich enough to attract a large number of people to it. The Ebisu area of central Tokyo is an example of how this thinking can work. It includes Yebisu Garden Place,11 a complex built on the site of an old Sapporo brewery that now includes a luxury hotel (the Westin Tokyo), an office building (Yebisu Garden Place Tower), a department store (Yebisu Mitsukoshi), a three-star French restaurant (TailleventRobuchon), and a high-rise condominium building (Yebisu Garden Terrace) (Figure 1.13). In each case, the developers invited in corporations 11 ‘Yebisu’ is the same place name as ‘Ebisu’; the ‘y’ occurs only in archaic orthography and is not pronounced. Yebisu Garden Place opened in October 1994.
A Value-Generating Ecosystem
25
1
1. The Westin Tokyo 2. Yebisu Garden Place Tower 3. Yebisu Mitsukoshi 4. Taillevent Robuchon 5. Yebisu Garden Terrace Ichibankan 6. Yebisu Garden Terrace Nibankan
6 4
5
3
2
Figure 1.13 The urban development ecosystem as seen in Ebisu. Source: iMenu, Gourmet information: http:www.sapporobeer.jp/imode/.
that made their money by providing high quality, and as a result the area has been able to attract people who yearn for a superior quality of life. The thoughtful arrangement of buildings and open spaces also provides places for street performers to present their art. On weekends and holidays, foreign performers turn up and the area bustles with people who come to watch. Those crowds will lure more stores into the area, enabling Ebisu to continue to develop. While the scale is smaller, Shinjuku Park Tower, a skyscraper complex built on a site owned by Tokyo Gas in the Shinjuku area of Tokyo, is another success story (Figure 1.14). The upper stories are occupied by the Park Hyatt Tokyo, a hotel that is a great favorite among foreign executives visiting here. The tenants also include the Conran Shop, a mecca for interior design, and other shops that set it off from conventional office buildings. Attracting the hotel and shops has in turn enhanced the image of the building as a whole. When construction began, few people thought Shinjuku Park Tower would be a success, given its distance from Shinjuku Station, a key factor in a city organized in terms of public transportation nodes. But skillful development of the environment enhanced its value
26
The i-mode Wireless Ecosystem
Figure 1.14 Exterior of Shinjuku Park Tower. Source: http://www.tgud.co.jp/i/, an i-mode Website.
so much that, far from dealing with a failure, the management has been able to set higher rents. Other projects and districts that have not created a similar value chain tend to acquire a name for being unpopular and see their rents fall into a downward spiral.
1.11 i-mode: The Potential Grows Turning back from real estate to i-mode, the buzz now concerns the relationship between i-mode as it exists at the time of this writing and our third-generation (3G) service.12 Our 3G service supports a maximum transmission speed of 384 kbps, 40 times faster than i-mode’s initial transmission speed (Figure 1.15). Interest in 3G seems to be running high. We are often asked how it will change i-mode or what new features it will make possible. My reply is always that DoCoMo will not stray off its established course in 12 DoCoMo’s 3G service is called Freedom of Mobile Multimedia Access (FOMA). Test service began in May 2002, with full service to begin in October.
A Value-Generating Ecosystem
27
Figure 1.15 The P2101V 3G handset.
implementing our 3G service: we will think, with our partners in the imode ecosystem, about how to develop attractive services using the speed that 3G offers. Thus far, we have taken an add-on approach to i-mode, and we will continue to follow that approach with 3G. The new service will operate on a separate network, on which i-mode subscribers will be able to receive the services they are already accustomed to. The hook will be additional content available only to 3G subscribers – video clips, for example. To subscribers, it will appear less of a new service than an enrichment of the existing service. To content providers, 3G will spell freedom from the speed restrictions of the existing network, making it much easier to provide sophisticated services. We expect, for example, to see many new business applications available on the 3G network. Our marketing will continue to focus on convenience for subscribers, as i-mode marketing always has. Subscribers use i-mode because it is
28
The i-mode Wireless Ecosystem
possible to handle their banking from a mobile phone, or make reservations, or enjoy other handy services, not because they are keen to use Internet technologies. We could, of course, give subscribers technical explanations: ‘Our 3G service uses the Wideband Code Division Multiple Access, or W-CDMA, high-speed wireless technology to transfer data at a maximum rate of 384 kbps. It can support transmission of moving pictures using the Moving Picture Experts Group-4 (MPEG-4) standard for their compression, decompression, processing, and coded representation . . .’. But for almost all subscribers, that would be just a jumble of technical terms. To subscribers, content is all. Thus, we are now working with content providers to think about how to enhance the value of content and services in 3G networks. One result is i-motion, launched in November 2001, to deliver brief movie previews and sports news. Called a video clipping service, the content it delivers includes audio and still images (including slide shows) as well as full-motion video (Figure 1.16). While our 3G service has ample capacity to deliver streaming video, we would be violating our basic principles if we made all content be motion pictures or summarized everything neatly in 15-second video clips. That is not what the Internet is about. It is important to consider how video clips can be used effectively within a connected flow of content. We must consider, too, that subscribers are paying packet communications charges as well as fees for access to content. Since moving pictures involve much larger volumes of data than does text, transmitting them is
Figure 1.16 The Hollywood Channel, provided by Movie Television, Inc.
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more costly. We would expect subscribers to demand value commensurate with their rising i-mode bills. What is important is that 3G is expanding the i-mode ecosystem, which already covered considerable territory through our tie-ups with content providers and corporations in other industries. Only if we structure the situation so that using 3G makes life more convenient for subscribers will content providers see their incomes grow or DoCoMo itself enjoy a revenue stream that will pay for our investment in the 3G network. If we do not, 3G will have no raison d’etre. DoCoMo has already experienced one major upheaval in switching over from an analog to a digital wireless network; we know that we can make the 3G transition work, too. By March 2004, we will have invested about one trillion yen to expand 3G service to deliver the same geographical coverage as the existing system and will have about six million 3G subscribers. The rate at which 3G is spreading is slow, but if we can build the value chain, it is bound to take off when the service area is wide.
Postscript: Learning from Failure It was a huge failure at my previous job that set me thinking about the value chain concept. I became vice president of Hypernet in 1996. At the time, we were the world’s first free Internet service provider (ISP), relying on advertising instead of user fees for income. In one year, we acquired over 200,000 users. The company president was applauded as the golden boy of the Internet industry and in late 1996 received the MITI award for the most valuable new business and the New Business Award from the late Isao Okawa, chair of the New Business Conference. I was in charge of overseas strategy and sales, but sales were not growing. The company was talked up in the mass media, all our clients were excited about what we were doing, but the bottom line was that the revenues were not coming in. Nonetheless, the idea of listing the company on the NASDAQ came up, and it became necessary to expand overseas while we still were not seeing domestic revenues get off the ground – to get in shape for that public offering. I sweated to set up a corporation in Silicon Valley and a joint venture with the Samsung Group in South Korea and basically spent my life flying around Japan and overseas.
30
The i-mode Wireless Ecosystem
Still, sales did not grow as we had hoped. Soon our executives were doing little more than trying to raise funds and laying off staff. As the situation worsened and we began blaming each other for our failure, we ceased even to want to work together to make a success of the new business. Our staff were, as individuals, highly talented, and they worked hard. They worked together, regardless of education, experience, or age, to develop the services, sell them to our clients, and provide thoughtful user support. We also had superb technologies. The patents we applied for then are, I understand, still in effect. And we had a good idea. We were gaining new subscribers at an exceptional rate for the Internet industry. ‘But why doesn’t it work?’ Under heavy pressure from the company president, I looked desperately for answers. By the spring of 1997, the company was unable to pay its executives. But I had to make business trips overseas, so I was paying for them myself – and the bill kept growing. Meanwhile, even though the company was in a sad state internally, we continued to be much in the limelight. We were asked to give speeches. We received lots of requests from clients and potential partners for time to hear their pitches. Why the gap between appearance and reality? Finally, I understood. What we were doing was evangelizing the Internet itself. A free ISP is a marketing medium. If there are no companies and advertisers wanting to do marketing there, the business fails. And, in our case, since the marketing would be directed at Internet users, our main target for our sales activities was companies offering some sort of service on the Net, and those companies did not have big marketing budgets. Only conventional companies did, and at that time e-commerce and Net businesses had not spread to them. When we pitched our services to conventional companies, our assumption was that they would indeed want to do business on the Net. Our proposals all started with how the Internet would change existing businesses. We then went on to explain what new services would have to be developed for that reason. Finally, we would reach the third step, using a free ISP to attract users. Unfortunately, we usually lost them on the first or second step and almost never got to the third step. For users, a service that offered nothing but free access to the Internet had no value. But we had no value-added services for them; back in 1996 and 1997, securities, companies, and airlines, now leaders in
A Value-Generating Ecosystem
31
Internet-based services, had yet to begin utilizing the Internet. We were requiring our users to put up with ads in exchange for free access, but there was not much in the way of information or services on the Internet to make looking at those ads worth their while. As I was about to leave the company, I came up with an explanation that made sense to me: our business model was flawed. We had not been able to provide users with value. In Internet businesses, there are limits to what one company can do, no matter how hard it tries. Both a business model that ties together as many companies as possible in a win–win relationship and good timing are vital. To build such a model and seize opportunities requires precise consideration of what the ultimate value chain, for users, will be, and carefully distinguishing between what an individual company can provide, given its position, and what it cannot. Hypernet failed to make that distinction successfully. In November 1997, two months after I resigned, it went bankrupt.
Chapter 2
The i-mode Effect There can’t be any ‘causes’ in a world in which everything that happens depends more or less equally upon everything else that happens. Marvin Minsky, The Society of Mind (Simon and Schuster, New York, 1986), p. 129.
2.1 Creating a Market, Changing Society The entire mobile communications industry, not just DoCoMo, has been humming since the arrival of i-mode. At DoCoMo, average revenue per user (ARPU) for i-mode subscribers topped ¥1,500 a month, and revenues from packet communications totaled ¥715.6 billion in fiscal 2001.1 (See Figures 2.1 and 2.2.) The demand for mobile handsets has also risen rapidly. According to statistics compiled by the Japan Electronics and Information Technology Industries Association, manufacturers shipped 42,800,000 mobile phones in fiscal 2001. As of the end of that fiscal year, Japan had 69,000,000 mobile phone subscribers, of whom only 8 million were new subscribers. Since new phone sales were five times higher than the number of new 1
In fiscal 2001, DoCoMo’s total revenues from mobile telephone operations totaled ¥5,022.1 billion, of which packet communications revenue from i-mode accounted for about 14%. The i-mode Wireless Ecosystem Takeshi Natsuno 2003 John Wiley & Sons, Ltd ISBN: 0-470-85908-3
34
The i-mode Wireless Ecosystem i-mode ARPU = stand-alone i-mode ARPU × (the number of active i-mode contracts/the number of active mobile phone contracts).
Total ARPU (including non i-mode users)
(Unit : ¥) 14,000
Voice ARPU 12,570
12,000 10,800 10,000
9,270 8,740 120 8,650 880
8,000
8,770
8,480*
1,470
1,540
Rise in i-mode ARPU
6,000 8,626
7,770
7,300
6940
1997 Mar.
1998 Mar.
1999 Mar.
i-mode subscriber ratio
2000 Mar.
2001 Mar.
2002 Jan.
2002 Feb.
19.1% 60.2% 67.0%
Expanded content
Introduced color screens
4,000
2,000
Introduced Java
78%
(Source : DoCoMo)
Figure 2.1 DoCoMo’s i-mode ARPU rises above ¥1,500 monthly.
(%) 16 ¥715.6 billion
7
Packet communications revenues
14
6
Ratio of packet communications revenues to total revenues
12
5
10 ¥353.4 billion
4
8
3
6
2
4
1
¥38.5 billion
Ratio of packet communications revenues to total revenues
Packet communications revenues
Unit: ¥100 billion 8
2
0
0 FY1999
FY2000
FY2001 (Source : DoCoMo)
Figure 2.2 DoCoMo packet communications revenues top ¥700 billion annually.
The i-mode Effect
35
subscribers, it is clear that i-mode and other new services had stimulated replacement demand. The energy generated was not confined to the mobile communications industry. New markets, such as the market for digital content, were created, and existing industries, social arrangements, and lifestyles changed. All the teeth in all the gears – a potpourri of industries, plus society as a whole – were meshing and beginning to turn together. Let us take a look at trends in each of these areas before and after the i-mode gears started turning.
2.2 The Digital Content Market Develops We know that i-mode took off so rapidly because all the elements in the i-mode ecosystem – the handsets, networks, portals, business model, and marketing – were working together. But the biggest single factor was the rich range and high quality of content available on i-mode. We can usefully divide i-mode content into two categories: content proper (digital content distributed by i-mode) and commercial content (content related to selling products or services distributed in other ways) (Figure 2.3). Because i-mode supplies a good balance of both types, subscribers perceive it as offering a wide variety of services. Of these, the first type, digital content distributed via i-mode, is digital content proper, as exchanged on the Internet, to which a commercial value is assigned. A newspaper’s news, a dictionary’s searchable content, wallpaper images for downloading, ringtone melodies for downloading – all are examples of content proper (Figure 2.4). Content proper distributed by i-mode can be subdivided by business model into fee-based and free services. Content providers incur costs at some point in creating content, but many are recycling commercially valuable content already developed for print and other media for i-mode. Others, particularly numerous in the entertainment field, focus on products designed to exploit the distinctive features of mobile phones. These I have labeled the mobile-specific providers. Neither type could survive without deriving some sort of income from the content they provide. With no viable providers, the market for content proper distributed via i-mode would not take off.
36
The i-mode Wireless Ecosystem
Content proper (content distributed by i-mode)
Fee based
Recycled Mobile specific
Free of charge
Advertising medium Customer services
Transactional content (e-commerce)
Supporting an existing business Creating a new business
Commercial content Promotional content
Promoting transactions Building customer loyalty
Figure 2.3 Categorizing i-mode content.
One of the distinctive features of i-mode, however, is that DoCoMo, the telecommunications carrier, collects the fees for fee-based services.2 Fee-based content providers use our billing service or credit cards and other methods to distribute content to paying customers. Content offered free of charge still costs; someone has to pay. Most of the free content that conventional media (magazines, newspapers) provide on i-mode is paid for by advertising. The alternative model is for a company to distribute content without charge as a service to its customers, with the payback expected to be greater customer loyalty. The recipes offered by food processing companies and the bar guides offered by beer and liquor companies are good examples of this type. The category I have designated commercial content refers to doing business on or with the assistance of the mobile Internet (Figure 2.5). The data being exchanged have no intrinsic commercial value, but the expectation is that the result of those exchanges will be completion of a commercial transaction. 2 Of the ¥100 to ¥300 that subscribers pay as fees for access to a content provider’s service, DoCoMo retains only 9% as its collection charge. The remaining 91% goes to the content provider.
PokeMelo Joysound 2002 Xing Inc.
Over 8,000 tunes! News Ringtone melody
PokeMelo
Sanseido Dictionaries © Sanseido
Figure 2.4 Content proper.
Disney-i Disney
Grand Concise E-J Daijirin (Japanese) New terms, synonyms
4. ¥ Fee-based dictionary access 7 dictionaries, ¥50 a month
3. Exceed J-E Dictionary
2. Exceed E-J Dictionary
1. Daily Concise Dictionary
Search Sanseido Dictionaries
Asahi • Nikkan Sports Asahi Shimbun, Inc. © Asahi Shimbun, Inc. • Nikkan Sports
Video News (asahi.com)
Search contents • Weather • Sports Chiezo & Article Database Pro Baseball • Entertainment
Asahi Newspaper For subscription, click here
The i-mode Effect 37
Sumitomo Mitsui VISA Card Sumitomo Mitsui Card Co., Ltd.
3. Cash advance, loan
2. Current bill, account
1. ID: issue, confirm, etc.
Cardmember
Sumitomo Mitsui VISA Card vp@ssClub
Figure 2.5 Commercial content.
Kinokuniya BookWeb Kinokuniya Bookstore © Kinokuniya Company, Ltd.
7. Delete ‘‘My Menu’’
6. Sign up for ‘‘My Menu’’
5. Branches nationwide
4. For members only
3. Search our stock & purchase
2. Become a member
1. User guide
i-mode Ticket Pia Pia Digital Communications © Pia
Select area: Kanto, Kansai, Tokai, Kyushu, Chugoku, Shikoku
Look! Go Sign up for ‘‘My Menu’’ for premium pre-release access to tickets
Ticket Pia i-mode
38 The i-mode Wireless Ecosystem
The i-mode Effect
39
Commercial content can also be subdivided into two categories: transactional tools (tools for buying and selling on i-mode, or what is often called e-commerce) and promotional content. The companies deploying transactional tools for e-commerce use i-mode as a tool in their primary business or in a new business started to utilize the potential of e-commerce. For example, airlines offer seat availability information, reservations, and eticketing via i-mode. In that case, i-mode is a new business format that makes the airlines’ primary business, selling airline tickets, more efficient. Publishing companies that sell products mentioned in their magazines via i-mode are an example of using transactional tools on i-mode to move into a new business, with mobile phones as their marketing channel. Companies providing promotional content use i-mode to support commerce: not by doing business via mobile phones but instead as a means of bringing in more business to their brick-and-mortar operations. Tsutaya, a chain of rental video shops, uses i-mode as a tool to encourage customers to visit their shops. It does use i-mode for direct sales (e-commerce), but it also announces, by i-mode mail, the arrival of new videos, stimulating customers to stop by their shops. In the latter case, the video chain uses i-mode not for e-commerce as such but to attract customers to retail outlets, not cyberspace. Credit card companies also use i-mode to distribute promotional content to support their businesses, giving cardholders information about stores and restaurants that accept their card, special offers, promotions, and other information by i-mode. While providing such information may not be directly related to increased card usage, it helps lock-in loyal customers.
2.3 Distributing Content: A ¥100 Billion Business Since the rise of the Internet, the idea of distributing digital content – particularly fee-based digital content – has generated great interest. Some industry watchers predicted that newspapers, magazines, television, and other conventional media would shift to using the Internet as their main means of distribution, and that a vigorous market would emerge for content for which consumers would have to pay. The reality of fee-based digital content distribution on the wired Internet, however, is very different. It is, in fact, insignificant, apart from one category: ‘adult’ content. Only a handful of content providers not purveying pornography have managed to set fees for their content itself, and derive revenues from it.
The i-mode Wireless Ecosystem
Persons registered for fee-based sites
(Unit: 1,000 subscribers) 40,000 35,000
Persons registered for fee-based sites
800
Fee-based sites Subscribers at month’s end
700
30,000
600
25,000
500
20,000
400
15,000
300
10,000
200
5000
100
0
Aug. Nov. 1999
Feb.
May
Aug. Nov.
2000
Feb.
May
Aug. Nov.
2001
Feb.
Fee-based sites
40
0
2002 (Source : DoCoMo)
Figure 2.6 Rapid growth in fee-based sites.
While hopes for a market for fee-based digital content ran far ahead of reality on the wired Internet, a fee-based market did blossom with the rise of i-mode. Figure 2.6 shows the number of i-mode sites offering fee-based content and the total number of registrations by subscribers to access that content. (Bear in mind that one subscriber may register for more than one fee-based service.) As the graph makes clear, the market swiftly grew to substantial proportions in only three years. As of the end of March 2002, there were 32,070,000 i-mode subscribers and 40,570,000 registrations to fee-based i-mode sites. This includes multiple registrations by the same persons; the actual number of individuals who have registered for such services is 16,620,000. They have, on average, signed up for 2.44 fee-based services each. The average charge for fee-based content is ¥187 a month. With over 45 million in fees being paid each month, the market has grown to a scale of not quite ¥8 billion a month or nearly ¥100 billion annually. That is quite a respectable market indeed.
The i-mode Effect
41
Those figures, by the way, refer only to services provided by official sites, those listed on the official i-mode menu,3 for which DoCoMo collects the fees the content provider charges. There are far more unofficial or voluntary i-mode sites, and many, including dating and adult sites, offer fee-based content, with subscribers paying by credit card, bank transfer, or one of the many electronic settlement services now available. Including those fee-based content sites as well as the sites on the official menu would produce a much larger figure for the size of the fee-based content market. While, since we handle part of the billing, we have a reasonably good grasp of the scale of the market for fee-based content distributed by i-mode, e-commerce (i.e. buying or selling a nondigital product) is a different story. According to the 2001 White Paper on Information and Communications in Japan published by Japan’s Ministry of Public Management, Home Affairs, Posts, and Telecommunications, such transactions carried out on the mobile Internet totaled ¥54.1 billion in 2000, on a final consumption goods basis. The same document estimates that in 2005, the Japanese Internet market scale as a whole will reach ¥7,900 billion, of which the mobile Internet’s share will be ¥1,700 billion. I would not fault their market growth prediction. Figure 2.7 shows estimates of market scale for fee-based content proper and e-commerce in Japan in 2001, on the basis of market research and unstructured interviews with firms engaged in mobile e-commerce. The mobile segment of the market obviously outstrips the wired segment in terms of fee-based content proper, and e-commerce is growing steadily on the mobile Internet as well. Take one example: online stock trading. DLJ direct SFG Securities, one of Japan’s biggest online brokerages, reports that about 15% of its Internet-based transaction volume is carried out on i-mode. These data demonstrate that much buying and selling of securities, high-priced items indeed, is conducted over mobile phones. Airline ticket reservations and purchases are another classic example of e-commerce, and the data show how rapidly that market is growing. For example, at Japan Airlines, Internet-based transactions as a whole grew fourfold between April 2000 and August 2001 (based on the number of reservations made). In the same period, however, the number of reservations made via the mobile Internet, including i-mode, increased 12-fold. 3 The official sites are the sites for services linked to the DoCoMo portal site (i.e. the i-mode menu). As of April 2002, there were 3,018 official sites (counted using the smallest unit for which subscribers can register using our My Menu service).
42
The i-mode Wireless Ecosystem
Mobile content proper market ¥110 billion Wired content proper market Wired e-commerce market ¥706 billion
¥32 billion
Mobile e-commerce market ¥115 billion
23% Mobile Internet
77% Wired Internet
Content: Fee-based content distributed on the Internet e-commerce: Commercial transactions on the Internet
Note : The source of the figures on the wired Internet is the Electronic Commerce Promotion Council of Japan (ECOM); for the mobile Internet it is the i-mode Planning Department’s estimate.
Figure 2.7 Estimated market scale for fee-based content proper and e-commerce on the Internet in Japan.
As these examples suggest, the rising number of people using the mobile Internet is producing an upsurge in e-commerce.
2.4 Advanced Mobile Phone Technologies When we launched i-mode, our public relations department created the line ‘from talking on mobile phones to using mobile phones.’ Changes in mobile phones in the past few years have indeed been along precisely those lines: the phones have transformed themselves from phones, pure and simple, into multifeatured communications terminals. Until i-mode, mobile phones were, literally, tools for talking. Their display capabilities were limited to showing the other party’s phone number, and ringtones were simple notes, not complex chords. A phone book feature was the closest thing they had to computer-like capabilities. It may be hard to believe now but, until a few years before i-mode, mobile phones did not even have a clock function. At that time, manufacturers were competing to make their phones smaller and lighter; features were a lower priority. Since the phones moving most
The i-mode Effect
43
rapidly out of the stores were the smallest and lightest models, their emphasis was well placed. The launch of i-mode changed the game entirely. The competitive edge shifted from offering the smallest and lightest to offering the best ways to deliver a greater variety of content: color displays, then displays offering greater color depth, chips capable of playing back polyphonic ringtones, and so on.4 An extremely attractive market had opened up for the manufacturers of such components. The evolution of i-mode displays is a good example. Until i-mode, almost all mobile phones had tiny black-and-white displays. They were quite adequate for the demands placed on them: displaying a telephone number or at most a short message. Today, however, color displays are taken for granted. In addition, 2001 saw the emergence of folding models with secondary displays on the back, to show the phone number or e-mail address of the person who initiated the communication. The 251i series, which debuted in mid-2002, has a built-in camera, and digital images are keyed to phone numbers and the phone book, so that a photograph of the person who called is shown in the secondary display. This means that, before answering the phone, one knows immediately who is calling. These developments suggest that secondary display features will continue to evolve as well. Moreover, not all color displays are created equal; competition over display performance is fierce. As the variety of content available on imode has grown, so – in a very brief period of time – has the number of colors that displays can show. The first color displays, in the mobiles that went on sale in 1999, could display 256 colors. Models with 4,096-color displays followed hard on their heels. The most recent 504i series includes some (the D504i models) with displays capable of displaying 260,000 colors. The brightness of the displays has also improved dramatically from the first models. As a result, today’s mobile phones can display photographs clearly. Several competing technologies are used in those displays. The first color liquid-crystal displays (LCDs) used the supertwisted nematic (STN) technology also used in early color displays for personal computers. Then, following the same evolutionary path as computer displays, mobile phone 4 Until the launch of i-mode, the most popular models were also the lightest; manufacturers had even come out with mobile phones weighing less than 60 grams. With i-mode, models with large screens became more popular, and weight became a secondary factor. In our 504i series, all models weigh in at about 100 grams.
44
The i-mode Wireless Ecosystem
displays shifted to the thin-film transistor (TFT) and thin-film diode (TFD) displays now generally used for computer screens. Both technologies surpass STNs in clarity and speed. Recently, luminescent displays that eliminate the need for a power-guzzling backlight have appeared. These include organic electroluminescent diode (OELD)5 displays. The growing i-mode market has also drawn more manufacturers into the business of producing color displays for mobile phones. Initially, Sharp and Seiko Epson were in the lead, but recently, other domestic manufacturers, plus display manufacturers in Korea and Taiwan, have been giving them stiff competition. Sanyo and Pioneer, which have developed OELDs, have also identified mobile phones as a promising market for their screen technology, encouraging them to invest substantially more resources into their development projects. For all manufacturers of LCD modules, the mobile phone market is a major source of business, complementing the market for much larger LCDs for personal computers and televisions. Expanding overseas demand for mobile phones with color displays anticipated is expected to drive further market growth. Sound chips for playing back polyphonic ringtones are another component of the i-mode ecosystem that has developed with the mobile Internet. At the sound chip manufacturers, such as Yamaha and Rohm, the basic single-channel or monophonic telephone ringtone was known as the buzzer. Perhaps because Yamaha and Rohm are companies in the business of being very particular about sound quality, their employees disliked using the single-channel, buzzer ringtone in their own phones. The development of more advanced sound chips for mobile phones reflects their audio obsession. The sound chip changes have been swift since late 1999, when mobile phones that could play three- or four-chord harmony became available. In 2000, phones were being shipped with chips to play 16-chord harmony. Recently, 24- and 32-chord chips have also appeared. While the average mobile phone user may have trouble telling the difference between the output of such sophisticated sound chips, the larger number of voices looks good in the specifications and seems to be an effective selling point. 5 Because OELDs contain an organic layer that glows brightly when power is applied, they do not need the backlight that conventional LCDs require, thus reducing power consumption, for improved battery life. They also have very wide viewing angles, fast response time, high contrast, and good color reproduction.
The i-mode Effect
45
Recently, phone manufacturers have been offering mobiles with frequency-modulation sound chips, which have a good track record in synthesizers and personal computers, and chips that can playback digitally sampled human voices or animal cries. When we demonstrate i-mode overseas, it is difficult to show people applications that require connecting to a mobile network, since our network is not available. Ringtone demonstrations are, however, highly effective. In other countries, the jarring buzzer sound supplied by the manufacturer is still the ringtone most often heard, and people are visibly surprised and pleased by the melodies that ring out from Japanese mobile phones. While less obvious to ordinary users, the software installed in mobile phones has also improved amazingly. Mobile phones today can send and receive e-mail, access Websites, manage a database of information about individuals, and allow people to play games, thanks to the robust software with which they are now equipped. I remember that when we first explained i-mode to mobile phone manufacturers, we had a hard time getting them to understand the new Internetrelated features we wanted, even though what we wanted to deliver – Internet access and the ability to download Java programs – was already available on personal computers. In our meetings with mobile phone manufacturers, we showed them the i-mode roadmap, explaining that we wanted to be able to browse the Internet from mobile phones and also, at some point, to be able to download Java programs. Finally, they got it. Back then, mobile phone manufacturers were pros at voice-communication functions and voice processing, but both the Internet and data processing on personal computers were uncharted territories for them. When we showed them the i-mode roadmap, it was clear from their expressions that neither ‘browser’ nor ‘Java’ meant anything to them. We were sweating to explain, and they were struggling, too, at a loss to know where to start in meeting our strange new requests. But start they did, and since then, mobile phones have rapidly developed into information terminals that rival personal computers. Looking at how software in mobile phones has expanded shows how that aspect of the phones has developed. In 1999, when i-mode began, mobile phones came with about 500,000 lines of code. Today, they come with more than 2 million lines. That is, the software has grown fourfold in three years (Figure 2.8). Considering that it took all of 18 years from the start of cellular mobile phone service for the embedded software to grow to 500,000 lines of code,
46
The i-mode Wireless Ecosystem (Unit: 1,000 lines) 4,000
rs
2–3
3,000
yea
JAVA SSL
2,000
1,000 18 years 0
MPEG-4 WirelessTCP
HTML HTTP
1999
2000
2001
2002
(Source : DoCoMo)
Figure 2.8 Rapidly expanding embedded software.
its reaching 2 million lines in only 3 years is astonishing. It demonstrates how rapidly the software for i-mode has evolved. While building Internet technology into mobile phones was initially a struggle, i-mode phones now incorporate the world’s latest Internet technologies. We proposed a version of the telecommunications protocol (TCP) used on the Internet for mobile use; the result is Wireless TCP. We were also pioneers in launching third-generation (3G) services based on the wideband Code Division Multiple Access (W-CDMA) standard, which we have named FOMA, for Freedom of Mobile multimedia Access. We have moved from playing catch-up to becoming an active force in the evolution of Internet technologies. The types of software built into mobile phones cover a wide range, so much so that mobile phone manufacturers cannot keep up by developing software on their own. The result has been expanding opportunities for thirdparty software companies. For example, much of the embedded browser software in mobile phones is developed by a company called Access, a startup company that develops software to connect devices other than personal computers, such as mobile phones, to the Internet. The software is similar to browsers used on personal computers but designed for mobile phones, with a pared down feature set to produce an extremely small program. Speaking of browsers, I should note that even the group promoting the Wireless Application Protocol, or WAP, with which we once had a difference of opinion, has recently adopted an approach that agrees with ours, even though our views, initially, were far apart.
The i-mode Effect
47
We said, ‘To expand the market for the mobile Internet, we should make it possible to reuse content available on the wired Internet. The shortcut will be to standardize on HTML as the markup language.’ But the others did not get it. They were unwilling to budge from their assertion that mobile communications need their own protocol and markup language for Internet access. Which protocol and language did the market choose? The standard used on the Internet, which we adopted for i-mode. It took quite some time, but after the market had demonstrably spoken in favor of i-mode, and its use had spread explosively, the WAP supporters finally began to understand. They decided to include a protocol based on the Internet standard in their next-generation standard, WAP 2.0. The process of developing the WAP 2.0 standard was an interesting experience in itself. When a new standard is announced, people tend to think that it was adopted because it is objectively superior to other technologies or is more efficient. In fact, however, the standards community involves corporate egos. Technical superiority and rationality do not necessarily determine what is designated a standard. Take the DoCoMo proposal, for example. The other sponsors of the WAP consortium were reluctant to listen to us. My feeling was that, as far as they were concerned, they did not see why the protocol and language that one mobile communications operator in Japan had adopted (even if they happen to be the Internet standards) should become the global standards for the mobile Internet. But an even more serious obstacle was their assumption that the mobile world needed its own separate standards. To overcome these attitudes, we at DoCoMo reached out to the engineers at Ericsson and Motorola, and then other companies, to build a better understanding of our proposal. It was a matter of building a majority, just as in politics. Companies naturally want to maintain their competitiveness and would thus continue to promote the technologies that they had proposed or that were advantageous to them. But whether the Japanese or European standard was technically better did not address the real reason the market for the mobile Internet was not growing, except in Japan. It took time for the early WAP-faithful to grasp our message: that the first task was to expand the mobile Internet market as a whole. The browser was by no means the only software for i-mode phones created by pruning a product for personal computers down to handset size. Another example is the front-end processor.
48
The i-mode Wireless Ecosystem
One of the challenges that had to be met in popularizing computers for Japanese use was developing an efficient way to input, using a standard keyboard, the thousands of kanji characters and two sets of phonetic syllabaries used in writing Japanese. The solution is for people to input text phonetically and have a front-end processor suggest likely kanji and syllabary combinations, handling the conversion process in interaction with the user. Happily, two of the most widely used front-end processors for inputting Japanese in the personal computer world are among the programs that have been ported to i-mode phones: ATOK, from Justsystem, and Wnn, which adds intelligent input prediction to conversion functions, from Omron Software. Why recycle existing software? ATOK and other popular applications are tried and true solutions with large installed bases on personal computers. Manufacturers of mobile phones could develop their own front-end processors, but it would take considerable time and effort to catch up with what Justsystem already had available. Instead of reinventing the wheel, the manufacturers realized that working with Justsystem would be to their advantage. While less conspicuous than the front-end, i-mode phones have their own operating systems. Here, the widely adopted choice is µITRON instead of an embedded version of the dominant operating system in the personal computer world. TRON is an operating system that has emerged from the TRON Project6 proposed by University of Tokyo professor Ken Sakamura. TRON is available in various versions to suit the machines in which it is to be used; ITRON and µITRON were developed for embedding in mobile phones and similar applications. µITRON was not the only candidate; Microsoft and Symbian also set their sights on the business opportunity represented by operating systems for mobile phones. In contrast to their offerings, however, µITRON is not the product of a company specializing in developing operating systems but an open-architecture system created through collaborative research among engineers at many companies and research institutions. In this respect, it 6 Sakamura was ahead of his time in conceiving of this project to build a ubiquitous computing environment that would network computers embedded in all the appliances and other devices around one. Sakamura proposed its core technology, the TRON operating system, in 1984.
The i-mode Effect
49
resembles the Linux operating system, and that it has become the de facto standard in mobile phones is an intriguing development. The larger amounts of software embedded in mobile phones have created an unexpected problem. While the lines of code have quadrupled over the past two or three years, the number of people working on software development has barely doubled. The productivity of individual programmers and of organizations as a whole may have risen, but not as rapidly as their workloads. The result, not surprisingly, was that, in 2001, software glitches were found in mobile phones, and some models were recalled. One reason, subsequent analysis showed, was the growing software development overload. Some manufacturers were, it appeared, unable to develop efficient methods for writing and debugging larger programs. Since these problems came to light, enormous effort has been applied to ensure that not only the software installed in mobile phones but also the software development system is extremely robust. All the companies involved have built great expertise in developing and testing software, and the number of fatal glitches has fallen substantially. Since the launch of i-mode, we have seen improvements in the performance of components, in assembly techniques, and in software. As a result, mobile phones from Japanese manufacturers have reinvented themselves, reaching the top, internationally, in performance. As DoCoMo continues to negotiate the roll out of i-mode with telecommunications providers around the world, the companies we are dealing with almost all want to use Japanese handsets. Those phones are well designed and attractive, but that is not the real issue. What is important to the companies providing mobile telecommunication services is the stability of the software inside. Japanese manufacturers’ products have the solid track record they are looking for. People may be accustomed to software problems on their personal computers, but they expect their Internet-capable mobile phones to be ready to use instantly and never develop software hang-ups, either while the phone is in use or in wait mode. We don’t want to betray their expectations. After all, it is that instant response, being ready to use whenever and wherever the subscriber wants, that is the chief attraction of mobile phones.
50
The i-mode Wireless Ecosystem
2.5 Manufacturers Combining Forces Impelled by the rise of the mobile Internet, the development of mobile phones with more advanced features has had unanticipated consequences in other areas. One is that mobile phone manufacturers are increasingly joining forces (Figure 2.9). Manufacturers have decided that acting alone to develop multifunctional phones, such as third-generation (3G) handsets, would be too much for them. More functions meant many more lines of code to write for embedded software. As the code expanded, coming out with several new models each year independently was becoming too much. Individual companies had been coping by assigning more and more people to mobile phone development projects, but they seem to have hit a wall when they started working on the 3G phones. That is why they have formed alliances, sharing product architecture and software modules so that they can use their development staff more efficiently. Only by cooperating can they keep up the pace in developing new models. In August 2001, NEC formed an alliance for cooperative development of mobile phones with Matsushita Electric Industrial (the consumer electronics giant that produces, among others, the Panasonic brand) and Matsushita Communication Industrial (another member of the Matsushita group, making car navigation systems and mobile phones, along with other
August 2001
NEC
Matsushita
Sony
Ericsson
Mitsubishi Electric
Toshiba
Nokia
Siemens
Agreement to develop platform jointly and share software October 2001 Merged their mobile phone operations and set up a new company March 2002 Joint development of third-generation mobile phones May 2002 Agreement to share software for mobile phones
Figure 2.9 Manufacturers joining forces.
The i-mode Effect
51
products). The three companies agreed to cooperate in jointly developing the platform and applications software for 3G mobile phones. Their effort appears to be paying off.7 In February 2002, half a year after they forged their alliance, they announced that they had developed the basic architecture for the 3G handset. They planned not only to use that architecture in their own companies’ products but also to license it to others. A similar alliance sprang up between Mitsubishi Electric and Toshiba. In announcing it in March 2002, they said they would cooperate in developing 3G handsets. Similarly, in 2001, Sony and Ericsson merged their mobile phone operations and set up a new company, Sony Ericsson Mobile Communications. Sony’s forte is audio, VCRs, and other homeentertainment equipment; Ericsson’s is telecommunications technologies. The intention behind the new company was for the parents to combine their strengths. In Japan, it is now taken for granted that mobile phones will have built-in audio and imaging capabilities, but demand for such advanced phones is still small overseas. That day is coming, however, and the founding of Sony Ericsson Mobile Communications is intended to anticipate these changes in the international market.
2.6 Initial Public Offerings (IPOs) and New Subsidiaries One of the side effects of i-mode that should not be overlooked is the stream of high-tech startup companies that either were launched in the mobile Internet field or found the rapid growth of the mobile Internet a strong impetus to growth. Quite a few such companies, sensing the potential of the mobile Internet, seemed almost synchronized with DoCoMo’s preparations to start i-mode. Cybird began its business supporting the production of content for the mobile Internet just as i-mode service began. It had noticed the critical factor that because subscribers’ packet-communication bills depend on the size of the content being downloaded, knowing how to make files as small as possible was essential for making content for mobile phones attractive. (Users’ greater sensitivity to the cost of Internet access is one of the 7 In April 2002, NEC and Matsushita, as part of their cooperative project, founded a new company, COSMOBIC Technology, in Shanghai, China, to develop technologies related to 3G mobile phones and the mobile Internet.
52
The i-mode Wireless Ecosystem
decisive differences between the mobile and the wired Internet.) Cybird’s founders, realizing the importance of minimizing file sizes, joined hands with companies that owned content libraries, signing contracts with them to outsource the conversion to i-mode content to Cybird. The surfer site Cybird developed, Namidensetsu (Surflegend), was one of the early i-mode’s most outstanding sites and still is today, with tens of thousands of loyal fans registered to access it. The Surflegend experience attests to the viability of information services directed at niche communities. Some startup companies played a backup role for major corporations. For example, the first i-mode game, Dokodemo Asovegas (Anywhere Asovegas), a quiz game, was provided by game maker Bandai (now Bandai Networks). Bandai developed the concept and Livin’ on the Edge created the content. Livin’ on the Edge had been involved in creating content for the Internet prior to i-mode as well as in developing and operating systems, and put its experience to work in creating i-mode content. In addition to Cybird and Livin’ on the Edge, many other high-tech startups provided much of the early content that got i-mode moving: Index, with its Ren’ai no Kamisama DX’ (God of Love DX) fortune-telling site (just one of its many i-mode sites), or Dwango, with Tsuribaka Kibun (Crazy about Fishing), a virtual fishing game, for example. Their ability to move swiftly and act creatively, so characteristic of high-tech startup companies, contributed to their creating clever content such as game software (Figure 2.10). Hudson, a major player in the games industry, was also quick to see the opportunities i-mode offered and jumped to develop games for it. When we introduced mobile phones with Java capability in January 2001, Hudson launched a site offering what it called ‘ringtone appli’ – minigames, downloadable games, with the choice of games growing every week. The popularity of those games had a role in generating demand for Java-capable mobile phones. Other established game companies such as Namco, Konami, Taito, and Enix also began providing game content for i-mode. Not all the successes were among existing game companies, however. Some, such as G-Mode, which was founded just before we introduced the Java-capable phones, were fledgling ventures that have been great successes, attracting large numbers of users. Outside the content area, many startup companies were involved in supplying embedded software for mobile phones. We needed to build a variety of Internet-related technologies into mobile phones, in order
Surflegend © 1999–2002 Cybird
01/07/2002 (Mon) 15:55
Surflegend
Katagai, Chiba Size
God of Love DX © Index
God of Love how-to
God of Love DX
Figure 2.10 i-mode games developed by startup companies.
A quiz game for predicting the future: Anywhere Asovegas © Bandai Networks/ Honkytonk
A game for predicting the future — that’s Dokodemo Asovegas!
Predict the Future
Crazy about Fishing © 1999–2002 Dwango
Crazy about Fishing
The i-mode Effect 53
54
The i-mode Wireless Ecosystem
for them to evolve from handsets for voice communication into Internet terminals. The complexity of technologies required for the wired Internet had given smaller companies the chance to develop niches. Our addition of Internet capabilities to mobile phones then handed such companies with sharply honed specialized skills a further opportunity to thrive by applying them to i-mode. The best example may be Access, a company I mentioned earlier. Making use of its experience in developing browser software for embedded applications, it has seized an overwhelming share of the market for mobile phone browsers. When i-mode phones became Java-capable, a huge potential market for Java applications appeared, giving opportunities to startup companies developing Java technologies. Until mobile phones provided a market for Java applications, many of those companies were stalled: they had the technology but no way to generate significant income from it. When i-αpplis8 became a possibility, startup companies such as Zentek Technology Japan, K Laboratory, and Connect found their own profitable niches. Lately, we have seen a gold rush of i-mode-related startup companies making initial public offerings (IPOs) of their stock. The first surge of IPOs by such companies came in 2001: Livin’ on the Edge, Index, Access, Cybird. Having done much to popularize i-mode itself, these startups were listing their shares on the over-the-counter market, on the Tokyo Stock Exchange’s Mother’s (a market for high growth and emerging stocks), or on JASDAQ (the Osaka-based share-trading market for smaller companies’ stocks) (Figure 2.11). A group of companies that might be called ‘IPOs in waiting’ also exists. These are subsidiaries set up by major corporations to specialize in mobile communications operations. Realizing that the mobile market is here to stay, more corporations are taking this route. For example, Bandai, which developed Kyarappa Anytime and other popular i-mode services, spun off its Internet content distribution division as Bandai Networks. The new company has entered into tie-ups with Internet-related companies in the United States, and is aggressively developing new services. These new companies have grown not because of any effort by DoCoMo to incubate startup companies to drive our i-mode operations. They have 8 An i-αppli is a service consisting of J2ME CLDC (Javd2 platform Micro Edition Connected Limited Device Configuration, a Java platform that Sun Microsystems developed for embedding in home appliances), a user interface, and an i-αppli API (DoJa) (application programming interface, DoCoMo Java) created for use on a i-mode phone and using HTTP communications.
The i-mode Effect Company
55 Area of business
Date listed
Market
Livin’ on the Edge
Internet-related system development and content development
April 2000
TSE Mother’s
ValueClick Japan
Online advertising
May 2000
TSE Mother’s
PA Co., Ltd.
Online want ads and employment service
July 2000
TSE Mother’s
Magclick Inc.
Online advertising
Mediaseek Inc. Cybird Co., Ltd. Access Co., Ltd. Nihon Enterprise Co., Ltd.
September 2000 Content development support November 2000 December Content development support 2000 Development of embedded February 2001 software February Content development support 2001
JASDAQ TSE Mother ’s JASDAQ TSE Mother’s JASDAQ
Open Loop, Inc.
Security technology development March 2001 JASDAQ
Index Corporation
Content development support March 2001 JASDAQ
Faith, Inc.
Music content creation
March 2001 JASDAQ
Zentek Technology Japan, Inc.
Development of embedded software
August 2001 JASDAQ
BeMap, Inc.
Content development support
GignoSystem Japan, Inc. Distribution of digital images (formerly PhotoNet Japan, Inc.)
January 2002
JASDAQ
March 2002 JASDAQ
Figure 2.11 IPOs by companies in the mobile Internet industry.
multiplied spontaneously, having identified the business opportunities imode offered. Nor has DoCoMo strayed outside its chosen role to tap the income possible in other parts of the mobile Internet industry. The usual telecommunications industry mindset – what I call telecom thinking – would suggest that DoCoMo itself might have joined them in developing content or software, given the huge potential market. But that would have led, quite reasonably, to the chilling suspicion that DoCoMo was keeping the best part of the market for itself. Would other companies have been as interested in contributing their creativity and expertise to building i-mode if they thought the only market available to them was DoCoMo’s leftovers? The success of i-mode, I think, demonstrates that setting up opportunities for many companies to participate attracted the companies we needed. Our ecosystem approach was the right way to go.
56
The i-mode Wireless Ecosystem
2.7 Boosting Internet Usage in Japan Yet another role played by the mobile Internet has been to encourage Internet use by nontechnophile members of the general public. According to statistics reported by the Ministry of Public Management, Home Affairs, Posts, and Telecommunications, in February 2002, the number of persons who used Internet services via mobile phones had increased by 19 million year-on-year to total over 50 million. The Internet White Paper 2002 (Internet Association of Japan, published by Impress) states that as of February 2002, the number of persons with Internet access in Japan had reached about 46,190,000 (Figure 2.12). This means that the number of people with Internet access by mobile phone is equivalent to the total number of Internet users. DoCoMo has, it appears, popularized the Internet in Japan almost single handedly. But, note that we have done so without using ‘Internet,’ (Unit: 1,000) 60,000
Internet users in Japan, 1998–2002 54,300
55,000 50,120
50,000 46,196
45,000
43,830
40,000 35,043
35,000
32,636 30,400
30,000 25,000
23,071
20,000
18,300
19,377
16,660
15,000 10,000
10,097
11,470
12,288
14,300
15,085
1998
1999
2000
2001
Dec. (projected)
June (projected)
Feb. survey
Dec. (est.)
June (est.)
Feb. survey
Dec. (est.)
June (est.)
Feb. survey
Dec. (est.)
Jun. (est.)
Feb. survey
Dec. (est.)
Aug. (est.)
June (est.)
0
Feb. survey
5,000
2002
(Source : © Access Media/Impress,2002)
Figure 2.12 Boosting the number of Internet users in Japan.
The i-mode Effect
57
‘browser,’ ‘Web,’ or technical terms in promoting i-mode. We felt, as we planned how to attract subscribers to the new service, that brandishing such terms would be incongruous and counterproductive. Consumer products almost never highlight the technologies used in them. Some customers for audio equipment or automobiles are, of course, deeply involved in acquiring the best possible sound or the finest transmission, for example, and want to know all the technical details. But, what most people are interested in is whether the quality is good, whether the product is affordable, and whether it is easy to use. Thus, in audio equipment, for example, the methods used to sell Walkmans to run-of-the-mill music lovers are different from those used to sell home theaters to true stereo buffs. Our target in attracting people to use i-mode was ordinary people, not technophiles. Thus, our marketing took the same tack as Walkman. We removed all the technical language possible from our television commercials, sales promotional tools, and other materials, and instead stressed the enjoyment and convenience that using i-mode would bring. The statistics and the white paper cited above also tell us that many people first experience accessing the Internet from a mobile phone, not a personal computer, and that many people access it only from their mobile phones. If, as those observations suggest, i-mode has enabled people for whom the Internet was remote and alien to make it a familiar part of their lives via i-mode, we are very happy, indeed. If Internet usage via mobile phones is included, Japan, though often described as a laggard in popularizing the Internet, would actually have among the highest rates of spread of Internet access in the world. In some European countries such as Sweden and the Netherlands, over half the population has Internet access. Japan is at or possibly above that level.
2.8 Dating Sites, Spam: The Tribulations of Success While i-mode and other versions of the mobile Internet have brought subscribers many benefits, they do have their downside. One is spam, the sending of unsolicited, unwanted e-mail to large numbers of e-mail addresses.9 Another is criminal activity arising from the abuse of personals sites, through which people with the same objectives become acquainted via the Internet. 9 Since 2001, complaints to telecommunications providers about spam, particularly bulk mailings to randomly generated e-mail addresses, have been on the rise.
58
The i-mode Wireless Ecosystem
These problems have developed because the service is convenient and easy to use, and because it has such a large pool of users. Unfortunately, the impact of a possible solution would be so great that individual companies in the industry cannot decide how to address these problems on their own. We are caught in a dilemma. Since mobile Internet services, including i-mode, have become part of the basic infrastructure of our society, a solution for any abuses that have developed must be developed through societal consensus. DoCoMo has taken several steps, in stages, to combat spam (Figure 2.13). We offer legitimate senders of bulk e-mailings a special connection service, a virtual dedicated entrance to the i-mode network, and guarantee the speed at which e-mail sent by that route will be delivered. The main users of that service are corporate entities using i-mode mail in their operations and organizations distributing e-mail magazines. That is, however, a mild, indirect measure that does not fundamentally solve the spam problem. The only way to combat spam fully would be to cut all connections between i-mode and the wired Internet, since much of the spam comes from senders using wired Internet addresses to send messages in bulk, abusing the fact that, unlike in i-mode, e-mail is free on the wired Internet. But walling i-mode off from the wired Internet would injure the many companies that offer legitimate services on the Internet and the many i-mode subscribers who use them. Neither side would be likely to agree to severing i-mode’s connection with the wired Internet. We need countermeasures that avoid that drastic measure. Privacy issues are also embroiled in the spam question, making it extremely complex. Most spam arrives without an identifiable sender: the spammer may use a false originating address or even borrow someone else’s. We would like to just toss out all mail from false addresses automatically. But, some would view that act as censorship. If we confirm the sender and, if it is false, delete the message, to some, DoCoMo, the telecommunications provider, would be spying on a third party’s private messages. In the face of such views, we, as a telecommunications provider, cannot put our automatic deletion idea into action. In response to the rise of spam, the Ministry of Public Management, Home Affairs, Posts, and Telecommunications, and the Ministry of Economy, Trade, and Industry drew up legislation to prohibit spam. Now that an applicable antispam law does exist, we can toss out any mail to which its definition of spam applies, at last.
The i-mode Effect
59
Date implemented July 1999
Countermeasure Changing e-mail address
Details Subscribers can choose another address instead of ‘mobile phone
[email protected],’ the default address when signing up for i-mode.
July 1999
Registering a secret code
Only messages with the secret code attached are delivered; to avoid receipt of unwanted mail, messages without the code are returned as undeliverable.
November 2000 Specifying e-mail addresses or domains for acceptance or rejection of mail
Subscribers can specify e-mail addresses or domains from which they will accept or reject messages.
November 2000 Rejection of all e-mail messages
Subscribers can refuse to accept all e-mail messages.
July 2001
Rejection of all Short Mail messages
November 2001 Blocking reception of spam
January 2002
Reception of mail from specified domains
February 2002
Special connection service (for senders)
April 2002
Reception of mail from specified domains (function reinforced)
Subscribers can refuse to accept all messages from DoCoMo’s short message service, Short Mail. The i-mode center refuses to receive bulk e-mail messages from an undefined sender. Subscribers can receive mail from domains they specify, as well from all i-mode subscribers. Mail from other domains is rejected. Businesses and others meeting certain conditions who are doing bulk mailings to i-mode subscribers are given a dedicated entrance to the i-mode network, to prevent delayed delivery. Subscribers can choose to reject mail impersonating mobile Internet mail but originating from personal computers.
Figure 2.13 Steps taken to prevent spam.
60
The i-mode Wireless Ecosystem
The personals sites present similar difficulties. Giving priority to protecting our subscribers, in view of the crimes and abuses that have arisen from such sites, we do not allow them on the official i-mode menu. But, there are many among the unofficial sites on i-mode. In the equivalent services offered by our competitors, J-Phone and KDDI, personals sites are openly developed and charged for. As the operator of the network, it is not our place to interfere in the operation of personals sites; we must let subscribers use them, at their own risk. All we can do is call upon subscribers to take responsibility for their own actions. Instead of a blanket exclusion of personals sites from the i-mode world, we inform subscribers of the risks they may pose, and have subscribers actively accept that they are using them in awareness of the risk involved. Personals sites are, of course, not unique to the mobile Internet, and not necessarily a bad thing. All media, and not only mobile phones or the Internet, have the function of linking large and random groups of people together. That can, in fact, be extremely handy. For example, the Sunday edition of the august New York Times has a people-to-people section, Times Personals. ‘Seeking woman 20 to 25,’ or ‘Calling WM’ – these personal ads set conditions for the sorts of people those who place them seek to meet. Some of the people who meet through such ads may have unpleasant experiences or even come to harm, but they accept the risk and are responsible for taking care of themselves. Society as a whole has reached an implicit consensus that the benefits of such services outweigh the risks. The example of the New York Times personals reminds us that even in as big a city as New York, many men and women have few chances to meet other people and are seeking attractive encounters. Instead of eliminating the problems the service presents by hushing it up, the approach seems to be to accept it, while maintaining a balance between accepting personal responsibility and social awareness. Personals sites are about more than finding dates: people also use them to find others who share their hobbies. Members of amateur sports teams, for example, use them to locate teams to play against. Eliminating this class of sites because some of its use is dubious would rob the majority of people of a helpful service. Thus, I think the better approach is a cautious balancing act as a societal consensus forms about such sites.
The i-mode Effect
61
Postscript: Comebacks I first met with the Bandai people before the launch of i-mode service. Our meeting began with a misunderstanding. Bandai had not had much success with its Pippin game machine, which required an Internet connection, a revolutionary concept at the time. It was, in fact, a flop. To make a comeback, Bandai had turned to mobile phones and had come up with the idea that a game machine for network-capable mobile phones might be a hit. It would certainly be more fun than the Game Boy, which lacked network abilities. Bandai thus approached DoCoMo with the idea of jointly developing such a game machine. When the Bandai people met with the people of the Gateway Business division at DoCoMo, they were annoyed to realize that they were talking with the wrong people of the company. But, thanks to Toyoshi Takahashi, who is now a director and chief technical officer of Bandai Networks, and Takeshi Shimizu, who is now its manager in charge of the IT planning office, they did not throw the opportunity away. They quickly came up with the concept of games that could be played using just a mobile phone browser. Coming back to us, they proposed the games Anywhere Asovegas and Mail de Koishite (Love by Mail). Today, games account for a large share of mobile Internet content, but back then, no one really thought they would amount to much. That did not deter Bandai, which applied what it had learned from Pippin as much as possible, given the unfavorable conditions – particularly the tiny mobile phone screen – to make those first two games a hit. Actually, we at DoCoMo also worked our fingers to the bone to ensure that the first games were not flops. Kei-ichi Enoki, the DoCoMo director-in-charge of i-mode, did his bit by playing them during the testing phase, and he remains a rabidly dedicated player of Asovegas today. Since August 1999, when the number of i-mode subscribers topped one million, lured by that market and the major hit Bandai scored with its Kyarappa Anytime, proposals for entertainment sites and, particularly, game content have poured in. Of them, the Dwango people were particularly impressive. Nobuo Kawakami, now its chairman and CEO, and Ryo Shimizu, now CEO of Dwango North America, brought us the
62
The i-mode Wireless Ecosystem
idea of a fishing game. They had experience in developing a networked game for the Sega Dreamcast, but Dreamcast itself had not been much of a success. When we heard their idea, Shigetaka Kurita, then the i-mode team member in charge of entertainment content and now a content planner at DoCoMo.com, I thought it had potential – and we kept tossing in more ideas. ‘Don’t have the fish already on the hook when the mail announcement comes,’ one of us said, ‘In real life, the fish sometimes gets away.’ ‘It would be more fun if you associated the game with actual locations. The game has got to be synchronized with data on real fishing spots!’ After our two-hour meeting, Kawakami said, ‘The game is all but set. Now, all we have to do is develop it according to plan.’ The result was ‘Crazy about Fishing.’ Since then, it has set the standard for games on mobile phones. The profusion of ringtones that we now take for granted also had its behind-the-scenes story. The first i-mode phone models, the 501i series, could not download ringtones. If subscribers wanted a particular melody for their own use, they would purchase a book on the subject and input the score themselves. Then, Yoshitaka Tohge of GigaNetworks, a karaoke company that was a subsidiary of Ricoh, brought us a proposal that he presented with great passion: he wanted to distribute scores for ringtones on line. I was dubious. His idea would mean that a subscriber would have to receive the score via i-mode, jot it down somewhere, and then input it into the mobile phone. What a pain! Was that really something you could talk people into paying for? Tohge was confident. ‘People have bought over a million books on how to input ringtones. They’re bound to go for the idea of receiving the scores by i-mode.’ At his urging, we agreed to give it a try, with GigaNetworks distributing the scores for free. The number of people accessing the ringtone service site was prodigious. Obviously, their desire to customize their mobile phones more than overcame the tediousness of the procedure. But, GigaNetworks then found itself in a bind: if they did not charge for the service, they could not keep their server for it. Thus, after two months, they added more melodies, shifted to a fee-based service, and still retained enormous support from i-mode subscribers.
The i-mode Effect
63
At about the same time, Masato Nakanishi(a director of a company with the odd name of Faith), the director of development at Rohm, and Yoshihiro Suzuki, a manager at Xing, a karaoke company, came to see us. Not surprisingly, they too were interested in melodies for i-mode phones. ‘Let’s add a ringtone downloading feature in the next model,’ they suggested. Faith, they told us, had developed the format, using MIDI-based open-source specifications, and Rohm had developed the sound chip. Xing would provide the content since, after all, it is number two in the karaoke industry. Having seen what a success GigaNetworks’ service was, I got on board immediately. Today, when ringtone melody sites are all over the mobile Internet, the two companies that consistently hold on to their top rankings are the pioneers, Xing and GigaNetworks. Their innovative ideas were backed by determination to succeed from the start, and succeed they have. In the process, they have done more than build wildly popular i-mode sites: they have transformed the business structures of their own companies. Today, not just those two but most of the karaokeon-demand companies in Japan derive more income from distributing ringtone melodies than from karaoke. Yes, determined people like these, clawing their way back from defeat, made a vast contribution to the success of i-mode.
Chapter 3
Ever-Evolving Mobile Phones Like a group of cells that suddenly comprise a conscious system, these groups [of people] then cluster together and take on characteristics that are profoundly different from the sum of the parts. Winston Farrell, How Hits Happen: Forecasting Predictability in a Chaotic Marketplace (Texere, London, 2000), p. 56.
3.1 The Drive for Individuation In the few years since DoCoMo began i-mode service, the mobile phone industry has evolved rapidly. The phones themselves have evolved from handsets for voice communication to multimedia devices displaying graphics in color and able to play polyphonic tunes. Our Digital Mova 503i models, which we announced in January 2001, went beyond better displays and clever sound chips to become Javacapable, able to run small applications written in the Java programming language. As we kept explaining at press conferences and in speeches, with this model, the mobile phone has taken a step closer to a computer. That is, just as with a computer, the owner, after buying the phone, could freely reinstall or add application programs. For mobile phones, that was a huge evolutionary step. Some earlier models did incorporate computer-like features, including address book and scheduling functions. But their application programs The i-mode Wireless Ecosystem Takeshi Natsuno 2003 John Wiley & Sons, Ltd ISBN: 0-470-85908-3
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The i-mode Wireless Ecosystem
were embedded at the factory and could not be altered or added to afterwards. To people used to working with computers, that seemed extremely odd. In the computer world, selecting hardware and software are entirely separate activities. People expect to select the hardware on the basis of the design, the space they have available, or other factors, and the software according to what they want to do with the computer, for their work or private purposes. But in i-mode phones prior to the 503i series, the choice of a phone model was also the choice of the software that would run on it. Hardware and software were sets, not sold separately (Figure 3.1). It did not take an experienced computer user to start comparing mobile phone features and to wonder why they did not offer more choice of software. Many thought, ‘I like this company’s design, but its address book is hard to use,’ or ‘If I could find a model with this one’s cool design that was as easy to use as that one, I’d buy it.’ The manufacturers were aware of demand for customized phones, but customizing phones, one by one, to suit user preferences was not practical.1 Mobile phones are mass-produced products; there are limits to how much the manufacturers can respond to individual needs. Thus, in the
PC
VS
Mobile phone
Multiple manufacturers offer Applications
Applications
Operating systems
Operating systems
CPUs
CPUs
One company offers
Figure 3.1 Personal computer, with hardware and software sold separately, versus the all-in-one mobile phone. 1 A manufacturer could do no more than produce about two models of phones in the same series, such as the 504i or 211i.
Ever-Evolving Mobile Phones
67
selection of hardware and software, the manufacturers tend to avoid going out on a limb. Instead, they go for the least common denominator. If, however, it were possible to install, delete, or change the programs in mobile phones, subscribers themselves could take charge of making changes in functionality. With subscribers assembling the group of programs they wished, the number of possible phones would explode from a few versions in each series to infinity. Selling the phone hardware and software as a fixed set was also not very attractive to those who develop applications programs. The situation resembled that of the early days of microcomputers, when each company had its own operating system and software for one would not run on another. It was extremely difficult to transplant an application from one manufacturer’s version of a mobile phone series to another manufacturer’s. That incompatibility blocked the kind of explosive growth in applications that we saw in the computer software industry when, for the first time, a disk operating system (DOS) provided a common environment so that software written for it could run on any personal computer operating under DOS. People are apt to look at someone else’s mobile phone and think, ‘Wow, I wish my phone had this feature.’ As long as the software was an integral part of the phone, people could not add the features they wanted. Want that superior address book? Buy a different phone. But if we could unlock the software from the hardware, then people could add the software they wanted, after buying their phones. Making Java-capable mobile phones into which programs could be downloaded was thus advantageous to users, manufacturers, and programmers. It was such an obviously good idea that it had, in fact, been proposed much earlier. But only with the 503i series of i-mode phones could we actually demonstrate that a market for that capability existed. As of April, 2002, slightly over a year from when that series went on sale, about 13 million people had purchased 503i phones. From the perspective of a telecommunications or service provider, however, strong sales of Java-capable phones are not enough. The real question is whether people are using the software downloading feature and thus increasing their phone usage, boosting our revenues. Simply buying the latest model, as a fashion statement, does not produce increased revenues. Our data show, however, that 503i owners use their mobile phones extremely frequently. They racked up an average packet communications volume (based on data from early 2002) about twice that of other
68
The i-mode Wireless Ecosystem (Unit: Packets per person per day) 600 FY1999
545
FY2000
511
500
FY2001
483
Number of i-mode packets
440
441
432
FY2001(non 503i users) 416
400
FY2001(503i users) 398 365
372 355
300 217
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100
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127
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Note: FY1999 had a special factor affecting packet usage: the release of the 502i series 0
Apr.
May
June
July
Aug. Sept.
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Figure 3.2 Packet communication usage by i-mode subscribers, nationwide.
subscribers (Figure 3.2). This figure implies that they were using i-mode twice as much as owners of earlier models.
3.2 The Charm of Customization Why, though, was I so sure that mobile phones needed Java? As I mentioned earlier, when we were developing the i-mode business plan back in 1997 and 1998, mobile phone manufacturers were embroiled in competition to produce the lightest, most compact phones. People mainly used their mobile phones for voice communications, and the various manufacturers’ products offered virtually identical features. Thus, smallness and lightness became the main selling point, and the manufacturers were sweating to shave off a gram here and a cubic centimeter there. How, then, did people treat their phones? While they were very concerned about weight and size when making the purchase, they would then proceed to hang straps and other accessories on them, adding quite a few grams, as well as decorating them with stickers. The poor engineers who slaved to make the phone smaller and lighter need not have bothered.
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Looking at the accessories dangling from mobile phones, I saw an opportunity. Those straps, beads, and stickers are a good guide to the owner’s personality and interests: a gregarious high-school girl with her phone plastered with stickers that are Polaroid photographs of her friends made on ‘print club’ machines or a hard-driving salesman with a strap advertising his company. If we see a middle-aged man with cute accessories on his phone that do not suit his reserved manner, we might infer that his children have chosen them. Be that as it may, we could see a desire for customization, for making the mass-produced phone into something uniquely one’s own. After customizing the phone’s exterior with accessories, what comes next? The next step, after some thought, became clear. While the salesman and the teenage girl had different straps on their phones, their screens showed identical images. People pick their own screen savers and background images on their personal computers (wallpaper, in the Windows parlance). Wouldn’t they like being able to pick what was shown on their mobile phone screen in call-waiting mode? I was imagining the digital equivalent of slapping one of those Polaroid photograph stickers on the screen. The appeal would go far beyond teenaged girls, too. I could see a man assigned for extended duty far from home, while his wife and children stayed behind, wanting to put a photo of his family or his children there, for example. The same logic applied to ringtones. Some models did give a choice of melodies, but people’s tastes in music are far broader than the few options the manufacturers provided. Rock, jazz, folk, bossa nova . . . people would want to pick their own favorites from the wide range of musical genres. (I personally like bossa nova and use ‘Wave’ by the famed Brazilian composer Antonio Carlos Jobim for my ringtone.) Some people, though, would not be satisfied unless they could always pick the newest tune for their phones. As soon as a favorite singer had recorded a new tune, they’d want it for their ringtones. The first-generation 501i and then the 502i met the demand for customized wallpaper and ringtones. What would people want next? The answer was customized functions (Figure 3.3). People tend to have a third criterion in choosing mobile phones: they want models that are compact, light in weight, and inexpensive. This requirement radically limits the features that can be built-in, compared with a computer, for example. As long as factory-embedded software drives features, the manufacturers’ only option was to select the features
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501i
502i
503i
12:11:20
Customized with accessories
Customized wallpaper
Customized ringtone
Customized functions
Figure 3.3 The march of customization.
that they predict most people would want. That would not, however, satisfy the demand for customization in so very personal an item as a mobile phone. To make it possible to customize their features, the phones had to support writing programs into them. DoCoMo might have come up with its own specifications for a mobile phone programming language – but we thought using Java would be far and away the faster way to go. If we had drawn up our own specifications, some programmers would have got on board and written programs for mobile phones – but only some. It would take considerable time before a substantial variety of programs was available. Java, however, was a known quantity, with a large group of software developers who knew the language inside and out.2 We were confident that if they wanted to, they could write programs of the sort that could be used in mobile phones in no time at all. We were right. The reason the Java-capable phones have attracted over 13 million users in about a year is undoubtedly the large selection of high quality programs (i-αppli) available to them. The choice of Java, events have demonstrated, was on the mark. 2 For example, JavaOne, the Java developers’ conference held annually in the United States, was also held in Japan for the first time in November 2001. It attracted 7,000 participants.
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3.3 Java Opens out Mobile Phone Uses What are those 13 million people with Java-capable mobile phones (the 503i and 504i series) actually doing with them? What applications have they installed? The obvious answer is games. The entertainment menu offerings, which are mainly games, have an overwhelming numerical lead in i-αppli menus. Familiar arcade games are represented in force among the i-αppli games (Figures 3.4 and 3.5). Taito has resurrected Space Invaders for i-mode (on its G@me Park site), while Namco offers Pac-Man (on its αppli-Carrot site). Are people indulging in nostalgia for the games they used to play? Recently, city planning simulation games that have been successful home game machine titles have also been ported to i-mode. SimCity Classic as well as Take the A-Train are making a comeback as i-mode titles (Figures 3.6 and 3.7). As mobile phones become more sophisticated, we expect to see more arcade and machine games finding themselves reincarnated on i-mode. With the infrared interface3 standard equipment on all 504i series models, it has also become possible for multiple users to play games interactively. For example, two people could enjoy playing Go or Othello
Figure 3.4 G@me Park: Space Invaders. Taito 2001. 3 The Infrared Mobile Communication (IrMC) interface is a standard set by the Infrared Data Association (IrDA); it was developed to enable mobile phones to exchange data such as address books, calendars, and messages.
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Figure 3.5 αppli-Carrot: Pac-Man. Namco, Ltd.
Figure 3.6 SimCity Classic for i-mode. 2002 Electronic Arts, Inc. All rights reserved. 2002 Hudson Soft; developed and distributed under license by Electronic Arts Inc.
together from their mobile phones. The new infrared interface looks likely to add to the enjoyment of virtual pet games as well: players can trade the characters they raise. Fortune-telling games have produced a fascinating use of infrared communications. Until now, fortune-telling games told the fortune of one person at a time, but the infrared interface makes it possible to tell the fortunes of a couple or to gauge how well two people are suited.
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Figure 3.7 Take the A-Train! Artdink Corporation. Hudson Soft.
Today’s love sign:
symbol
Figure 3.8 Hello Kitty Ekireki (Hello Kitty Divination). 1976, 2002 Sanrio Co., Ltd.; approval no. S306201. 2000 Imagineer Co., Ltd.
Imagineer’s Hello Kitty Ekireki (Hello Kitty Divination) and Index’s God of Love DX can do more than give a diagnosis for relationships, between those romantically linked and those who are merely friends. They also offer suggestions for places to go on dates together, lucky items, and jinx warnings (Figures 3.8 and 3.9). These developments give fortune-telling games a much stronger draw. (DoCoMo lists them under the ‘Entertainment’ section of the menu, by the way.)
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Your relationship diagnosis is ready!
Results
Figure 3.9 God of Love DX. Index.
The development of the 503i and 504i series of handsets has brought us at DoCoMo into a much closer relationship with the game industry. In the process, I have developed a profound respect for the fertility and ingenuity of game makers’ imaginations. They keep bringing us ideas that we, the more straitlaced types in the telecom industry, could not have come up with in a million years. Interestingly, games seem to be the field where the openness that we have adopted as a key i-mode principle has paid off the most. And we think there are more good things to come. In particular, efforts to develop games that utilize the possibilities of data networks have only begun among companies in the home game machine market. While there are certainly many games on our i-αppli menu, Java is not exclusively used for games. For example, one service, Hello Kitty no Machiuke Navigation (Hello Kitty Mobile News Navigation), uses Java to show the latest news on the mobile phone screen at all times (Figure 3.10). The effect is similar to the streaming news highlights shown in some trains (including the Shinkansen or Bullet Train) and taxicabs in Japan. Instead of unadorned text, however, what appears on the mobile phone screen is Kitty of Hello Kitty fame as the newscaster. In effect, the service functions both as a screensaver and as a news service. Map services for mobile phone subscribers are more convenient now that the phones can use i-αpplis. For example, the first version of iMapFan required people, if they wished to see a map of the area next to the one currently on-screen, to download another image. Using an i-αppli, however,
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PM Koizumi: Structural reform
Figure 3.10 Hello Kitty Mobile News Navigation. Imagineer Co., Ltd. 1976, 2002 Sanrio Co., Ltd; approval no. S3062601.
the subscriber downloads the relevant map images all at once, so that it is possible to scroll to see beyond the current screen without incurring additional packet charges. The infrared interface on mobile phones takes that a step further by enabling people to exchange map data. Just as we exchange business cards, we can zap each other’s maps to our homes or places of business or for the next meeting place, instead of constantly scribbling maps. A new application available for the 504i series of handsets acts as a remote control for karaoke-on-demand (Figure 3.11). With the i-αppli
Remote Control
Input request number My Song List (number of songs: 0) New Song List
Figure 3.11 MeloDAM/DAM Remote Control. 2002 Daiichikosyo Co., Ltd.
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MeloDAM/DAM Remote Control by Daiichikosyo, a would-be vocalist can select the song he wants to sing from a downloaded list of tunes. Then he holds his mobile phone towards the karaoke-on-demand digital automatic music (DAM) player to reserve, via infrared transmission, the song he wants to perform. As Daiichikosyo’s karaoke service suggests, the combination of infrared transmission and Java applications opens out a wealth of new application possibilities for mobile phones. Imagine, for example, that the phone is communicating, not with a karaoke player but with a point-of-sale (POS) register in a store. The phone could then take the place of small change or of a membership card. Of course, that application requires POS systems that have infrared interfaces built-in, but that is not too far-fetched. We expect that infrared-capable phones will be used, in fact, in a variety of such settings. Turning back to i-αppli, however, there are now so many that a whole book about them has been published, and more are appearing every week. I cannot pretend to present a definitive overview of such a swiftly changing field here; the only way to keep up – and to understand what the excitement is about – is to acquire a Java-capable i-mode phone and explore the useful and convenient services that i-αppli written in Java make possible.
3.4 Setting Mobile Phone Specifications – a la i-mode Marketing digital equipment tends to focus on specifications and new technologies. Even advertising for consumer products can be infected by that tendency: I recently saw a television commercial for one that was all acronyms and arcane technical terms, including MPEG-4 and Bluetooth.4 The advertiser presumably intended to communicate, by stringing together all those technical terms, what a technological powerhouse the product is. But while those working in similar fields probably know what the terms mean, for most people, they sound, I would guess, like nonsense syllables. Moreover, those who know the technology well enough to know what MPEG-4 and Bluetooth are probably already know what that company is doing and will not be impressed. Meanwhile, how does 4 MPEG-4 is an international standard for video and audio compression and multimedia delivery. Because it permits a high order of compression, it is appropriate for use with mobile phones and other devices operating over low-speed systems. Bluetooth is a short-range radio technology developed for use between mobile phones, audio and video equipment, and computer peripherals.
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the company – which had been trying to communicate a favorable image of itself and its products – look to the potential purchaser? It did not get the message across at all, did it? In the product development phase, it does matter that companies introduce new technologies and struggle to shave off a millimeter here and a gram there. Competition drives them to improve their technologies and their products. But when a consumer product is ready to be marketed, we have to highlight what the new product can do for people, not its features and specifications. A company that insists on emphasizing the technical side of a consumer product is not presenting it attractively to consumers. People will tend, if they encounter an advertisement that is all about technology, to assume that the product is for technophiles or that it would be far too complicated for them to use. The result of hyping technology in marketing consumer products, then, is often the opposite of what was intended. That is why, while marketing i-mode to consumers, we decided to refrain from making a great song and dance about specifications and technical achievements. Instead, we adopted the user’s perspective in stressing what people could do with i-mode. Our first i-mode commercials avoided technical terms such as ‘Internet’ or ‘Web’ entirely. Instead, we talked, to end users, only about the advantages i-mode could bring: more convenient banking and ticket reservations, for example. With the Java-capable 503i series, we maintained that user-centered approach in our marketing. That is evident even from our calling the imode Java service ‘i-αppli.’ We did not trumpet that the new service was realized through Java, because we knew that for most people what matters is being able to install or replace programs, not whether the technology used is Java. They might just possibly become aware of Java by seeing its logo when they launch an application; that is sufficient. We took our user-centric approach even further, applying it not only in the marketing phase but also in deciding on the specifications for our Java-capable phones. It would have been quite possible to set more ambitious specifications, but our interest was in ease of use for the ordinary subscriber; more impressive product specifications took second place. For example, we set a limit of 10 kilobytes for the size of programs to be downloaded and for the scratch pad that holds user data. That 10-kilobyte limit imposed huge restrictions on application developers, because it made it difficult to write programs supporting desirable features. It also seemed to place us at a disadvantage vis-a-vis the follower firms in the mobile
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Internet in Japan, J-Phone, and KDDI, because they had set larger sizes for applications and scratch pads.5 It is not hard to imagine why the others gave in to the temptation to adopt larger program sizes. But, while there is no barrier to making applications and scratch pads as large as you like, large applications take a long time to download and save on a mobile phone – while the user waits. Studies of mobile phone users have shown that the length of time that most people can stand to wait for the next screen to come up is seven to ten seconds. And, coincidentally, if you set as your condition that an application has to download and be displayed in no more than ten seconds, it can be no larger than 10 kilobytes. Thus, we concluded that allowing applications of over 10 kilobytes would make it harder for our subscribers to become accustomed to the service and actually be disadvantageous to our subscribers and us.
3.5 The Next Evolutionary Step: Born through Positive Feedback The user-oriented thinking that is an i-mode hallmark also drove development of the 504i, the second-generation Java-capable handset. That is why, in view of the higher transmission speed (28.8 kpbs) available, we raised the program size limit – and further increased the size of the scratch pad (Figure 3.12). After the release of the 3G 503i models, we began exchanging data with content providers on how their services were actually used, to determine the specifications for the next generation. Knowing what subscribers were interested in and what the usage trends were was precious information for providers, who were thinking night and day about services that would be a hit with subscribers. Our decision about program size was straightforward: since the transmission speed had tripled, we decided to triple the maximum program size as well. This meant that the download time would remain unchanged at a maximum of ten seconds. The main question, then, was the size of the scratch pad. Should we simply triple it, as we did the program size? When we talked with the people providing services using Java programs, we repeatedly heard that 5 In the initial specifications for Java services, DoCoMo allowed downloading 10K applications, J-Phone 50K, and KDDI 30K.
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503i Java program size (writing the program)
3 times larger 10 KB
30 KB 10 times larger
Scratch pad size (for storing user data)
10 KB
100 KB
3 times larger Transmission speed
9600 bps
28800 bps
Ample space for content Downloading time unchanged
Figure 3.12 Scratch pad expansion: an important step.
with a larger scratch pad, they could do new and better things. That is, there was more demand for a larger scratch pad than a larger program size. But what would a larger scratch pad do? Quite simply, it would permit a richer array of content. For example, Hudson had an idea for a game in which every time the user opened his folding mobile phone, a virtual woman would greet him in sweetly sexy tones, saying, ‘How are you today?’ or ‘It’s been a long time,’ or a kittenish ‘Meow!’ The greeting function itself would be written into the program. Because it is not too complicated, the programmers could keep the program size down. The greetings would be stored in the scratch pad, which meant that the larger the scratch pad, the greater the variety of greetings. And more greetings would mean that users would use the service longer without getting bored. A larger scratch pad would also be helpful for role-playing games. The approach had usually been for the subscriber to download another i-αppli to move on to the next stage. With more scratch pad space, it would be possible to download one i-αppli and enjoy several stages in the game. In addition to the program and scratch pad size change, the 504i was planned to permit a significant increase in customizable functions on the handset, which had been one of our goals for i-mode from the start. In particular, 504i users could define an i-αppli as their call-waiting screen. With
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Figure 3.13 The i-αppli switching button.
the 503i, a user wanting to use an i-αppli had to start it up, temporarily disabling the handset from receiving calls. But with the 504i, users can be in call-waiting mode while an i-αppli is running. The user can switch the phone between voice mode and i-αppli mode at the press of a button (Figure 3.13). Those who download the Hudson greeting game into the 504i, for example, can leave the game running as their call-waiting screens. With the ability to run an i-αppli and use the phone for calls in place, programmers could simply write the code so that whenever the phone was unfolded, the virtual woman greeted the user, as long as the game was running. News sites are another excellent candidate for call-waiting screens. Subscribers can keep the news on their displays, yet still be able to make or receive phone calls as usual. And, after a call ends, another press of the button returns the phone to i-αppli mode.
3.6 Reading in Cards by Infrared This was not the only customizable feature of the 504i. Thanks to its infrared interface, this phone can also replace many of the cards that tend
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to clutter wallets. Since many stores use membership cards as customer loyalty devices, wallets fill up not only with bank cash cards and credit cards but also with the video shop membership card, the CD shop discount card, and prepaid cards. Many acquire so many of these supposedly handy cards that they need a separate wallet to carry them. Carrying only the ones most likely to be used might be the solution, but in the general perversity of things, it is always the one at home in a drawer that needs to be used. These cards record name, membership number, and possibly the number of points accumulated by making purchases at the store. The data security level is not noticeably high; in fact, the information is written on the card, for anyone to see. With the 504i, all that information can be saved in the mobile phone and then updated or exported as needed, via its builtin infrared interface (Figure 3.14). Instead of hauling around a clump of cards, the user can let her mobile phone handle it all. For example, Geo, a major video rental chain, is working on developing a cardless membership system using the 504i. In the past, customers would show their membership cards every time they rented a video, and the checkout clerk would stamp their cards to update the number of usage points, which, when they reach a certain figure, entitle the customer to a discount.
Figure 3.14 The infrared interface.
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Figure 3.15 The Geo POS register.
Geo is planning to transmit the customer information, via a mobile phone’s infrared interface, to a POS register. The register sends that information to the Geo customer database, confirming that the customer is actually a member (Figure 3.15). To make this work, Geo has installed infrared interfaces on the POS registers in each of its stores. It also plans to connect the new system with the services Geo already offers on i-mode, including sending announcements of when videotapes are due to be returned and letting customers make priority reservations for videos. The Geo service resembles the Daiichikosyo service described earlier in connecting the real world (the bricks and mortar video stores) and the cyber world (a commercial site on i-mode) quite effectively. We expect to see other businesses moving in a similar direction. Except for services delivering content proper, e-commerce cannot be based entirely in cyberspace. A clicks-and-mortar service that connects the cyber and the real world has enormous business potential, as I will explain in greater detail in Chapter 4.
Postscript: Java – Success out of Disaster In December, 1998, I was feeling very low. We had not been able to launch i-mode on schedule. There would be a three-month delay. Meanwhile, the content providers were ready, the business model was set, and the marketing was in a holding pattern.
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Pulling myself out of the dumps, I decided I would use those three months to do something to enhance the likelihood that i-mode would be a success. My colleague Mari Matsunaga was planning a splashy launch party for i-mode, featuring the actress Ryoko Hirosue, as her revenge for the exceedingly low-key press conference that had been held in November. (For the details, see Mari Matsunaga, i-mode jiken (The i-mode incident), Kadokawa Shoten, 2000.) Another colleague, Kei-ichi Enoki, was dedicatedly performing final checks on the system. He kept the pressure up on other sections of DoCoMo through a combination of threats, coaxing, and praise to test handset quality, double check network quality, and confirm server specifications. I myself took on two tasks. One was to take a good look at the sales side of our operation. No matter how excellent our products and service were, if the sales staff was not going to sell them, we would be dead in the water. A complicating factor was that the team that had been developing the i-mode service was based in the parent company, NTT DoCoMo, Inc., known within DoCoMo as ‘Central.’ It is responsible only for sales in Tokyo and the surrounding prefectures (Kanagawa, Saitama, Chiba, Gunma, Ibaraki, Tochigi Yamanashi, Nagano, and Niigata). Our eight regional subsidiaries (NTT DoCoMo Kansai and NTT DoCoMo Shikoku, for example) were not involved in i-mode’s development but are responsible for sales in their own regions. We needed them to sell it. In each region, there would be a primary sales agent under the regional company’s umbrella, and then DoCoMo Shops and other retail outlets would actually sell the services. Beginning in December, I set up meetings with people at the primary sales agents in the area for which Central is responsible. Day after day, I went around explaining i-mode. Whenever I had a request from the sales side of one of the regional companies, I would go do my dog and pony show. In particular, since Masahiro Saito and Tomoaki Kenmochi of DoCoMo Kansai and Harunaga Nakamura and Satoshi Okamura of DoCoMo Shikoku were i-mode enthusiasts from the start, I was particularly eager to respond to requests coming from those regions. If someone wanted to know about i-mode, I was ready to go talk to them, no matter where they were. I was glad I did. People at the sales agencies and retail stores said that they had never had a manager from Central come and give a detailed
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explanation before a new service was launched. They also said, to my delight, that they were quite interested in selling i-mode. My other focus was on developing the eye-catching functions that would sell the next generation of i-mode handsets. From the very beginning of our discussions of i-mode specifications, I could not get the notion of the wallet PC promoted by Microsoft’s Bill Gates out of my mind. (For details, see my earlier book, i-mode Strategy.) i-mode was only the start, I believed. Ultimately, mobile phones have the potential to surpass personal computers, but only if we can make it easy to download software from content providers’ servers. At the time, Java seemed to be the only programming language that could make that idea a reality, but it had no track record in mobile phones. A few engineers in our industry had argued over Java’s potential, but no player in the mobile telephony world had taken the risk of developing a commercial operation using Java. So I said to Enoki, ‘For our next step, I want to be able to download software. But if we don’t use an open platform, no one will produce software for us. That’s why I think Java is a perfect fit for i-mode. I’m going to go to Silicon Valley and negotiate with Sun.’ Sun Microsystems, which had developed Java, was feeling somewhat at risk because the demand for Java, which enables the same software to run on different operating systems, was declining as Microsoft Windows won an increasingly overwhelming share of the personal computer operating system market. At the time, Mark Tolliver, president of Sun’s software division, was in charge of Java, but I was actually negotiating with Samir Mitra, an Indian-American whom I found great to work with. We immediately agreed to launch the project and exchanged a memorandum about it. But when two large companies start talking about documents, things soon get more complicated. The upshot was that Mark Tolliver said he would sign the agreement, taking responsibility for all the points that Sun’s legal affairs office was not satisfied about. Thus, on March 14, 1999, Mark Tolliver and Kei-ichi Enoki managed to hold a press conference announcing the alliance, at Tokyo’s Imperial Hotel. The legal risks that Mark Tolliver and Samir Mitra accepted were risks only if we maliciously betrayed them; we were determined to do our best to be worthy of their trust. The result was the launch of the 503i series, the world’s first mobile phones to have true Java capabilities, in January 2001.
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The rights to the DoCoMo version of Java programs, which we called i-αpplis, are jointly owned by Sun, NEC, and Matsushita. The three developers used the nickname Samir and I had come up with, ‘DoJa,’ short for ‘DoCoMo Java.’ At the time, at Sun, Java development code for mobile phones was called Kauai, which is the oldest of the Hawaiian Islands. For that reason, we held our first technical workshop together in late April and early May at a Hyatt hotel on Kauai. Ah, those were the days. Koji Chiba, chief engineer in charge of technical development, and the other participants did not manage to catch even an hour out on the beach during the three days we were there. Thanks to that effort, today one in ten residents of Japan uses DoJa. Back in that meeting room in Hawaii, we would never have believed it.
Chapter 4
Connection with the Real and the Realistic Today the network of relationships linking the human race to itself and to the rest of the biosphere is so complex that all aspects affect all others to an extraordinary degree. Murray Gell-Mann, The Quark and the Jaguar: Adventures in the Simple and the Complex (Abacus, London, 1994), p. xi.
4.1 From the Street The essence of telecommunications, including mobile telephony, is connecting. Person to person, person to computer, computer to computer: all are connections. The basic mobile phone service, voice communications, and the short messaging and e-mail services that later became popular are applications that connect one human being to another. Then came i-mode and other versions of the mobile Internet, in which the focus is on applications that connect human beings to computers (whose servers dish out content). Now, taking things a step further, games that support multiple participants – connecting human beings and computers simultaneously – run on i-mode. The variations on connecting and communicating are multiplying. The i-mode Wireless Ecosystem Takeshi Natsuno 2003 John Wiley & Sons, Ltd ISBN: 0-470-85908-3
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In my earlier book (i-mode Strategy), I had stated that i-mode has progressed on two evolutionary axes, vertical and horizontal (Figure 4.1). Evolution on the vertical axis has strengthened the connections between mobile phones. That is, this axis represents advances in mobile phones themselves, improving their functions and transmission speed. This evolutionary thrust represents achievements by DoCoMo on its own or by the telecommunications industry as a whole. Vertical evolution is arguably the conventional model of evolution in this industry. Evolution on the horizontal axis happens, however, through a strategy shared by mobile phone companies and partner firms that own other platforms. The goal is, by connecting mobile phones with a variety of other devices, to increase the range of situations in which mobile phones are used. Many of these horizontal developments involve local communications between a mobile phone and another device, without accessing the mobile phone network. This would seem to pose a problem for DoCoMo: mobile phones communicating with other devices without going through the mobile phone network do not produce any direct income for us. Indirectly, however, the impact can be huge. As mobile phones are used in more situations through linkages with other platforms, we will see bar codes being downloaded, new programs installed, and cumulative points checked – over our network. That is, an increase in the number of situations in daily life in which people use mobile phones ultimately boosts the demand for mobile communications. What, then, are these other platforms? Look around: you are surrounded by electronic devices. At home, you may have computers, game machines, and home appliances; in public areas, there are vending machines, arcade games, point-of-sale (POS) systems, and multimedia kiosks. These familiar, even taken-for-granted devices – the infrastructure of postmodern living – are the platforms that we want i-mode to link with. Our goal is to make life more convenient by creating some form of connection between these platforms and mobile phones. This was the starting point for horizontal evolution in i-mode. Following this line of thinking, we have developed partnerships with Lawson (the Japanese convenience store chain), Sony Computer Entertainment, Coca-Cola (Japan), Sega, and other firms. These companies
Lawson alliance
Car navigation alliance (GPS data)
7600 stores
HTML GIF e-mail
Use in Intranets
1 million subscribers
3 million subscribers
MIDI sound Color LCDs adopted
6 million subscribers
i-mode standard on all DoCoMo mobile phones
10 million subscribers
15 million subscribers
Java capability built in
20 million subscribers
W-CDMA
February 1999
April 1999
August 1999
December 1999
April 2000
August 2000
December 2000
Coming soon
Source : i -mode Strategy, 2003.
Introduction of My Menu personalization, This Week's Announcements guidance, fee-for-access contents, and data warehouse features
Introduction of regional menus (9 regions, September 1999)
Menu list order adjusted to reflect access (March 2000)
Investment in PlayStation.co.jp (March 2000)
Investment in Japan Net Bank (March 2000)
Establishment of Payment First (April 2000)
Start of English Menu (June 2000)
Announcement of tie-up with Sony Computer, i-mode and PlayStation network service (August 2000)
Conversion of ‘This Week's Announcements’ into a no-packet-communicationscharge service
Announcement of AOL tie-up (September 2000)
Establishment of Japan Net Bank, Limited (September 2000)
Menu updates (adding celebrity and artist searches, September 2000)
Start of ‘This Week's Announcements’ banner advertising service (October 2000)
Establishment of i-Convenience, Inc. (October 2000)
• Stronger customization (menus differentiated by user attributes: 13 categories × 9 regions) • Stronger navigation features (searches within the official menu) • Message-free location information services
Terminal technology and portal feature advances
Vertical evolution
Figure 4.1 Two strategic axes, vertical and horizontal evolution.
Links with other platforms
Horizontal evolution
20 million units
Alliance with PlayStation
April 2001
August 2001
December 2001
Connection with the Real and the Realistic 89
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The i-mode Wireless Ecosystem Instead of a commuter pass
Instead of coins Networked games
For seamless game playing at home and elsewhere Instead of coins and a membership card
Having tickets issued in advance LAWSON
Figure 4.2 Living is easier with mobile phones.
have already developed nationwide networks of their platforms, in stores, vending machines, or game machines.1 There are many situations in daily life in which being able to connect a mobile phone to these infrastructural devices would be handy. And each of these situations implies an opportunity to develop a new service. For example, who has not stood in front of a vending machine or POS register futilely hunting for small change? It would be so much easier if all you had to do was wave your mobile phone to make the purchase. Or how about being able to pick up concert tickets at your local convenience store instead of making a special trip to a ticket counter or spending money on postage? Thinking along these lines will generate a whole range of potential services (Figure 4.2).
4.2 High Tech? Not Necessarily Suppose you have an image of a promising new service in mind. The first step in translating that idea into a reality is thinking about who can help 1 Numbers are critically important in planning for widespread penetration of a service in a tie-up with another platform. Lawson has 7,734 stores (as of February 2002); domestic shipments of the Sony PlayStation totaled 19,200,000, plus 9,650,000 of the PlayStation 2 (as of March 2002); Coca-Cola (Japan) has 980,000 vending machines (as of December 2001).
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you make it happen. As I wrote in my earlier book, one of the criteria we take most seriously in picking a partner is whether the other party has the necessary determination. Getting a new service off the ground is a backbreaking task. If any of those involved are less than fully committed no matter what, if they lack the necessary will, failure awaits. If, on the other hand, they do share an image of the goals of their partnership and of the service they want to develop, and if they have the will to do it, then, as hard as it may be, the task of making that service a reality will proceed quickly. Note that the partners should be equally passionate about the project. If one is determined and another less so, the project will go nowhere. In addition to determination, a desirable partner for developing a new consumer service needs to have a healthy market share. To popularize a newly developed service quickly requires a company that is a power in the pertinent market. After deciding whom to partner with in developing our new service, we need to ask what tools and technologies use should be to make the service a reality. We are all apt, I suspect, to assume that a new service requires special, innovative, never-before-implemented new technologies. It makes a degree of sense: surely, a service that had not existed before needs a technology that also had not existed before. And sometimes it is true – but not always. In fact, for i-mode, we prefer not to depend on bleeding-edge technologies. The i-mode style is to go for the approach that can actually do more, even if it is low tech. Indeed, our basic policy is to avoid new technologies that have not fully matured and spread to our competitors. Our preference is for mature technologies that have already had the rough edges knocked off in the real world. Mature technologies are reasonably priced; implementing them in our handsets and services is inexpensive. And using well-worked-out mature technologies also helps keep our operating costs down, because the risk of bugs and malfunctions that would interrupt service is small. Another criterion we use in choosing technologies for launching new services on i-mode is how many other elements of the i-mode ecology would benefit from that choice. We prefer to pick the option that will please not only DoCoMo but also manufacturers, subscribers, and content providers. In making our decisions in terms of complex systems and economic theory, it comes down to a choice of which technology offers the best external economies. Our decision to use HTML as the markup language
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The i-mode Wireless Ecosystem
for content when starting i-mode and our choice of Java as the programing language for i-αpplis were both based on that principle. Because both were in use before i-mode was dreamed of, there were many people who could use HTML and Java to develop content and write programs. Choosing to use those mature technologies in i-mode gave us access to their wealth of skills, while giving them new business opportunities. External economies were definitely at work. As an extra attraction, both HTML and Java had (to put it mildly) a track record on the Internet; we did not have to worry about their stability and reliability. In both the initial vertical evolution and subsequent horizontal expansion, our policy has consistently been not to be fixated on the very latest technologies but to make choices that enable external economies to work for us. One excellent example, which I would like to explore in detail, is the ticket service that we set up in partnership with Lawson. Within a year after its launch in May 2001, iLawson, Lawson’s i-mode site, has over 200,000 members (Figure 4.3). The ticket service is offered in association with the iLawson site. (Unit: number of individuals) 220,000 200,000 180,000 iLawson members
160,000
208,000 (April) 203,000 (March) 192,000 (February) 182,000 (January) 164,000 (December) 155,000 (November)
133,000 (October)
140,000 120,000
84,000 (September)
100,000 80,000 60,000 40,000 20,000 0
Sept.
Oct. 2000
Nov.
Dec.
Jan.
Feb.
Mar. Apr. 2001 Source : i-Convenience, Inc.
Figure 4.3 Growth in iLawson membership.
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The ticket service enables an i-mode subscriber to reserve tickets on the Lawson ticket site on i-mode, through which he or she receives a reservation confirmation number. The subscriber takes that number to a Lawson store, inputs it, by hand, into the Loppi2 multimedia kiosk, and the tickets are issued on the spot. Many people have commented, hearing that explanation, that inputting the number by hand seems too slow and roundabout. Why not use a wireless technology to transmit the confirmation number to the Loppi? That would be the smart way to do things. That indeed would be more efficient for both Lawson and the subscriber. But there is a snag: to transmit the number wirelessly requires deciding which technology to use to connect the mobile phone and the Loppi, testing the technology, and installing it in both. Those who already own i-mode phones, however, would not be able to use this new technology without upgrading to new mobile phones. We would, in effect, be asking our subscribers to buy new phones merely to pick up tickets at a convenience store – and that, they would rightly think, is nonsense. Thus, our first step was to use a familiar, widely used input interface: the index finger. It is important to recall that what has value for our subscribers is not the input interface but the service itself: being able to reserve tickets by mobile phone and pick them up at a convenience store. With the 504i series, i-mode phones have evolved from the index finger to infrared transmission for local transmission of small amounts of information. We expect that technological progress will continue. When such new technologies are sufficiently mature and operating so smoothly that they can withstand use by the nontechnophilic general public, we will happily, and eagerly, adopt them. To return to picking up tickets at Lawson: where, at root, does the convenience of this service lie? It is handy because i-mode takes the place of making reservations by phone. As an extra attraction, i-mode offers an advance ticket lottery for tickets to popular events.3 Usually, in Japan, 2
People can use the Loppi multimedia kiosks in Lawson stores, in addition to issuing tickets, to place reservations and order games and entertainment products, arrange delivery of gifts, personal computers, and other items, and even have game software installed. 3 As the problems in selling the remaining seats at the 2002 FIFA World Cup games in Japan made clear, the telecommunications network does not cope well with a heavy, concentrated burst of people accessing a particular site or number. The ticket lottery system is extremely effective for tickets to popular events, for which we would expect a rush of people, all trying to make reservations in a very short period of time.
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reservations for a popular event can be made by phone, starting at a certain day and time; those who want tickets start dialing the reservation number, and have to keep dialing, until they get through. i-mode eliminates that tedious process. In addition, it displays the type of ticket reserved and the date on the mobile phone screen, and allows the subscriber to check the confirmation number via i-mode, instead of dialing and dialing, then jotting down the reservation details, and arranging for pickup. All the i-mode subscriber needs to do is go, mobile phone in hand, to a convenience store. Interestingly, we believe that ‘more convenient than before’ is about the right level of innovation for making a new service a hit. If the new service is too great a leap from the usual way of doing things, subscribers will be slower to adopt it and, in the worst case, will reject it. After this first small step in a new direction, though, once the new way of doing things is a familiar part of the landscape, people will find it easy to advance to the next step. In the example of i-mode’s tie-up with Lawson, once subscribers are used to the new ticket-issuing service, we can move on to making it even more convenient by adding a new technology in the input interface, and people will accept this new step readily.
4.3 Printing Service: Step by Step Having begun with the ticket-issuing service in our tie-up with Lawson, we are moving forward with other plans. Since 2002, for example, we have offered the iLawson Print Service. The subscriber selects the content he wants on i-mode, from its title or brief description, then prints out the detailed information on the color printer in a Lawson store. The procedure is roughly this: the subscriber chooses content that he finds interesting on the Lawson i-mode site, specifies the Lawson store at which he wants to receive a printout, and then drops by to pick up the printed document. Lawson initially provided several kinds of content for this service: fortunetelling, sets of practice questions for standardized exams, and vocational aptitude tests (Figure 4.4). It developed the content in cooperation with partner firms such as Gakken, a major publisher of home study and other educational materials. Simply because the service uses Lawson equipment does not mean, of course, that Lawson must provide the content. In this context, Lawson is a provider of infrastructure, providing the setting necessary to make the service work. Beyond that, its role is collecting the fees for the content, just as DoCoMo does for fee-based services on the i-mode official menu.
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Service
Provided by
Content to be Printed
Price
Stella Kaoruko
Work@
Perfect Horoscope
¥300
Diagnose Your Relationship
¥300
Fortunetelling
Standardized exam sample questions
Gakken
English, mathematics, physics, social studies
¥350
Vocational aptitude tests
Profile
Course A (6 pages)
¥1,250
Course B (5 pages)
¥1,000
Course C (4 pages)
¥700
Course D (2 pages)
¥350
Figure 4.4 Content for the initial iLawson Print Service.
We expect to see a gradual development of a wider range of content for this service. The possibilities need not be limited to identifiably digital content. Travel-related pamphlets and catalogues and brochures of all sorts – materials for which there is a strong demand and for which printing is expensive – are good candidates. A print-on-demand service of this sort could also be seen as a way to personalize or diversify magazines. A more mature consumer culture means that individual interests are becoming increasingly diverse. Magazines and other publications try to target audiences with specific sets of interests, but there is a limit to how far they can go to adapt to individuals’ tastes and interests. For economic reasons, they must be least common denominator media that large numbers of people will like. In view of the cost of putting together articles and advertisements, printing, and distribution to bookstores and other outlets nationwide, it is clear that without a certain level of circulation, a magazine cannot break even. If, however, they were able to use the Lawson Print Service platform, new publications that would not have been commercially viable in the past might emerge. Lawson stores would become little print shops for niche markets. Here again, we plan to improve the actual procedures for using the print service, little by little. At the launch of the service, the procedure
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The i-mode Wireless Ecosystem
Select document to be printed
Use Loppi to print receipt
Search for desired information, select, receive 9 digit receipt number
Input receipt number into Loppi
Print out receipt, take to cash register
Payment
Receiving print out
Pay (if there is a fee for the document)
Print out at Lawson Choose content
Lawson Print Service
Please pick up the document within 48 hours at your nearby Lawson
Receive the document
Lawson print receipt
Figure 4.5 Basic flow for use of the iLawson Print Service.
was for the subscriber to receive a voucher number by i-mode, input the number into a Loppi at a Lawson store, wait for the Loppi to print out the voucher, take that to the store’s POS register, pay the fee, and then receive the desired printout (Figure 4.5). Having to input the number into the Loppi makes the whole procedure a bit clumsy and overly complicated. When the 504i series is in widespread use, however, we can change to inputting the receipt number from a mobile phone directly into a POS register, skipping the Loppi. This also opens the possibility of ‘digital value’ businesses (digital coupons or prepaid cards, for example) by linking mobile phones and POS registers (Figure 4.6).
4.4 Proven Advantages: Our Tie-Up with Coca-Cola Step-by-step is also the watchword in our ongoing partnership with CocaCola (Japan). We began by inducing our subscribers to use a relatively simple service, which made them aware of the multifunctional capabilities of the new Coca-Cola vending machines. Now we are gradually expanding the types of services available.
Connection with the Real and the Realistic i-Convenience Existing services Mobile@Lawson, Loppi
Infrared communication between 504i series and Loppi 1. Coupons for in-store use 2. Other coupons 3. Fortunetelling, etc.
97 Lawson
LAWSON DVD sales Book sales Gift product sales
Mobile communications Local communications • Reserving merchandise, services
• Picking up merchandise
• Recommendations
• Payment at the store
• Merchandise delivery information, etc.
• Data output (documents, etc.)
Multimedia kiosk (Loppi)
Ticket sales (etc.)
Shopping Mall Orders from printed catalogues Orders from digital catalogues Sales of standard items (etc.)
Printing
POS register
Games, horoscopes Detailed maps Reference books, how-to books Advertising-related (etc.)
In the future: electronic payment functions Digital Value Digital coupons Digital points
In addition to offering services such as coupons, points from purchases, prepaid value, electronic payment functions
Color printer
Digital prepaid cards (etc.)
Other mobile sites
Logistics gateway Distribution center
Partnerships to provide products and services
Other services
In stores Vending machines
Coupons
Stations (etc.)
Digital value-related services Instructions for shipping merchandise
Shipping merchandise
Figure 4.6 From a printing service to digital value operations.
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The i-mode Wireless Ecosystem
Coca-Cola (Japan) announced its tie-up with DoCoMo in the summer of 2001. This announcement was the result of a long process of thinking about what the new service linking mobile phones and vending machines should be. The first step we considered was having mobile phones replace coins, on a prepaid basis. Coca-Cola (Japan) had developed new Cmode vending machines (Figure 4.7) designed so that someone could put money into one of these machines in advance and then use it to keep buying soft drinks, until, of course, the money was used up.4 It was almost like depositing money in the bank and then withdrawing it when in need. But how is the machine to know that you are the person who deposited ¥550 in it and can buy a soft drink with part of that sum? At the bank, I would use my bank-issued cash card to identify myself to the cash machine, but it would make no sense for a beverage company to issue its own cards. Instead, Coca-Cola (Japan) decided to use mobile phones as a means of identification. Here, too, the notion is not that someone would rush out to buy a new mobile phone simply to enjoy the advanced capabilities of a Cmode vending machine. The system was designed so that anyone with one of the
Figure 4.7 Cmode vending machine. 4 Cmode vending machines are equipped with a display, speaker, and printer, so that people can acquire maps, coupons, tickets, and information on special events or sales campaigns from them.
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Figure 4.8 Two-dimensional bar code screen.
common i-mode models could use it. Someone registering for the service is sent, as a membership ID, a two-dimensional bar code screen to her mobile phone. The Cmode vending machine then reads that screen and recognizes the subscriber (Figure 4.8). Our goal was not to be hung up on new technologies but to offer a platform that as many people as possible can use. For four months, from September through December 2001, Coca-Cola (Japan) tested the Cmode–i-mode system, mainly in Shibuya, a major shopping, entertainment, and transportation center in Tokyo that is a mecca for young people. The results were astonishingly successful. The most striking test result was confirmation that a market for a prepaid system for vending machine use exists. The prepayment cash deposited in the 25 Cmode machines set up for experimental use totaled some ¥800,000, or about ¥30,000 per machine. Furthermore, the test demonstrated that repeat users who would use the Cmode machines regularly also existed. On average, each machine had 10 repeaters using it each day. Usage of the prepaid service was much heavier than had been expected. We had assumed that most purchases from these machines would be on a cash basis, even though they had the electronic bells and whistles for the prepaid, i-mode-linked service. But to our surprise, about 1 in 10 persons used not cash but their mobile phones to buy beverages. This, we thought, was quite a high proportion.
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Another aspect of the system is that frequent buyers could accumulate points, which they could then use to buy beverages. Coca-Cola (Japan) found that over 1% of purchases were made using points, a result that implies the existence of a pool of very frequent Cmode users indeed and further underscores the evidence that consumers were buying from Cmode machines on an ongoing basis. If they had continued the test service longer, the ratio of purchases made using points would very likely have risen. Also, not to be overlooked is that the Cmode machines themselves had a customer-attracting effect. Compared to conventional vending machines in the same sites, the Cmode machines had considerably higher total sales. This was a very attractive point for the bottling companies that actually install the vending machines and operate them. Cmode would, the test results suggested, give them a locational advantage. Coca-Cola (Japan) does business through its regional bottling companies, and vending machines are one of the most powerful sales tools the bottling companies have. If Coca-Cola (Japan) were to get the new project off the ground, it would need the cooperation of those bottling companies. This would not, however, prove a hard sell, for the bottling companies had already been aggressively adding new functions to their vending machines. For example, Chukyo Coca-Cola Bottling, which serves Aichi, Gifu, and Mie prefectures, has carried out repeated tests of telemetering systems with vending machines.5 The bottling companies’ receptivity to innovation was part of the motivation driving the Cmode project. Still, as plans to introduce the system jelled, one point bothered many of us: the maintenance and repair costs of the new machines. They were difficult to estimate in advance; the possibility that they might ultimately eat up the profits was not to be ignored. While all eyes tend to be on the growth of sales when a new service is introduced, it is unfortunately often the case that the additional costs it introduces outstrip any gain in sales. This makes whether the new service will really be advantageous to the company less easy to assess. The Cmode machines came through with flying colors, however, with no major system trouble during the test period. Because the Cmode test had demonstrated the public’s ready acceptance of the new service, Coca-Cola (Japan) announced in April 2002 that it 5 Telemetering is used to manage sales and stock information at scattered facilities from a remote base. For vending machines, telemetering checks stock levels, to prevent their running out of merchandise or change.
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would expand the service on a commercial basis nationwide. Its initial goal was to install 2,000 Cmode machines around the country in 2002. Cmode was launched to do more than confirm prepaid amounts and let customers use them instead of cash. The project also includes developing a full range of services for registered members (Figure 4.9). What services? The Cmode vending machine prints out and sells amusement park tickets, plus maps, and other area guide information. Users can also pay for i-mode content on a Cmode and then download wallpaper screens and ringtone melodies into their mobile phones. The charges are all deducted from the sum on deposit in one of these vending machines. In the initial phase, we used a two-dimensional bar code screen as a user ID, but subscribers with the 504i model can use its infrared interface instead. The procedure for operating the phone and vending machine is the same whether the subscriber is using the bar code screen or infrared interface to ID himself and purchase beverages and content. Coca-Cola (Japan) is also, for a fee, making part of its Cmode user interface and server system available to third-party content providers (partner companies) that offer membership services. The arrangement amounts to leasing part of Cmode and is, in effect, a service quite similar to i-mode itself. I refer to this as a closed user group or CUG program.
1. Present member ID
Register as a member Cmode
Cmode server 2. Authentication
4. Information on amount on deposit 3. Deposit prepaid amount Uses:
To purchase beverages 1. Choose method of payment
Drink purchase Prepaid: ¥580 Points: 485 Payment method Prepaid Monthly bill (points)
To purchase content 6. Add points
Cmode server
Cmode
4. User authentication, product confirmation
2. Acquire C ticket Present C ticket
5. Receive service or merchandise
Figure 4.9 The flow of services on Cmode vending machines.
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The i-mode Wireless Ecosystem
For most companies, building specialized terminals for information flow and payment, and servers for managing membership information from scratch would be extremely costly. Using the Coca-Cola (Japan) vending machine network, however, partner companies can implement customer relationship management (CRM) programs economically and efficiently. An idea under consideration to increase user convenience is letting points circulate within the CUG. If the partner companies agree, the points a user earns through making purchases or accessing services on Cmode machines would become part of his or her general balance, for purchasing any of the goods or services offered. The system is similar to that under which credit card points acquired by charging a restaurant meal can be applied to an airline mileage plan, as they can be with some credit cards. This example suggests interesting possible extensions. With an even more comprehensive point service, for example, points earned by renting videos could be spent on soft drinks to enjoy while watching them instead of only on the next video rental. Thus, Cmode has advantages for customers and for partner firms as well, but the real added value is experienced by Coca-Cola (Japan). It has hordes of ultraloyal customers who purchase its products daily, but it has no way, apart from conducting surveys, to get a picture of its customers as a whole – who buys what each month, with what frequency, spending how much at a time. Not being able to pinpoint its best customers, it has been unable to offer customized services for them, such as telling certain customers first about new products. The partnership with i-mode, however, gives Coca-Cola (Japan) access to information on purchasers and the opportunity to tailor its marketing to them. Instead of relating to its customers only as people who purchase soft drinks, the company can get a better sense of them as individuals.
4.5 Sega: New Games Using Mobile Phones Sega and Coca-Cola (Japan) have similar hopes for their partnerships with DoCoMo. Of course, Sega makes games, Coca-Cola beverages, but both share a similar problem: not having a close-up picture of their customers. Sega knows that the people visiting its game centers include regular customers as well as some people who try the games once and never visit again. It is, however, nearly impossible to tell them apart by looking at them. Although Sega would like to make sure that its regular customers get the very best service, it cannot tell who they are.
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An added complication is that customers come to game centers to have fun while they are there; once they leave, it is game over, as far as Sega is concerned. It has no way of knowing whether a customer will come back again soon or never again, and has little influence on that decision. Sega, not surprisingly, would like to find ways to motivate customers to come again to its game centers, and come again soon. The lack of distinction in treatment between regular customers and occasionals may bother customers too. If someone enjoys arcade games and has spent considerable time and money gaining skills and moving up levels, it is rather discouraging to have to start at the beginner level the next time he/she goes to the game center. Sega introduced its VF4 Character Access Card for customers as a way of solving these problems. This card for its wildly popular arcade game Virtua Fighter (VF) retains a record of each game played.6 Because the membership card has the results of the previous games played, the next time the customer settles down to play Virtua Fighter, he starts on the basis of the previous game and can continue on from there. Since a tie-up with i-mode is a perfect fit with that strategy, in July 2001, Sega started VF Net to send information via i-mode to members. This service is an extension and reinforcement of its membership card system. VF Net permits subscribers to check their cumulative records from playing VF4, their win–loss records, and other game-related information from their mobile phones. Sega also came up with another interesting concept for VF Net. It made the i-mode service the equivalent, for Virtua Fighter, of a dedicated sports news program. That is, if playing Virtua Fighter is like watching the live broadcast of the game, then VF Net gathers the highlights of current play, edits them, compares them with historical data, and provides a commentary. This approach will resonate with sports fans, for whom the game itself and the commentary are separate sources of pleasure. Sega wished to use VF Net to tickle this aspect of its fans’ psyches. And here is another perspective: through VF Net, games on the street (the game machines in the arcade) and mobile games (on i-mode-capable mobile phones) are seamlessly integrated. Immediately after one game is completed, the next one begins. Not stopping there, Sega is also starting to link with home game machines. By connecting the street, mobile, 6 Virtua Fighter (VF) is an action game skillfully utilizing 3D computer graphics. An i-mode service menu (VF Net) for the latest version, VF4, was launched in the summer of 2001.
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The i-mode Wireless Ecosystem
and home platforms, it has created the opportunity to keep its customers captivated by the game throughout the day. Sega’s VF Net is also a highly interactive service through which, for example, the subscriber can receive a thorough analysis of his play and advice on how to improve. That is not something that arcade games can deliver. Plus, its partnership with i-mode enables Sega to form a gameplaying community on the Net. Participants can collect their friends to form a team, play against other teams, and participate in rankings within the team and between teams. Sega, an early entrant in the networked games field, has a good feel for how to use networks. VF Net attracted about 50,000 subscribers in the first half year after service began in July 2001. While we do not know what percentage of all Virtua Fighter players 50,000 people represent, we do know that Sega now has information on the attributes of at least that subset of its customers, and that is a remarkably big payoff. Now Sega and Coca-Cola (Japan) are considering a linked service on the i-mode axis. The goal is synergies from combining multimedia vending machines, game centers, and i-mode. The notion is to install Coca-Cola’s Cmode multimedia vending machines in Sega game centers for use as game navigation terminals. Sega would show information about its new games on the vending machine’s screen or, through an interactive process with the customer, choose the ‘optimal’ game for that customer. The goal is, of course, to increase game usage rates. Initially, Sega was thinking of setting up a multimedia terminal of this sort on its own, but the costs involved in developing a stand-alone terminal were prohibitive. The existence of a vending machine with multimedia capabilities, ready and waiting to be used in this way, would, however, drastically slash the startup costs. Sega’s thinking was in perfect agreement with Coca-Cola (Japan)’s goal of adding value to its vending machines by turning them into multimedia platforms handling a variety of information. Both companies have thus entered into the new service with a will, and their partnership looks promising. When it comes to games, Sega is not, of course, the only game in town. Our partnership with Sony Computer Entertainment also has great strategic significance. What we originally hoped to accomplish by working with Sony Computer Entertainment was very similar to our plans with Sega. One of the original objectives was to let people play games for home game machines elsewhere. For example, a game player who was away from home could feed and cosset the character he had carefully
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brought up on his home game machine and thus have the character grow even more. Upon returning home, he could continue raising his character. We saw another opportunity in the PlayStations themselves: these family game machines are actually computers with outstanding graphics capabilities. Why not use them, we thought, as data terminals? They might even serve to display electronic catalogues distributed on DVDs. The idea was to distribute up-to-date catalogue information not by having people download it but by burning it into a DVD in advance, and then, when the right time arrives, have a key unlock that section of the DVD. The key could be set via i-mode. Because the volume of data being transmitted is small – the key, not the catalogue contents – the subscriber would not be hit with a huge packet communications bill. Still, using i-mode to connect a PlayStation to the Net was at best a temporary solution; it simply happened that at the time, the easiest way to connect a PlayStation to the Internet was via i-mode. Then, in May 2002, PlayStation BB, a very promising broadband service using the PlayStation 2, was launched.7 It is not important for the i-mode PlayStation partnership that the two devices be physically connected. They are, after all, only two types of terminals connected via the Internet. We expect that ways to enjoy that content will increase synergistically, since a basic law of the Net is that the more things are connected, the more enjoyment and convenience increase geometrically. If PlayStations, for which there is already an installed base in Japan of over 20 million units, connect to the Net, it follows, as night follows day, that i-mode content will grow significantly richer. PlayStations with broadband connections also have potential for playing a leading role as hubs for household network connections. In that case, its partnership with i-mode will make life even more convenient. For example, is when you want to purchase a CD always the same time as when you want to listen to one? Or when you want to buy a video or watch one? In most cases, wouldn’t you prefer to go home and listen to a CD at your leisure, or wait until the weekend and watch a DVD with your partner? A similar time lag occurs in the case of games between deciding to purchase the game and playing it. When I personally start playing a 7 PlayStation BB is an on-line service accessible from the PlayStation 2 game machine over a broadband connection. Its groundbreaking offering was Final Fantasy XI, the newest version of the popular Final Fantasy series of games. Final Fantasy XI is only available on-line.
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The i-mode Wireless Ecosystem
game, for example, I lay in things to drink and settle down for a good long session. Where does i-mode fit into this lifestyle? It is, in a word, a remote control. The consumer can order content whenever it occurs to her, at work or elsewhere away from home. When she gets home, it has been downloaded and is waiting. That game, that DVD, that CD – order it when the mood strikes, using i-mode, pay for it, and then go home to find it has arrived in your always-on-line PlayStation: that’s the idea. If, in addition, the PlayStation becomes the hub connecting home appliances to the Net, i-mode and the PlayStation BB service could combine to permit remote operation of home appliances. I am confident that PlayStation and i-mode, working together, will make people’s lives visibly more convenient.
4.6 D2C Builds a Mobile Advertising Market While it is not precisely an example of evolution on the horizontal axis, here I would also like to mention mobile advertising, a new communication service born on i-mode. Mobile advertising can provide information in forms different from conventional mass media advertising. That is, it can take advantage of the distinctive feature of mobile phones as singleperson terminals, transforming them into an advertising medium that is more closely tied to the individual’s life. The topic of this chapter is ‘connecting.’ From that perspective, mobile advertising is, arguably, a new channel for information that connects the information provider and the user more efficiently. In June 2000, DoCoMo, advertising giant Dentsu, and NTT-AD (an advertising agency owned by NTT) jointly launched a new company, D2 Communications, to provide three types of advertising communications and information services over i-mode. They are the Tokusuru (‘to your advantage’) menu, Message-Free advertising/e-mail advertising, and banner advertising. (In the i-mode context, the banner is more of a small picture.) The Tokusuru menu is advertising of a type provided as content on i-mode (Figure 4.10). On receiving information on a special sales campaign a company is conducting, an offer of gifts for those who apply, or information on discount coupons, for example, the subscriber can act to take advantage of them. If the subscriber has preregistered the usual
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Tokusuru Menu
1. Simple i-response Fill in the blanks: Win a super trip to . . . !
Figure 4.10 The Tokusuru menu.
information, he can reply to multiple opportunities without filling in personal information for each transaction. To subscribers, this content is less advertising than useful information. To keep it that way, we exercise great care in deciding what information can go on this menu. Over one million subscribers have already registered for the Tokusuru Menu. For some subscribers, it has become an established source of information. Our Message-Free advertising is push-type advertising that uses what we call the ‘Message-Free’ service. Subscribers who register information about themselves (age, sex, area in which they reside) on the Message-Free screen automatically receive advertisements (Figure 4.11). The advertisements are the message; ‘free’ comes in because those messages are free to the subscriber, who pays no packet-communications charges on them. (The advertiser pays.) We have found, as expected, that the proportion of subscribers receiving Message-Free advertisements who click to receive more information – the click-through rate – is quite high. Of course, the rate varies according to the type of advertisement, but, on average, we see a click-through rate of over 33% (as of fiscal 2001). In other words, one in three of the people receiving these messages is interested enough in the information to click and ask for more details. These are figures that speak of the power of carefully targeted advertising.
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The i-mode Wireless Ecosystem
Fly anywhere in Japan for ¥10,000. ANA′s ultra discount tickets now on sale! Plus a chance at cool gifts if you act now. For more information, click here.
Source: ANA This page is free of packet-communications charges.
Figure 4.11 A Message-Free advertisement.
Not surprisingly, advertisers have been pleased with this service; over 60% of them have chosen to use it again. Over two million subscribers have registered for this service: over two million people have registered their attributes and preferences and are waiting for information tailored to them, from our advertisers. Banner advertising works in the same way as the banner ads in the wired Internet, where they are usually placed on the top pages of Websites. As in the wired Internet, our banner ads are very effective in raising awareness of brand names and logos, because they make a strong visual statement to users. Where banner advertising on i-mode differs is in its extremely high click-through rates, compared to such ads on the wired Internet. The clickthrough rate for the banner ads on our Weekly i-Guide, which provides information on new i-mode sites and specials each week, averages over 15%. Depending on the ad, the click-through rate may top 20%, a figure that is an order of magnitude greater than banner ad click-through rates on the wired Internet. We founded the advertising company, D2 Communications, in June of 2000, in the second year of i-mode service. We actually began offering advertising services that autumn, to coincide with our attaining a critical mass of over 10 million i-mode subscribers. Advertising on i-mode had been part of our plan from the start. In fact, all i-mode-capable phones,
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from the first-generation 501i series on, have been equipped with the ‘message-free’ function. Possibly, another mobile communications company (very possibly, in the case of such companies in the West) would have launched an advertising service from the very start or at least as soon as phones equipped with the appropriate functions were available. But selling advertising is a business that only works if you can deliver a certain reach. Having personal experience in an Internet advertising business before coming to DoCoMo, I was keenly aware that we needed to proceed step by step. No matter how dazzling the concept, without building a solid foundation in terms of the number of subscribers, an advertising service cannot succeed. Thus, we timed our founding of the new company to start up a new service, mobile advertising, carefully. The result is that D2 Communications is steadily expanding its operations.
Postscript: Look-Alikes? PlayStation and i-mode The start of the PlayStation partnership with i-mode came about rather oddly. Ken Kutaragi, president of Sony Computer Entertainment, first reached out to a different division of DoCoMo, just as Bandai did. He was inviting DoCoMo to invest in a company called PlayStation.Com Japan, which would sell PlayStation and PlayStation 2 software on the Internet. The idea was that it would become a game content platform. The manager in charge of the division Kutaragi approached turned him down on the spot, much to Kutaragi’s chagrin. A week later, in early February 2000, Sony Computer Entertainment’s head strategist, Hiroshi Kagiwada, called on the i-mode team. ‘I think PlayStation and DoCoMo’s business, especially i-mode, have much in common. We have a lot to talk about . . .’ I had been well aware that i-mode needed to work on developing horizontally, so that suggestion hit home with me. I immediately agreed that the company would consider investing in PlayStation.Com Japan and set about negotiating within DoCoMo to do that. Frankly, the investment was in itself not significant, in terms of either the sum involved or the ownership ratio we acquired. I saw it more as an opportunity for us to work cooperatively with PlayStation on what, I thought, was bound to be an interesting application platform. I first met Kutaragi soon afterwards. ‘Mr. Kutaragi, I think i-mode and the PlayStation should hit it off well together,’ I said. ‘After all,
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while this mobile phone may seem to offer trivial functionality, you can play games like this on it.’ ‘I know we’re a natural pair,’ he replied. ‘That’s why I reached out to DoCoMo. But what we are interested in is broadband. Unless you make your third-generation service incredibly inexpensive, there’s no point in our connecting with you.’ ‘You know, I don’t think that connecting is the only thing that counts. After all, some of our subscribers use fixed line phones when they are at home. There are lots of ways to connect, and that’s fine. What I am more interested in is linking the games as applications. If someone connects a PlayStation to the Internet, then every game can be connected with i-mode.’ ‘That’s a thought. We’re not interested in the handheld market, like the Game Boy, but it might be interesting if people were playing our games on their mobile phones.’ ‘Actually, we are loading Java on the next generation of i-mode phones, and I think game makers will climb on board.’ And the conversation went on, very productively. Even then, Kutaragi already had the idea for the PlayStation BB online service using broadband circuits in mind. He positioned mobile phones not as direct tools but as auxiliary tools for applications. That is, a game fan could be connected via i-mode with the game running on the family PlayStation, even when she is not at home. That would probably feed-back into increasing use of the PlayStation when she is home. ‘Let’s start by coming up with a cable to connect PlayStations and imode phones,’ Kutaragi agreed. ‘We can use i-mode to get PlayStation connected to the Internet.’ As that propitious first meeting suggests, the thinking behind PlayStation and i-mode have much in common. For both, revenues come not from sales of terminals but their use. Both entrust the creation of their most important content or game software to third parties. And both have well-worked-out strategies. Our teams also had similar working styles, I felt. Both made decisions quickly; were on the ball; had high morale, top to bottom; were working for the sake of the work itself, not the pay; valued frankness and honesty; and, above all, both teams were treated as heretics – odd men out – in their companies.
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We announced the PlayStation-i-mode tie-up in August 2000. The photographs from the event show our respective team leaders, Kutaragi and Enoki, together, looking like old friends. A pair of logos hangs on the wall behind them, as is usual at such events. But surprisingly, they are not the Sony and DoCoMo logos but the PlayStation and imode logos. I wonder now if that was a deliberate statement by the two teams?
Chapter 5
i-mode and the Battle for Net Supremacy Our best ideas are often those that bridge between two different worlds! Marvin Minsky, The Society of Mind (Simon and Schuster, New York, 1986), p. 131.
‘What is next for mobile phones?’ is a question I am often asked, and am asked more often now that i-mode has achieved such penetration. People naturally wonder what we will do now that the rate of growth in numbers of mobile phone subscribers in Japan is slowing. If we look only at ownership rates for mobile phones in Japan, we see little room for continued growth. The decline in the rate at which we gain new subscribers that we began to see in the second half of 2001 (Figure 5.1) was hardly surprising, given that over 60% of the population of Japan already owned mobile phones.1 The numbers should be topping out. The i-mode growth rate is also, not surprisingly, slowing. Since the number of i-mode subscribers is necessarily a subset of the number of mobile phone users, a slowdown was predictable. 1 Including Personal Handyphone System (PHS) phones; PHS is a low-cost Japanese digital cordless phone system.
The i-mode Wireless Ecosystem Takeshi Natsuno 2003 John Wiley & Sons, Ltd ISBN: 0-470-85908-3
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Number of subscribers 70 million
62.037
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66.390 65.356 65.918 64.180 64.714
Cumulative month-end figures 69.768 68.001 69.121 67.101 67.537
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Figure 5.1 Monthly changes in the number of mobile phone subscribers.
5.1 Real Use Begins Now To me, our current situation, when mobile phone usage has penetrated so thoroughly, spells an opportunity: now is the start of real mobile businesses. Over 33 million DoCoMo subscribers are already using i-mode. They own sophisticated mobile phones able to browse Internet content, with a high-definition display, sound chips supporting a wealth of melodic resources, and a powerful microprocessor. Over 13 million2 of those subscribers are using mobile phones that can run Java programs (the 503i and 504i series), so that they can download the programs they want and customize their phones. They can change the programs that run as wallpaper between calls or enjoy their favorite games. These programs are not all fluff and recreation: business applications can be added as well. Suppose that a company develops a program that just 5% of the 13 million subscribers with Java-capable phones will use. Its user base will 2 As of June 9, 2002, 13,730,000 subscribers were using phones that support i-αppli (the 503i and 504i series).
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be 650,000 persons. To the application developer, this is an extremely attractive market. The market’s existence totally changes the picture for software developers. If mobile phones that are a platform for running Java applications did not exist, the developer would have to develop a dedicated terminal and popularize it in order to sell its applications. Selling 650,000 dedicated terminals would be a huge task. i-mode delivers an attractive market, with growing opportunities for software and content developers, because our terminal – the imode phone – is not static. We can continue to add new services and technologies, since with i-mode the content, the applications, and the terminals are separate. Television provides a useful analogy here. Even after almost every household had a television set (the terminal), the terminals and content (television programs) continued to evolve. One evolutionary plateau was reached when nearly 100% of households had acquired color televisions, but development did not stop there. With thin, flat-panel televisions using liquid-crystal or plasma technologies spreading, it is clear that full penetration has not meant an end to the evolution of television sets. The same is true of television content (programming). The use of computers in program production, for example, is giving rise to new possibilities and efficiencies. Live sports coverage, for example, now includes displays of data on past wins and losses as part of the game coverage – a development that has appeared only in the last few years. Camera work and image quality have also improved remarkably since the dawn of color broadcasting. The mobile phone market, like television, still has considerable room for growth. The phones themselves are still evolving towards greater processing power. Most services now available on mobile phones are still rather primitive compared to what is available on personal computers. That is not surprising, given the four or five year gap in processing power between mobile phones and personal computers. Many in our industry expect mobile phones to acquire the enhanced processing power to display content more quickly and run more powerful applications. While some thought personal computers would never need more than 64 kilobytes of memory, they have kept on improving. A similar evolutionary drive is likely to improve mobile phone performance as well. Where do i-mode phones stand on the processing power to run applications? The 503i series, which went on sale in 2001, has about the same
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processing power as the arcade game machines that were popular in the 1980s, 20 years ago. I am referring to the table-model game machines offering Space Invaders or Pac-Man that were installed in coffee shops and candy stores in Japan. These games, Space Invaders and other favorites from way back then, underwent a revival when versions were developed for the 503i. The i-mode reincarnations of these games work about the same way, with about the same response speed, as on the old game machines. No wonder they have been a hit with the Space Invaders generation, which is still highly attached to the old arcade games. Arcade game machines have evolved amazingly since the day Pac-Man ruled the roost. Today, some use 3D imaging and links to the player’s gestures and movements for a virtual reality experience of auto racing or other sports. As mobile phones gain more processing muscle, we will see similarly exciting developments in programming for them. The phones will continue to evolve, but not in isolation. We anticipate parallel developments in content and services. Faster transmission speeds and more powerful processors in mobile phones mean that they can run larger programs. This in turn means that they can access a richer range of more fully developed services. The Internet industry, of which i-mode is a part, is also continuing to develop. Yet untouched territory remains, as I will describe below. By introducing new Internet technologies that can open up and stake out those new territories, we will make life with i-mode even more convenient.
5.2 Untouched Territory for the Internet Before going into the ways we plan to develop i-mode, I would like to sort out the battle for leadership in the Internet industry thus far and position i-mode, a comparative Johnny-come-lately, in relation to other industry participants. In the United States, start-up companies have dominated the Internet world – Yahoo!, the browser; Amazon, the on-line bookstore; and America Online (AOL), the Internet service provider. As a group, they are often referred to as the ‘new economy’ companies. Then we have existing information technology (IT) companies, such as IBM and Microsoft, taking them on, as well as ‘old economy’ companies such as AT&T and Time-Warner embarking on Internet businesses in earnest as well.
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At first glance, competition in the Internet industry appears to be a free for all, with firms of all types and sizes being part of it. But there is a certain logic to the situation. At root, the Internet is a medium connecting content and service providers with customers for those services and content (Internet users). The elements making up the medium can be divided by function: building up stores of content, informing users of their existence, delivering them efficiently, and so on. Figure 5.2 shows all those elements. The most important element is content. Why did the Internet attract so many users so rapidly? Content. It did not take people with detailed knowledge of computers or communications to become fascinated with what is out there on the Web: no matter what your interests, it offers something for you. This variety of content is mirrored by the variety of content providers, from giant corporations to individuals. Anyone can, without too much effort, become a supplier of information to the whole World Wide Web; that is one of the attractions of the Internet. Second in importance after the content itself are the servers that store it and release it, or incorporate more, at need. The companies that supply servers include many that were pre-Internet IT powers, such as Sun Microsystems, Microsoft, Hewlett-Packard, and IBM. The servers themselves do not differ much in performance, but the ability to build systems using those services is regarded as highly significant. Service Content Servers Content platform area
Information and services on the Internet Store Internet content
Links multiple servers and content
Gateways
Collect fees, user management
Networks
Transmit information
Clients
Process, display, play back information
User
Figure 5.2 The layered structure of the Internet industry.
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Then there are the portals, which categorize content by genre, provide search functions, and introduce users to the content they are looking for. Here, we find many ‘new economy’ companies that launched themselves with the popularization of the Internet, with Yahoo! and Amazon.com at the top of the list. Following the portals are the gateways, which offer the means of connecting to the Internet and to billing systems. These include the Internet service providers (ISPs) that provide an environment by which users can connect to the Internet. The gateways are a mixed bag of Internet start-up companies and existing major corporations. As price competition grows stiffer, however, we are seeing an industry shakeout, with major players forming alliances. Then come the networks that actually deliver content to users. Here, the major players are the established telecommunications companies, such as AT&T, and cable television companies. Referred to as the ‘first mile’ or the ‘last mile,’ the business of providing the circuits that reach the user’s home or business is the Internet industry area that requires the greatest time and investment for entry. That is why, although many companies that have started Internet-related business are dissatisfied with network performance, they have emphasized using existing networks rather then building their own. Microsoft, which has aggressively invested in cable television companies, is the rare exception: an Internet player that is moving into networks.3 The rapidly growing trend to Asymmetric Digital Subscriber Line (ADSL) services utilizes existing networks to deliver broadband service. ADSL, a new modem technology, converts plain old telephone system twisted-pair lines into access paths for high-speed communications. This multiplexing technology is applied in that last or first mile to the user, transmitting two separate data streams, with much more bandwidth devoted to sending data downstream to the user. Because it does not require the huge investment that building new networks would, many companies, including start-ups, have been entering the ADSL market. Since they too do not provide added value beyond the ADSL service itself, in terms of the layered structure I am outlining for the industry, they belong to the ‘network’ layer. 3 Microsoft has bought a $1 billion equity stake in Comcast, the fourth biggest cable television company in the United States. It has also invested in Jupiter Telecommunication (J-Com), a major cable television company in Japan.
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The layer closest to the user, with an extremely important role to play, is the client software and terminal by which the user connects to the Internet. Way back when, the phrase ‘Internet client’ suggested the Unix workstations used by engineers at universities and research centers. Later, workstations for business applications and personal computers became Internet-capable as well. They were followed by personal computers in the home and then by mobile phones such as i-mode phones. Other devices are following mobile phones into the Internet client arena: we are starting to see PDAs, televisions, game machines, even home appliances that can connect to the Internet. In fact, almost every piece of electronic equipment around us could potentially access the Internet, although whether that will happen will depend on whether viable business models calling for such access are drawn up and adopted. If many different appliances do become Internet-capable, we will see overlapping functions and competition where there had been a functional division of labor. Competition in the Internet field prior to i-mode was focused on a vertical division of labor and competition, but post i-mode, as the question ‘What will the post-personal computer device be?’ suggests, competition among various types of clients has begun on the horizontal dimension (Figure 5.3). A critical element in the Internet client area is software, particularly the software that provides the user interface. One reason AOL, for example,
Information volume: small
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Figure 5.3 Horizontal competition among an increasing number of types of Internet clients.
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was able to attract so many users in such a short time after it was launched was that it offered its own client software. From back when it was a pre-Internet computer online system, it has provided client software that novices could use easily. When its service expanded to Internet access, it promptly incorporated Internet browser functions in its client software for subscribers. Its appeal was being easier to understand and easier to use than competing services. Even today, when so many more people are comfortable using computers, AOL reaps considerable benefit from offering its own browser, and continues to improve it. For example, in response to growing concern over children’s access to inappropriate Websites, AOL upgraded its software to allow parents to block their children’s access to certain categories of sites. This function is one of the attractions of AOL for many users.4 Analyzing competition in the Internet industry in terms of type of function – content, servers, portals, gateways, networks, and clients – and then considering the types of machines on which client software can run should make it clear which firms are strong in which fields. The larger the area a company occupies on our Internet map, the easier it will find it to forge a value chain and to provide significant value-added services. The more aggressive a company is about its Internet business, the more ambitious it will be about expanding its territory. By contrast, a company that cannot put much energy into its Internet business will stay in one field and not expand its domain. Such companies will not build a large value chain. Let us apply that map to the Internet efforts of specific firms, starting with DoCoMo.
5.3 Where i-mode is Going Next. . . In our map of the Internet industry, DoCoMo’s i-mode provides clients (the mobile phone), networks (the mobile communications networks), gateways (servers for fee-based services), and a portal (the i-mode menu). (See Figure 5.4.) i-mode has points of contact with players in every layer of this industry model, from companies that provide content to manufacturers that build clients. Our position enables us to balance the interests of players and 4 AOL’s access control feature is robust. A parent can restrict the usage (access to certain types of content) for each screen name associated with that account.
i-mode and the Battle for Net Supremacy Content
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Services
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Content platform area i-menu (portal)
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i-mode servers Mobile communications network
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Broadcast networks
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Figure 5.4 i-mode starts with the network and clients.
coordinate the system as a whole. This has permitted us to build a service that forms a huge value chain. For example, today, ringtone downloading services are taken for granted, but those services are possible because we have digitalized content (melodies) and mobile phones with the capacity to play them back. Popularizing those services also took an easy-to-use portal and effective marketing, so that users could learn about which melodies were available and select the ringtone services and tunes they wanted. We also offered a further, often overlooked, pair of elements that are essential if an Internet business is to go beyond merely being an interesting experiment: an appropriate business model and a system for collecting fees. If any of those components were missing, ringtones would not have become the established part of the mobile Internet that they are today. Today, DoCoMo is a key player in the Internet industry. Prior to 1999, our main business was meeting the demand for voice communications, in both the client and network layers. The Internet? We had almost nothing to do with it. i-mode, however, linked our mobile phone networks to the Internet. With our provision of i-mode service, we became involved in competition within the Internet industry. In the process, we created a comprehensive value-chain-based service combining servers, portals, gateways, networks, and clients.
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Now where is i-mode going? Referring back to my map of the Internet world may suggest that while i-mode has covered the vertical axis well, it may seem lacking in horizontal spread. The only clients we offer, after all, are mobile phones. But the huge numbers of mobile phones give them influence that no other type of Internet client can match. DoCoMo alone has over 40 million subscribers. Adding in our competitors in the Japanese mobile communications industry gives a total of about 70 million subscribers. These subscribers, it is important to note, on average, replace their mobile phones at least once every two years. Annual domestic shipments of mobile phones stand at over 40 million units. This is several times higher than the figure for annual shipments of new personal computers and an order of magnitude higher than shipments of PDAs. With such a robust market, it is hardly surprising that i-mode has focused on mobile phones as clients. Having acquired 33 million domestic subscribers, what i-mode is aiming for next is not, then, a pointless horizontal expansion through multiplying the types of Internet clients we offer. Rather, we will develop further on the vertical axis – because uncharted terrain still exists in our map of the Internet industry. In particular, we are looking at the content platform area. Incorporating this virgin territory into our value chain will enable us to build a chain with even greater added value (Figure 5.5). What functions would a content platform have? One is account aggregation. For example, imagine an i-mode subscriber who uses online banking and other online commercial services. As such services are set up now, when our subscriber moves from the i-mode menu to the banking service she uses, she is asked for her user ID and password. Next, she decides to reserve airline tickets. She is again asked for a user ID and password. Then, she wants to log on to her company’s intranet, and again has to sign in by inputting an ID and password. Because the authentication procedures for each work in isolation, each needs to confirm her identity separately. The frustration and inefficiency are obvious, especially when you realize that a user-authentication procedure (strictly speaking, a handset-authentication procedure) had already been completed when she first moved into i-mode on her mobile phone. The problem is that the system is not making use of that authentication when she wishes to use services under the main i-mode menu. It’s not hard to imagine that many subscribers find recalling and inputting all those IDs and passwords so much trouble that they give up on using online services.
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Content Servers Comprehensive content platform
Content platform area
Added-value platform
Other companies’ platforms
The area i-mode is targeting
Gateways Networks
i-mode servers Mobile communications network
ISPs for wired clients Landline networks
Broadcast networks
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Figure 5.5 The content platform area that i-mode has set its sights on.
Why not make it possible for a single sign-in, when the subscriber accesses i-mode, to work across all the online services for which he has signed up? That would be simple and secure. That is the starting point of the account aggregation concept. A real-world parallel would be using a cash card issued by one bank to withdraw money from another bank’s automatic teller machine (ATM). That works. And wouldn’t it be even more convenient if this card could also be used as a credit card and prepaid card? Still, in the world of bricks and mortar, customers need to move from one store or financial institution to another to make use of multiple services, and identifying themselves at each does not seem excessively strange or out of line. But in cyberspace, the customer can stay in one place while accessing multiple services within a matter of moments. That is precisely the virtue of online services. But in that context, it would be significantly more convenient to be able to get the signing-in process over just once. The reality is that more than a few subscribers find the bother of signing in to use each service, and remembering the various passwords and IDs, painfully tedious. And where customers are dissatisfied, a business opportunity awaits.
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5.4 Progress on the Vertical Dimension Spurs Horizontal Progress To make service aggregation a reality is beyond the capacity of any single company. Existing i-mode services offered by many companies use a variety of user IDs and passwords and varying levels of security. It would be easy for us to offer aggregation on a test basis, but the hurdles to achieving it on a large scale are many – and quite high. One approach to the problem that has attracted considerable publicity is the Liberty Alliance,5 which was proposed by Sun Microsystems. DoCoMo is a founder member, as are IT companies such as Sun, AOL, and Sony, American Express, MasterCard, and other credit card companies, and companies engaged in e-commerce, such as United Airlines. Founder members from the telecommunications industry include Vodafone and France Telecom in addition to DoCoMo (Figure 5.6). The requirements for an effective aggregation system such as the ones that Liberty Alliance proposes are, at first glance, mutually contradictory: a Founder Members
Sponsor Members
American Express AOL Time Warner Bell Canada Citigroup France Telecom General Motors Hewlett-Packard MasterCard International Nokia NTT DoCoMo Openwave Systems RSA Security Sony Sun Microsystems United Airlines Vodafone
ActivCard Bank of America Catapult Cisco Systems CollabNet Deloitte & Touche EarthLink EDS Entrust Fidelity Investments Gemplus Intuit Nextel Novell OneName PriceWaterhouseCoopers register.com Sabre Holdings Schlumberger Sprint Verisign Visa International
Figure 5.6 Liberty Alliance Project members. 5 The Liberty Alliance Project was organized in 2001 to deliver ubiquitous single sign-on, decentralized authentication, and open authorization for the Internet, for greater user convenience.
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service that is both simple to use and secure. Those demands can and must be met, but deciding on the specifications will take time. While provision for a fully developed single-sign-in service based on these requirements is still some time off, the alliance is now working steadily on developing and implementing specifications. I wrote, in the previous section, that DoCoMo is interested in vertical development, not horizontal development by multiplying the types of clients we offer. But an indirect effect of our efforts in the area of aggregation systems will be horizontal development. Why is that? It is not because having only one terminal (client) for using services is insufficient for subscribers. Rather, making a service available anywhere and anytime, as with i-mode, is more convenient for everyone. Take Internet banking, for example. People often use their mobile phones to check their balances or handle bank transfers when they are away from home and check their computers when they are home. To withdraw cash, however, they need to go to an ATM at a bank or convenience store. Even though banks have started offering online banking by mobile phone or personal computer, they are not closing their conventional bricks-and-mortar banking operations. Much the same is true of games. While more games are available on mobile phones, competition from them is not driving home and arcade game machines into extinction. But imagine if all three types could be linked via the Internet: then a game lover could enjoy the same game wherever he finds the time. Instead of battling for the attention of one game player, all three game terminal suppliers would work together to enrich his experience – and themselves. For example, imagine that our game player had been turning over solutions to a puzzle that he had encountered in the course of playing a game, and the solution came to him while he was out visiting a client. At the appropriate moment, he could send the solution from his mobile phone to his game machine, and then take up the game from there when he returned home. Similarly, while out, he might develop a game character, then use that character to win at a game center.
5.5 AOL Targets Aggregation At present, all the major players in the Internet world are interested in service aggregation and other pieces of the content platform. The field remains wide open, though, because there are limits to the content platform
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Content
The area AOL is targeting
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Magic Carpet Content platform area
Other single sign-in services
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Single sign-in
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Networks AOL client software Clients
Figure 5.7 The content platform area AOL has set its sights on.
services that one company can provide on its own. The members of the Liberty Alliance Project, aware of that difficulty, are directing their efforts towards offering combined services. By combining multiple services, they can, they believe, generate more positive feedback. For example, because AOL owns a powerful portal, it has come up with its Magic Carpet concept to promote services in conjunction with other content players (Figure 5.7). It is the same single sign-in account aggregation concept other companies are working towards. Simply by starting to access the Internet by inputting the AOL screen name and password, an AOL subscriber can take care of a payment on the Citibank Website without going through another sign-in procedure.
5.6 And Microsoft too Looking at the moves that Internet-related companies are trying to make in terms of our map of the Internet industry makes it much easier to keep track of the action. This is particularly so in the case of Microsoft’s efforts in the Internet field over the past few years.
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With Windows, Microsoft has a near monopoly on operating systems for personal computers. But, as Bill Gates has himself said, it was a laggard in the Internet field. This is clear at a glance if you look at our map of the industry. Until just a few years ago, Microsoft was a player in none of these areas. It was dominant in operating systems, with Windows, and strong in applications software, thanks to Word and Excel. But as an Internet company, it was very small potatoes. It had nothing in Internet-related software, servers, portals, or networks. In 1999, Microsoft realized its weakness in the Internet field and began a forceful catch-up effort. It started developing its Internet Explorer browser. It launched Windows CE, its operating system for small, smart, mobile devices, and Pocket PC, an operating system for PDAs. Then it came out with Xbox, its own home game machine. It also bought Hotmail, the granddaddy of free e-mail services, and also moved aggressively into television, with WebTV, MSN, and cable television investments. All were efforts aimed at grabbing a leading role in the Internet field (Figure 5.8). Their first target was developing browser software, the point of entry from a personal computer to the Internet. Until Microsoft began providing
Content
Hotmail, MSN
Servers
Internet Information Server Passport
Content platform area
The area Microsoft is targeting
.NET
Gateways Networks Windows CE, Pocket PC .....
Windows
Xbox, WebTV .....
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Figure 5.8 Microsoft moves into the content platform area, too.
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Internet Explorer, Netscape had a nearly total grip on the browser market.6 Microsoft, leveraging its strength in applications for personal computers, quickly gained substantial control of the client area of the Internet map. At the same time, it was also investing resources in servers. With its Internet Information Server, it started to get control of the server area as well. Servers were a natural choice because, basically, all network services are a combination of clients and servers. Becoming a power in the client area alone would not enable Microsoft to build added value. The next step for Microsoft was to tackle what I have called horizontal development, in terms of our Internet industry map. To control terminals other than personal computers, it began moving into other devices. The first steps were developing Windows CE and Pocket PC as operating systems for car navigation systems, PDAs, and embedded devices, including Internet-enabled home appliances. Embedded devices and PDAs are in themselves important fields, but connecting them to the Internet gives them an even more significant capability. Thus, the next Microsoft strategy was to give terminals other than computers Internet access. It appears that Microsoft sees expanding the range of clients using its operating systems as extremely important. I say that because, to get a grip on such clients, it ventured outside software development and into hardware development, an area that has not been one of its fortes. Microsoft launched the Xbox7 home game machine in the United States in the autumn of 2001 and in Europe and Japan in the spring of 2002. We can infer from that effort a determination that goes far beyond merely entering the game machine market. Like Windows CE and Pocket PC, the Xbox is aimed at horizontal expansion. Microsoft, then, is determined to move deep into the home market. Until now, its penetration of that market had stopped at the home office door. Microsoft had not made it into living rooms, the heart of family life, where Japan’s leading manufacturers of home entertainment equipment, including Sony and Matsushita, and home appliance manufacturers have had an overwhelmingly strong presence. To counter them, Microsoft believed it needed to provide the hardware for game machines, not just the software. 6
From being a latecomer to the Internet field, Microsoft leaped to having an extremely high percentage of the browser market, with Internet Explorer. 7 The Xbox is a home game machine positioned to compete with Sony’s PlayStation 2. Its selling points are superior graphics and the ability to connect to broadband networks.
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Even before launching the Xbox, Microsoft had been buying up startup companies and marketing WebTV set-top boxes, to turn television sets into Internet terminals. In the WebTV venture, Sony and Matsushita were original equipment manufacturer partners in Microsoft’s run at the home market. WebTV, in the end, was not a success, but we still might think of it as a means for Microsoft to get a grip on the living room. Microsoft’s activities touch other parts of the Internet map as well. In the gateway area, it operates MSN, an ISP. In the network area, it has invested in cable television companies. We can read these moves as an attempt to broaden its influence in each area so as to build a value chain. The strategy they have worked out recently is what they call .NET.8 It is, in terms of our Internet industry map, a vertical development strategy headed straight at what I earlier described as virgin territory: the content platform area. In fact, they have already launched what they are calling .Net My Services, which they describe as the building blocks for developing user-centric applications efficiently. The key to making those services convenient is, of course, the userauthentication process. Microsoft has proposed .NET Passport as the technology to make that feasible. Using .NET Passport, the user signs in once, with one name and password, to access a variety of Web-based services – just as with the service Liberty Alliance envisions. If a company like Microsoft, with its overwhelming power in the personal computer industry, could attract 20 to 30% of all users to use .NET Password and gather data on them, it would have a substantial collection of data indeed. It would be more than adequate as marketing data to use if Microsoft wanted to expand its value chain further. When Microsoft worked out its .NET strategy, some people were resistant to the idea of entrusting Microsoft with personal data on users. ‘How do I know they won’t misuse the data on me?,’ people wondered. I expect the Liberty Alliance proposal would be met with the same resistance. It is true that data management is a source of unease when thinking about those providing aggregation services. But the question is, what sort of services would ordinary users be receptive to. The criteria for answering this question are to be found not among social critics and theorists but among the consumers themselves. The service provider must build a data management system that will remove doubts about the security of personal data while also delivering 8 .NET is the platform for Web-based services from Microsoft. It offers services for devices of all types and mutual connections between them.
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such outstanding convenience that it will overcome any remaining qualms about data security.
5.7 Those Who Provide the Circuits: A Hard Life, with No Added Value While Microsoft has been busy expanding its influence over the Internet industry, some players have been unable to expand their own spheres of influence. Many, in fact, fall into that category. Let’s look again at our Internet industry map and ask ourselves why. Interestingly, the players who typically fail to expand their presence in the Internet age are telecommunications providers. The rise of the Internet has forced many telecoms into painful competition, for reasons that our map makes clear. The individual telecoms own networks, including trunk and access lines, and some have dominant positions in the networks area. But networks take up only a small part of the Internet map (Figure 5.9), have little contact with users, and have no control over services. Thus, the telecoms find it difficult to add value to their services. Content Servers
Content platform area ISPs operated by telecoms Portals Gateways Networks
Wireless LANs (hot spots) Mobile communication networks
ISPs for wired clients Landline networks
Clients
Figure 5.9 Telecoms are hard-pressed to build value chains.
Broadcast networks
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The telecoms have not simply been sitting on their hands since the dawn of the Internet age. Increasingly aware of the risks they face, all have planned to expand into other territories. The direction most often chosen for expansion is gateway services: becoming Internet service providers (ISPs). ISPs) launched by telecoms are everywhere. In the United States, AT&T founded WorldNet; in Japan, NTT Communications set up OCN, KDDI launched DION, and Japan Telecom offers OCN. Has launching their own ISPs enabled the telecoms to offer users strikingly greater value? Combining a gateway and network gives their services no advantage at all. To users, an ISP run by a telecom is just another ISP. It is apt to be buried by the services offered by other firms in the same field. NTT has also taken a slightly different tack by beginning to offer Internet access using its wireless LAN technology. This service enables people to access the Internet from hotels, restaurants and bars, and other spaces with wireless LANs – so-called hot spots. Offering those wireless LANs, however, just widens the choices available in the network field, that is, within the same layer of the industry, instead of maximizing value as seen from the user’s point of view. It will have, I expect, little impact on the competition over added value within the Internet industry. DoCoMo is, of course, also a telecom and lives with the same risk. For example, we have launched our third-generation (3G) high-speed wireless network service, using the standard known as W-CDMA, which stands for Wideband Code Division Multiple Access. But having a faster network is not, in and of itself, sufficient to attract subscribers. Our 3G network, as such, is just a network; other companies can provide the same service using the same network equipment. In fact, J-Phone is planning an equivalent service, also based on W-CDMA.9 And when two telecoms are starting the same service using the same standard and the same equipment, price is apt to be the focus of the competition between them. Since there are, of course, limitations on how far costs can be cut to support price competition, the competitors are then unlikely to have the resources to create new valued-added services.
9 J-Phone had initially planned to launch its 3G service in the second half of 2001 but, after repeated delays, is now scheduling it for late 2002.
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5.8 The Theory of Horizontal Specialization: In Our Interest? Some, looking at the success of i-mode, propose a horizontal specialization that would split DoCoMo into service and network providers. They assert that DoCoMo has too much influence over both service and network operations; if those two were entirely separate, then competition in each field would spring up and the market would, they argue, expand. But is that true? That model may be valid for industries in which growth and development have come to a halt, but it is not, I think, applicable to industries that are growing and developing. For example, under the model in question, a company that provides network services alone would, after having built its network, have to be content with providing maintenance services alone; it would have no motivation to develop new services. And a company that was the service provider would find it difficult to deliver services that took into account compatibility with the network. That would reduce its hopes for growth in its services. In sum, complete horizontal specialization could not generate services on the value chain model, and, if a value chain does not form, new services such as i-mode will be difficult to create. Kei-ichi Enoki, the father of i-mode, has considered value chains in the IT industry in Japan from a broader perspective. Whenever he gives a speech, he gives people in and around our industry a piece of his mind about the idea of horizontal specialization: In the past few years, there has been lively discussion of IT ‘strategy’ in Japan. But the discussion focuses on coordination in the domestic market alone. It sounds like the country is still closed to foreign contact and international trade, as it was a hundred and fifty years ago. That kind of thinking forgets to ask how, in an Internet age, Japan is to make its living. After the opening of Japan and the Meiji Restoration of 1868, a series of industries have, in turn, been the mainstays of the Japanese economy, creating employment: textiles, steel, petrochemicals, automobiles. In the IT age, what industry will provide jobs in Japan? Who is making money in the IT world today? Boards for personal computers are made in Taiwan or China. CPUs are made by Intel, an American company. In operating systems, it is Windows, also American made.
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What about infrastructure? The basic piece of Internet infrastructure, the router, is made by Cisco Systems, an American company. Servers are made by Sun or Hewlett-Packard, data storage devices by EMC. Almost all the value-added products are made outside Japan. Keeping on this way will not sustain Japanese industry. By contrast, the mobile Internet, as in i-mode, is an arena in which Japan has power. Think about the components that go into a mobile phone. The µITRON operating system, the micro browser and other parts, the liquid crystal display: they make up the compact, lightweight mobile phone. And we offer high quality and very diverse content. The ringtone melody is an outgrowth of karaoke, an area in which Japan is a force. Games and animated characters invented in Japan are found in every corner of the world. The strongly high-touch content from Japan has exerted great power in the mobile, i-mode world. And all are competitive at present. Internet access via mobile phones is still developing. This is not the time to invoke the theory of horizontal specialization but to explore and develop this new market to the full; we are still growing. Implementing the idea of horizontal specialization, which happens to have aroused considerable talk lately, would mean severing the value chain. That means that Japan could create no more products with global competitiveness. In discussing IT, now is the time to stop thinking in terms of carving up the industry and, treating Japan in isolation, serving only 120 million Japanese. Now is the time to tackle the creation of new industries that will serve all six billion people throughout the world.
Ironically enough, proponents of horizontal specialization bring up the European mobile phone market as a good example, when that market’s horizontal specialization is precisely why it has lagged in mobile Internet services and a major reason why the worldwide mobile phone industry is in the doldrums now.
5.9 Similar, but Different: AOL and Ordinary ISPs The number of AOL subscribers recently topped 34 million worldwide. AOL is, without a doubt, the world’s largest ISP. Its size gives it influence not only over subscribers but also over content providers and manufacturers of computers and servers. Other ISPs, in Japan and other countries, have at most several million subscribers each. In Japan, the ISP with the largest market share, Nifty,
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has about five million subscribers. By right, it too should have significant clout, though not perhaps as much as AOL in the United States. But there is no comparison between the influence AOL and Nifty wield. Why is that? Back to the Internet industry map: garden variety ISPs only participate in the gateway area. It is a rare ISP that has moved into the client and content areas. Nifty began life as a pre-Internet online service and thus has some content, including subscriber communities. But, lacking both a client and portals, it has not been able to build a value chain (Figure 5.10). AOL, however, has its own browser software, which gives it a toehold in the client area. And its clever browser design has been effective in attracting users: it differentiates AOL and gets users to choose AOL over other ISPs. Nifty also offers its own client software, Nifty Manager, but by the time it was introduced, users were already accustomed to using browsers supplied by other companies. The timing of the Nifty Manager launch made it a less-than-effective tool for Nifty to win back subscribers. What about companies outside the network and gateway areas? Yahoo! is almost synonymous with Internet portals, having started as an online navigational service for Web users. Its basic business model is that
Content Servers
Content platform area
Business areas covered by Japanese ISPs Portals + ISP
Gateways Networks
Mobile communications networks
Landline networks
Broadcast networks
Clients
Figure 5.10 ISPs in Japan do not have their own client software.
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it provides lists of Websites organized by category, offers free Internet accounts, attracts as many visitors as possible, and derives revenues from targeted advertising, directed at visitors interested in a particular subject. In Japan, some companies have leaped on the Yahoo! bandwagon by offering extremely low rates for Internet access. In fact, in September 2001, Yahoo! and BB Technology, a subsidiary of Softbank, jointly launched Yahoo! BB, a comprehensive commercial broadband service using ADSL. Its monthly fee, ¥2,280, helped drive down fees for ADSL service in Japan. Still, neither Yahoo! BB nor others in the market appear to be able to build a total service value chain. Because marketing is the largest cost factor for ISPs, being able to make use of the Yahoo! brand value was a huge plus for Yahoo! BB; it will be a test case of whether it can, in the end, use that advantage to create its own value chain. Because communications services by themselves are a low-margin, bulk sales business, if a company cannot seize a certain level of market share quickly, it runs a high risk of going out of business before its value chain takes shape. It you are selling a product to which you have added value, you should price it at a level commensurate with that added value. Getting stuck in a price war when whether you can add value is still open to question will make it even more difficult to add the value you need. The upshot is the quagmire of price competition. In the short run, lower prices for a service may seem good for users. In the long run, however, companies without the resources to hold up under a war of attrition will leave the market, and only the strong will survive. The result, ironically enough, will be the emergence of oligopolistic arrangements that eliminate price competition. In the end, the consumer pays.
5.10 Is there an Opportunity for Manufacturers? The Internet client, as I have said, plays an extremely important role in the competition in this industry. Whether the end user perceives a service as providing added value will depend to a large extent on how well the client terminal and software work. This suggests that the manufacturers of the terminals (mobile phones, computers, PDAs, intelligent refrigerators) are in an advantageous competitive position in the Internet field. The manufacturers do not, however, face a level playing field on which to fight for their Internet opportunities. As might be expected, those with an overwhelmingly large share of the market for the sort of terminals they manufacture will be stronger. Having a huge market share enables
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a manufacturer to work out deals with users and content providers. In today’s world, in which all sorts of companies can easily connect on the Net, having a large installed base is a precondition to developing a new service to a large scale. This logic suggests that in the mobile phone field, Nokia, which has top market share worldwide, is in an enviable position. It has at least a 30% share of the global market,10 with annual shipments of over 100 million mobile phones. This figure is larger than the total number of mobile phone subscribers in Japan. If Nokia gets serious about the Internet, it should be able to show users and content providers significant value. For some reason, however, Nokia has shown no signs of a full-scale entry into the Internet field. They are, it is true, developing servers and content as well as the mobile phones in which they excel – but not for the Internet. Nokia is promoting WAP, a protocol for wireless networks (see Chapter 2) and apparently wants to build a dedicated network for wireless use that would be independent of the Internet. It is maintaining its distance from the Internet, possibly to avoid competition with the companies already in that industry. What about manufacturers in other fields, such as home game machines? Sony Computer Entertainment, source of the PlayStation, is trying to gain momentum in the Internet world by leveraging its base in game machines (Figure 5.11). With an overpowering share of the home game machine market, the company is indeed well positioned to become a force in the Internet industry. Sony Computer Entertainment launched PlayStation BB, a service to distribute content for PlayStation 2 machines, in May 2002. The service will enable owners of the PlayStation 2 to download games, music, movies, and interactive content over broadband connections. In announcing the new service, Sony Computer Entertainment, a company with hitherto no involvement in the Internet, has entered the field, flying the PlayStation colors. Sony Computer Entertainment has adopted a unique strategy, providing only PlayStation 2 as the terminal and its Dynamic Network Authentication System, a server and proprietary authentication system. It has outsourced the network and the gateway (for collecting fees) to large 10 According to an announcement from Gardner Dataquest, a U.S. research and market analysis company, 399,580,000 mobile phones were sold throughout the world in 2001. Nokia had a 35% market share, with sales of 139,670,000 mobile phones.
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Content Servers The area Sony Computer Entertainment is targeting
Dynamic Network Authentication System server
Content platform area
Gateways
i-mode servers
Networks
Mobile communications networks
Landline networks
Broadcast networks
PlayStation 2 Clients
Figure 5.11 Sony Computer Entertainment aims at building a value chain on its PlayStation foothold.
existing ISPs. It is interesting that its strategy seems to be not to meddle in areas where it finds others to do the work. It is clear that Sony Computer Entertainment was meticulously preparing for the launch of PlayStation BB as it designed the PlayStation 2: its box was built with extra space for attaching a network connection module. Ken Kutaragi, president of Sony Computer Entertainment, and I share the same approach in our vision for Internet strategies, and I look forward to generating synergies between i-mode and PlayStation 2 in a variety of fields.
5.11 Fractal Structures: The Internet and the Real World At the beginning of this chapter, I asserted that the Internet is a medium for connecting producers and consumers. If we try to grasp the role of the Internet from a broader perspective, this may seem an obvious thing to say, but the Internet, we must remember, is only one means for connecting producers and consumers. And what is provided via the Internet is only
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information in digital form. It is not, obviously enough, possible to send physical objects over the Internet. When someone is lamenting that an Internet business is not going well, ask about the business plan. Was the idea too broad – substituting Internet arrangements for everything in the real world – or too narrow? Restricting the use of the Internet to downloading digital content, for example, may be too narrow a business concept. Linking the real world and the Internet can open up an enormous market. Perhaps because expectations of the Internet are so great, many who try to run Internet-related businesses think that they can put their whole operation in cyberspace. Actually, though, most companies running Internet-based business-to-consumer businesses are also running brickand-mortar businesses in the real world. If it were possible to do it all in cyberspace, they could have shut down their conventional businesses, but they have found that it makes more sense to think about synergies between the Internet and the real world and stimulating latent demand. Interestingly enough, business in the real world has layers with functions that parallel portals, networks, and gateways along the way to putting merchandise in consumers’ hands. Layered businesses exist, just as they do on the Internet (Figure 5.12). Let us consider, for example, a convenience store. The content on the Internet is equivalent to the merchandise lined up on the store’s shelves. The server is the store as a building, the box in which the business takes place. The portals are equivalent to the shelves for displaying goods in the store. The convenience storeowner selects the merchandise in accord with regional characteristics and customer demographics. Since the number of items that can be displayed on the shelves is limited, what the store owner selects affects sales. The network is equivalent to the physical distribution system. It is necessary to think about delivery schedules, including how many times a day and with what size of trucks merchandise should be delivered. That is very similar, in the Internet world, to choosing from among communications modes with differing speeds. The brick-and-mortar equivalent of a gateway is the point-of-sale (POS) register. The main currency it accepts is cash, but some models also accept prepaid cards. While department stores often offer their own credit cards, in convenience stores this role is played by prepaid cards. Convenience store chains that have built such value chains include Seven-Eleven and Lawson. Large as they are, they do not build all the
System for distribution to stores
Expanding business domain
Multimedia kiosks
Vending machines
Vending machines
Clients
Networks
Gateways
Content platform area
Content
Mobile phones
ISPs
Play Station
AOL
Microsoft
Sun
*mopera refers to a DoCoMo wireless Expanding transmission system providing full business domain services over the Internet
Content linkages, external interfaces
AOL
Landline networks
mopera*
DoCoMo mobile communications network
i-mode servers
Value-added services
Microsoft
Internet
Figure 5.12 The fractal structure of the Internet and real worlds.
POS Boarding gates, registers ticket wickets External interface functions
Distribution network
Tickets, coupons for commuter passes, points, e-money
Transportation network
Products and services in real-world businesses
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content of their stores themselves. The owners of the individual store are not employees. Even though their stores may stock the same merchandise, its arrangement on the shelves will be subtly different. But the chain stores as a whole have a consistent atmosphere and product line that creates an identifiably Seven-Eleven or Lawson style. I have described convenience stores at length for a reason. i-mode is often compared to the wired computer-based Internet. Kei-ichi Enoki, the father of i-mode, calls that the wrong analogy. ‘If the personal-computerbased Internet, with its large information volume and wealth of expressive capacity, is a department store, then i-mode, with its much smaller information volume, is a convenience store.’ A small information volume forces us to be selective in the content we offer and to be clever in how we display it. By analyzing our customer base carefully, we can at times create original products. But what is particularly important is that people have a much higher frequency of contact with convenience stores in the course of daily life than they do with department stores. Convenience stores have a more important positioning for consumers. And the way convenience stores build value chains is also very similar to the i-mode approach.
5.12 Business Opportunities through Links to the Real World Despite the existence of the ‘clicks and mortar’ concept, until the recent collapse of the Net bubble, the industry did not seem to appreciate having a real-world base. Companies with no track record of actually doing business were overvalued on the stock markets, and some companies managed to become listed, and then switched into totally different lines of business. Now that overheated fantasies of what the Internet might do have cooled, it seems to me that we have at last come to understand the true power and roles of the Internet, including serving as an extension of existing businesses. It seems likely that real-world businesses that effectively incorporate the Internet into their operations will grow. What would be a concrete example of a service that effectively links the Internet and the real world? And how can mobile phones be used effectively in it? Mobile phones are far inferior to television, newspapers, or personal computers in the volume of information they can send and receive. They also have extremely limited display capabilities.
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But where mobile phones do have the edge is in their mobility: they are a medium that people can keep with them 24 hours a day, wherever they go. And as long as a mobile phone is turned on, it is constantly connected to the network, ready for use with no warming up. To the provider of information, it is a tool that permits sending information at the provider’s choice of timing. No other service has those characteristics. Its always-connected, always-there characteristics make the mobile phone the ideal medium for providing a constant connection between the Internet world and the real world. The answer to the question with which I began this chapter, ‘What is next for mobile phones?’ lies here, I believe. Let’s look at one example: music-downloading services. Most people may think of these services as enabling one to download the track one likes – or a whole album – on the spot. Of course, in households with broadband connections, where people can download full-track versions of tunes in a few seconds flat, they may use downloading services in just that way. There may also be quite a few people, especially young people, who want to download the music of their choice whenever and wherever they like. But most people have only limited time to listen to music, at home or elsewhere. They may well not be at home when ‘Wow, I really like this tune. I want to buy it’ crosses their minds. The urge to buy may also not occur in an ideal environment for listening to music. It often happens that one hears music while chatting with a friend or walking along a busy street and thinks, ‘I’d like to have that tune,’ or ‘I’d like to listen to it carefully later.’ But without a way to buy the tune at the moment ‘I want it’ crosses the mind, it is easy to give up on the idea or simply forget about it. The purchase impulse fades. Those who sell CDs are losing major opportunities because they miss so many impulses that do not lead to purchases. Imagine, then, that it was possible to download full tracks of tunes, on demand, to a mobile phone. A service providing such on-demand downloads to music lovers would be highly effective, or so DoCoMo believes. That is why we launched M-stage music, a music distribution service. But how many i-mode subscribers would want to download a track while out and about and listen to it right there? Most people probably want to listen while relaxing at home, where they have the time and the right environment for listening carefully.
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Thus, it makes sense that DoCoMo’s biggest role in the music downloading area is to make it simple to order a track whenever the subscriber wishes. That is, the subscriber orders it via mobile phone, wherever he happens to be, and then that track is delivered to his home in one form or another. One option is delivering it as digital data,11 for download into the hard disk of the subscriber’s computer or game machine. Another is delivery on a CD. Or, if the subscriber wants, downloading it into the mobile phone. Why not give the subscriber a choice of delivery media? The same strategy of offering a variety of delivery media, from which the subscriber can choose, can work for other kinds of content as well. Imagine, for instance, that someone is on the way to visit a customer when she sees an advertisement for a vacation destination and thinks it might be exciting to go there, or is talking with a friend and learns about a concert she would like to attend. She wants information about a product, or the product itself (a concert ticket, for example). If she had a simple means of ordering the product or a catalogue when the impulse came to her, that would increase the likelihood of her ultimately purchasing the product. What about that mobile phone she always has with her? Its most important role may be in keeping opportunities to make purchases from slipping away. Companies involved in e-commerce are well aware of that point. One solution they have adopted is to send users some sort of content that will stimulate a later purchase of their merchandise. DoCoMo is fully aware of i-mode’s ability to connect impulse to real-world purchase. Our alliances with companies operating in the real world – Lawson, Coca-Cola (Japan), and Sony Computer Entertainment, among others – are driven by that awareness. Our aim is to have subscribers use their mobile phones away from home and at home by providing them with services that fuse the Internet and the real world. Achieving that goal will mean a world in which a subscriber who was armed with an i-mode mobile phone would be all set. As I indicated in i-mode Strategy, my vision for the future of mobile telephony is precisely one in which mobile phones are the bridge between the real world and the 11 Of the many data compression schemes for distributing audio data, Adaptive Transform Acoustic Coding (ATRAC3), Windows Media Audio (WMA), and Advanced Audio Coding (ACC), the MPEG-2 and MPEG-4 encoding standard, are in conformity with intellectual copyright protection technologies.
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Net. That has been the direction I have consistently pursued since joining the team developing i-mode. For a taste of that vision, imagine along with me a typical day in the life of an i-mode subscriber. Let’s assume he has an office job and thus leaves home for the station each morning. He does not need to pull out his commuter pass: just holding his mobile phone over the ticket reader lets him through the gate. At the office, he can buy a soft drink without fishing for change. And he does not have to worry about showing his company ID: it is registered in his mobile phone as well. He can check his e-mail or how his company’s stock price is doing during meetings. The incoming e-mail might include a message from a family member as well as business messages. At lunchtime, he takes his mobile phone instead of a wallet, to pay the bill. That evening, he uses the same phone instead of a credit card to pay for a business dinner as well, having used its Internet capabilities earlier to reserve a table and confirm the client’s purchasing history. On another night, he might use his mobile phone to pay for an intimate dinner with a date. Back at home, the mobile phone comes into play in many other contexts as well. If he feels like watching television, instead of twiddling his thumbs while his personal computer starts up, he checks the listings via his phone and, if he wishes, orders pay-for-view programming or sets up a reservation for an interesting show. He has a personal computer, of course, but using it is always something of a production, whereas he can use the mobile phone on the spur of the moment. Its screen is more than adequate for checking his bank balance or reserving a concert ticket. Should he also own a PlayStation with a broadband connection, he could even reserve that ticket, then go on to purchase a DVD by the artist – and have it downloaded into his PlayStation. That may sound like a daydream, but mobile phones do have the potential to become that deeply entrenched in a broad swath of real life. It is my hope that we achieve a world in which, with a mobile phone, one can communicate anywhere in the world. To do so, mobile phones will have to be easy to operate, yet offer reliable data security. And we want to think about a mechanism for synchronizing a multiplicity of services effectively. We at DoCoMo are currently working on a variety of plans to get us closer to that objective. I have drawn a broad sketch of linkages between
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Internet-enabled mobile phones and the real world because the time has passed in which to talk about mobile phone services in terms of communications and the Internet alone. The launch of the 504i series of i-mode phones, starting in May 2002, brought a new, stronger connection between the mobile Internet and the real world, with the inclusion of an IrMC infrared interface. The infrared interface is extraordinarily useful. At the video rental shop, for example, it enables the mobile phone to provide identification, so the user does not need a membership card. It also permits making payments, instead of using small change. The convenience possible by utilizing data available on the Internet in daily life is infinite. And with the infrared interface on the 504i series, services that use mobile phones as the medium for a fusion between the Internet and the real world will grow explosively.
Postscript: Justice and Generosity in the IT World? Widespread support, both within DoCoMo and from other sources, has helped us build i-mode into the major platform it is today. I first got to know Tetsu Kayama, chief operating officer of Sega, when I was a student working part-time for Recruit. But after I completed my education, my work did not bring me into contact with him. I did subsequently meet the late Isao Okawa of Sega many times. What a surprise it was to learn that the successor to the famous Okawa was someone I knew: Kayama. Shortly after being appointed to the chief operating officer spot, Kayama came to see me. ‘Natsuno,’ he said, ‘You’ve saved my bacon.’ What, I wondered, could he be talking about? ‘We were wringing our hands over a company swimming in red ink. But since last year, it’s been turning into the bluest of blue chips.’ ‘What do you mean?’ ‘Those ringtone melodies. They’re saving our karaoke subsidiary.’ But that wasn’t all. ‘VF.NET’s amazing, you know. Playing Virtua Fighter on their i-mode phones produces a direct response from customers I’ve never seen before.’ Kayama went on to do a lot of business with us, setting up linkages between Sega services and i-mode. He is like a brother to me.
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I happened to meet Makoto Sato, a Coca-Cola (Japan) vice president, rather unexpectedly. He came to see me through an introduction from someone else. We chatted along, and then he said, ‘We want to develop our vending machines, and I think the key to doing it is mobile phones. Do you have any suggestions? Could we work on the problem together?’ That was music to my ears. I had plenty of ideas about how to make use of mobile phones, but not the clout to get a project moving. But with Coca-Cola asking . . . . ‘I’ll put a project team together immediately. Let’s work together to build a business model so new and solid you could take a patent out on it.’ While Sato was busy with other things, he found time to administer the salutary kicks in the pants needed to keep me and the rest of the easily distracted i-mode team moving. His perseverance in leading the project is why the Cmode information terminal vending machines exist today. I also owe a great deal to Birathon Kasemsri, vice president of Disney International. When Michael Eisner, who was then the chairman of Disney, came to Japan, Birathon brought him to visit only one company: DoCoMo. According to Eisner, i-mode delivered Disney’s first big success in its online businesses around the world. ‘It’s making us real money – i-mode is fantastic.’ His praise was welcome, but that success was possible because Birathon’s team was quick to recognize i-mode’s potential and worked with DoCoMo on aggressively developing the market, including joint marketing. I’ve known Shin’ichi Nakamoto, vice president of Hudson, the game company, since the i-mode project started. He was the first game software maker to really see i-mode. ‘I’m going to pull some top people out of our consumer content business and set them to working on mobile content,’ he announced, at a time when, to be honest, I was not all that confident about i-mode myself. Tose Software Shigeru Saito was another i-mode pioneer from the game world. My wine appreciation mentor as well, Saito told me, ‘Come on, we’re from the Kansai. How can we not make money?’ And he backed that up by allocating resources to i-mode projects early on. I am glad that we were able to meet Nakamoto’s and Saito’s expectations.
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Another early help was Atsushi Kunishige, president of DLJ direct SFG, the online brokerage. He created the opportunity for us to coax Sumitomo Bank into offering the world’s first mobile banking system, for which I am eternally grateful. Minoru Okada of Lawson Ticket, Kishiro Fujino of Daiwa Securities, and Tomohiro Nishihata of Japan Airlines also were sources of support, thanks to being so quick to notice i-mode’s potential as an e-commerce tool. A very special group of true comrades-in-arms worked with us to develop the new i-mode market – and then went on to take their companies public. Kazutomo Hori, president of Cybird, and Tetsuya Sanada, his vice president, Masami Ochiai and Yoshimi Ogawa, president and vice president of Index, and Keiko Iida, president of Gigno System Japan (formerly PhotoNet Japan), were a great help in developing new services and taking them overseas. Their reputations, overseas as well as in Japan, are entirely deserved. These people – and so many more that only lack of space keeps me from mentioning – have shared a relationship based on jingi to ninkyo, or ‘justice and generosity,’ with DoCoMo. Many of my readers may be familiar with the phrase giri to ninjo, ‘obligation and human feeling,’ which refers to what many see as old-fashioned relationships in which people are forced to work together as a result of socially imposed obligations, even if that contradicts rational interests. The ‘human feeling’ half of the equation originally implied the conflicts that often occur between the dictates of duty and of the human heart, but today giri and ninjo tend to be lumped together to mean a dysfunctional subordination of the individual to the group and a sacrifice of efficiency and creativity to acting out of obligation. Jingi to ninkyo, justice and generosity, is a very different kettle of fish: it refers to the extremely rational relationships that, in the business world, we call win–win relationships. For example, if we could not offer our partners attractive services and markets, there would be no point in their working with us. And on my part, it is precisely because these partners have been adding enormous value to DoCoMo that we have developed tie-ups with them or worked with them as content providers. We have not, moreover, developed exclusive relationships with anybody; there is no need to do so. We have been opening up a new market together; working together to create the market, as swiftly as possible, has itself been the greatest mutual benefit to all of us.
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Speaking from my experience in Internet businesses, I think that the more capable the company, the more talented the person, the more they are attracted to the idea of that win–win relationship. My sense is that the less confidence players have, the more apt to fall back on giri to ninjo instead of relying on their own competence. Sometimes people pile abuse on DoCoMo, asserting that we do business with only a few companies or that we control the content on i-mode. As a matter of simple fact, we could not have attracted and kept so many subscribers if that were the case. If we had tried to restrict participation or control content, the complex system that is i-mode would have failed. Life is not as simple as our critics like to think.
Chapter 6
i-mode for the World The experiences we find easiest to recollect are often just the kinds we find hardest to describe. Marvin Minsky, The Society of Mind (Simon and Schuster, New York, 1986), p. 84.
6.1 From Japan to a Global-Scale Ecosystem On March 16, 2002, i-mode was born – for the second time. That was the day that E-Plus, one of Germany’s largest mobile phone companies, launched i-mode in Germany, its first market after Japan. E-Plus is part of the Netherlands-based KPN Mobile Group, in which DoCoMo had invested to support launching i-mode by E-Plus and by KPN itself. March 16, 2002, the date selected for the launch of the German version of i-mode, corresponded to the opening day in Hanover, Germany, for CeBIT 2002,1 the largest IT trade show in the world. The week-long show attracted 700,000 visitors and exhibits by 8,000 companies. Their booths occupied a space equivalent to nine Tokyo Domes. It was truly an enormous show. 1 The Consumer Electronics Show, held each January in the United States, is the closest equivalent outside Europe.
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While CeBIT is under way, TV, newspapers, and magazines are always filled with news about the products and services on display. It was to take advantage of that opportunity to maximize coverage that E-Plus selected this week to launch its i-mode service. Its press conference the day before CeBIT opened attracted many reporters. Not only did E-plus schedule the launch of i-mode to coincide with CeBIT, but also invested heavily in exhibiting i-mode at the show. More than half of the E-Plus booth was devoted to i-mode. As soon as they entered the E-Plus booth, visitors encountered the giant yellow ‘i’ logo already familiar to the Japanese (Figure 6.1). The logo as well as the naming was the same in Germany as in Japan. Since the logo
Figure 6.1 E-Plus booth at CeBIT.
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was also displayed on paper shopping bags distributed to visitors, it was visible everywhere in the hall. Thanks to E-Plus’s strategy of scheduling the launch of i-mode to coincide with CeBIT, an enormous amount of attention was paid to i-mode. Visitors eager to try it out poured into the E-Plus booth. While 90 phones had been provided for use in sampling i-mode, these proved too few to keep up with demand. E-Plus’s fully integrated promotion ensured that the German version of i-mode grew smoothly from the start.
6.2 Why Take i-mode Overseas? E-Plus was only the start. Other telecommunications providers in which DoCoMo had invested have also launched i-mode services. In the Netherlands, KPN Mobile launched i-mode on April 18, 2002. In Taiwan, KG Telecom started its i-mode service on June 20 of the same year (Figures 6.2–6.4). That same year, services equivalent to i-mode were
Figure 6.2 i-mode start-up screen in Germany.
Figure 6.3 i-mode start-up screen in the Netherlands.
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Figure 6.4 i-mode start-up screen in Taiwan.
also scheduled to begin in the United States and in Belgium. There would also be launches in countries where DoCoMo had not invested in a local service provider, since DoCoMo has agreed to license i-mode to Bouygues Telecom, the third largest mobile telecommunications provider in France, with the start of service scheduled for fiscal 2002. In every case, DoCoMo is proactively providing i-mode operating know-how and support. Why did DoCoMo, which started out as a domestic telecommunications provider in Japan, take i-mode overseas? What was the benefit to DoCoMo of having i-mode spread beyond Japan? Those are questions that often come up these days. The straightforward response is to enhance DoCoMo’s bottom line. If the overseas providers in which DoCoMo invests attract more customers by launching i-mode, their profitability will increase. As the value of these companies rises, so will the value of the dividends received by DoCoMo. Given the pervasiveness of mobile phones and the already high i-mode usage rate in Japan, the outlook for further substantial revenue growth in Japan is limited. By contrast, income from dividends paid by overseas i-mode providers promises to be a major new source of income for DoCoMo. But the deeper reason behind our exporting i-mode is that only by investing in telecommunications providers overseas could DoCoMo be able to emerge victorious in global competition. Consider, for example, J-Phone, a competitor with DoCoMo in the Japanese domestic cell phone market. J-Phone is a member of the Vodafone Group,2 which is based in the United Kingdom. Its tie-up with 2 Vodafone is a mobile phone company that provides mobile telecommunications to more than 210 million subscribers in 30 countries around the world.
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Vodafone gives it a strong advantage in developing new services or purchasing equipment. Especially in the case of purchasing equipment, the larger a provider’s orders for cell phones and cell phone infrastructure equipment, the stronger its position is in negotiations with suppliers. While at present there is no single telecommunications provider that dominates the global market, it is easy to see when looking into the future that those with more subscribers will obtain cheaper prices and be given purchasing priority. In these competitive circumstances, DoCoMo has no choice but to ally itself with overseas telecommunications companies. Proactively building alliances is an indispensable ingredient in preserving competitive strength. DoCoMo’s approach, however, differs from that of Vodafone. We purchase no more than 15% of the shares in the firms in which we invest. We respect their independence. Besides dividends from our partners and lowering equipment procurement costs, we have one other objective. By broadening the scope of our business, we aim to acquire new technologies, ideas, and business models. These will contribute to the further development of i-mode. Since the start of our i-mode service, it has evolved through partnerships with many other companies in Japan. The wallpaper images, ringtones, and games that drove the spread of i-mode in Japan were all our partners’ ideas. Working alone, DoCoMo could never have come up with such a wide variety of unique new services. The overseas markets are an order of magnitude bigger than the Japanese domestic market. As DoCoMo expands overseas, so will our opportunities for finding new partners. The more partners we have, the more new ideas we will incorporate, to drive i-mode’s continuing evolution. DoCoMo will not be alone in enjoying these benefits. As new technologies and ideas acquired overseas increase i-mode’s appeal, our customers in Japan will also reap the rewards.
6.3 The Nursery School Model Will i-mode win acceptance overseas? Is it more than a Japanese fad? These are questions we are often asked. Of late, my answer is likely to be a metaphor I call the Nursery School Model. In this model, the regions or countries of the world are seen as separate classrooms in a large nursery school, with the telecommunications providers operating in each classroom as the children in those classes.
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Consider, for example, a class called the Cherry Blossoms. It has three kids in it. One of them starts to play with a new toy. The other two then want the same toy. Before you know it, all three are playing with the same kind of toy. But when they all have the same toys, the first little kid starts to get bored with it and starts playing with another toy – and the other two do the same. That is the phenomenon with which we in Japan have become familiar over the past several years. The Cherry Blossoms are DoCoMo, KDDI, and J-Phone. The toys are mobile Internet services. Whenever one member of a class starts playing with something new, the other children want the same thing. They were perfectly content without it as long as no one had it, but as soon as one has a new toy, the others begin to feel that they’re missing something. What happens in other classes, that is, other regions and countries? Let’s take a look at the Tulips. There, too, one kid begins playing with a new toy. Maybe she has learned something new from her friend in the Cherry Blossoms. Now, other Tulips also find new friends among the Cherry Blossoms. They, too, now have new toys to play with. Before the first Tulip acquired hers, the Tulips had heard about the new toys the Cherry Blossoms were playing with. But they had turned up their noses at it: ‘That’s just Cherry Blossom stuff, nothing to do with us.’ But now that one kid in their class has begun to play with the new toy, the others start fussing. They start pestering their parents, demanding one, too. Some of the parents think they would like to give their kids one, while others do not see the point and are not about to come up with the new toy. The members of this class were originally all very proud. ‘We have our ways and they have theirs,’ they would say. But they could not resist the attraction of the new toy, which is likely to become a huge fad. The Tulips are Europe. E-Plus, DoCoMo’s partner in Germany, is the first kid in the class to start playing with the new i-mode toy. Over here, we have the Marigolds, a class that is cliquish and intensely competitive. The Marigolds are not terribly friendly with the Cherry Blossoms, but they do spend a lot of time watching how the Cherry Blossoms play, and some have started imitating them in a monkey-see-monkey-do sort of way. Now, not only kids who belong to their clique but also kids in the other cliques begin to get interested in the new toy. Because the
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spirit of competition is already so strong among the Marigolds, it is only a matter of time before the new fad is launched. The Marigolds are the United States. There, Sprint PCS, a firm that is not allied with DoCoMo, is promoting its own mobile Internet service. Responding to the Sprint PCS initiative, other providers have begun preparations to introduce their own services. Next door to the Cherry Blossoms, we have the Dandelions. Attracted by what they see the Cherry Blossoms doing, they are still unable to make up their minds to do it. Since, however, the Dandelions are easily influenced by the Cherry Blossoms, here, too, it is only a matter of time before the boom begins. The Dandelions are the rest of Asia. Here, Japanese idols and pop music groups are highly popular, as are Japanese manga comics. Tastes and preferences resemble those in Japan. If the opportunity presents itself, i-mode should spread rapidly there. That, of course, is a very broad sketch of the situation as I see it. My observation is that as long as i-mode service has not appeared in a country or region, people do not have much of a sense of what it is or why anyone might want it – but once they do take a good look, they immediately get on board. Walkman, PlayStation, personal computers, Internet, cell phones . . . audio and video equipment, game machines, and other digital devices have spread without regard to national differences. i-mode is a service that only the Japanese appreciate, they tell me. But it is hard to find any other case in which the oft-touted uniqueness of the Japanese market made any difference at all. We can confidently expect that within a few years, all cell phones will be equipped with features modeled on i-mode, and that those features will be taken for granted.
6.4 Difficulties in Achieving Consensus While i-mode has high potential overseas as well as in Japan, it cannot be denied that, in contrast to Japan, finding shared objectives and reaching consensus seems more difficult overseas. In Europe and America, telecommunications providers have long been accustomed to adopting manufacturer proposals wholesale. Some providers are willing to try to create proposals for new services such as i-mode, but others cling to established ways of doing business and cannot think outside
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their telecom box. How else can we explain, for example, their embracing technologies in the full knowledge that they are not competitive? Because telecommunications providers overseas were initially afraid to abandon the WAP standard, the i-mode browsers used in overseas phones had to support both WML3 and HTML. There was a demonstrable gap in quality between WML and HTML content, and content providers strongly support HTML. Thus, it made no sense to require support for WML. Still, at the planning stage, dual support was defined as essential. Opponents of i-mode frequently mention what they see as i-mode’s uniquely Japanese attributes. They have argued, for example, that Europeans would have no interest in ringtones or that only Japanese love cartoon characters. DoCoMo’s i-mode team has repeatedly and politely refuted these assertions. Sometimes our most persuasive point has been the revelation that during the planning of i-mode, our Japanese staff themselves offered the same kinds of arguments against it.
6.5 The First Step, Customized Straps When we met with overseas providers and watched how individuals used their mobile phones in other countries, we saw some major differences. In many cases, behavior taken for granted in Japan was lacking overseas. For example, the first thing we noticed when we went overseas was the total absence of cell phone straps. In fact, the phones themselves lacked a loop to which a strap can be attached. Instead, there was a sort of button that allowed phones to be suspended from the user’s belt (Figure 6.5). In Japan, virtually everyone has a strap attached to his or her mobile phone. Straps are handy for pulling a phone out of a bag or briefcase and convenient when just carrying the phone. Beyond that, straps are accessories used to give phones a personal touch and express the owner’s individuality. Because so many people use straps, many people are also involved in manufacturing them. We don’t know precisely how big the strap business is, but the market must be large. The first group to become serious about straps was young people, but today straps are appreciated by people of all ages. Displays dedicated to 3 Wireless Markup Language (WML) is a program language included in the WAP standard for mobile data communication. In the most recent version, the enhanced version of HTML called XHTML – for extensible HTML – has become the standard. Initially, however, the use of WML meant that mobile communications required a totally different language from the Internet standard.
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Figure 6.5 Button for hanging phone from belt.
selling straps can be found in the men’s haberdashery departments of the finest stores. You can even purchase premium-quality branded straps from luxury apparel producers Louis Vuitton and Gucci. Why are Europeans so opposed to using straps when straps have become so popular in Japan? According to Nokia, Europeans simply don’t use straps, and therefore Nokia had, at the time, no intention of adding loops for straps to its phones. That attitude was an interesting contrast to the fact that European companies like Gucci and Louis Vuitton were producing and selling straps. Now, when manufacturers say that the users of their products won’t accept straps, we do have to wonder if this opinion is not their own prejudice speaking. The fact of the matter is that when we met in Germany with executives from E-Plus and showed them straps sold in Japan, they were very interested indeed. In fact, when we showed them one strap version with a little square screen cleaner attached, they all wanted one. We were later surprised to hear that KPN Mobile, our partners in the Netherlands, had heard from our German partners about these straps with the screen cleaners and went right ahead and produced some for themselves. When is a strap not a strap? When it is the first step in customizing a mobile phone. Attaching accessories to a phone is a way of personalizing
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the phone, a means of self-expression. Customizing the wallpaper and ringtone, then customizing applications are all extensions of the same idea. We expect, then, to see things developing overseas in the same way they have in Japan.
6.6 Early Results of i-mode’s Overseas Expansion Earlier in this chapter, I wrote that one expected benefit of taking i-mode overseas was finding new ideas. We have already begun to see those hopes realized. One example appears on the menu screens of the German version of i-mode. As part of the i-mode service provided by E-Plus, a GIF4 image of the service provider’s logo mark appears at the top of the service provider’s menu page. Thus, for example, when the user accesses a newspaper publisher’s home page, the newspaper’s logo mark appears on the screen (Figure 6.6). This idea did not come from DoCoMo. It came instead from an E-Plus executive, who asked a partner company to implement the idea. In Japanese i-mode menus, title and copy appear in the same text style, but we realized, when E-Plus did it, that the logo mark makes the display more attractive. Our partners in the Netherlands, where i-mode was launched a month after Germany, and in Taiwan, where i-mode was launched two months
Figure 6.6 German news display. 4 Graphic Interface Format (GIF) is a still image file format established by US-based Internet provider CompuServe. It is the most common format used for the images that appear on Websites.
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Figure 6.7 Dutch news display.
Figure 6.8 Taiwan news display.
later, noted the German improvement and used it to recruit content providers. Now, the major news providers in all those markets make heavy use of graphics on their sites (Figures 6.7 and 6.8). On June 20, 2002, Taiwan provider KG Telecom launched its i-mode service. At the press conference to launch the service, KG Telecom CEO Leslie Koo, myself, and all of the KG Telecom employees present were wearing T-shirts decorated with the yellow i-mode ‘i’ logo. There we stood, wearing gaudy T-shirts more suitable for teenagers, being showered in strobe lights as the local media covered the launch. I could not help remembering the launch of i-mode in Japan, back in 1999. Back then, no one in the mass media, in the telecommunications industry, even inside DoCoMo was as confident of i-mode’s success as KG Telecom’s employees were on this day. In Japan, i-mode was launched with 67 content offerings. In Taiwan, it launched with 86. The first i-mode phones in Japan had black and white displays and no ringtone download
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capability. In Taiwan, the first i-mode phones had color displays and could play 16-part harmony. Plus, more than anything else, they had the proof of i-mode’s success in Japan behind them. There will be many experiments as i-mode’s international development continues. Experience in other countries will yield new success stories and ripple effects that are sure, I am confident, to contribute to the organic growth of i-mode worldwide.
Figure 6.9 Sales promotion goods in the Netherlands. The strap with display cleaner, jelly beans, and chewing gum.
Figure 6.10 Sales promotion goods in Germany. Original sweatshirt, pamphlets in the shape of phones.
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Figure 6.11 Sales promotion goods in Taiwan. The ‘I love i-mode’ slogan was eye-catching.
Postscript: Marrying off a Beloved Daughter I don’t feel like it. It is always this way just before an overseas business trip. I must be way high in the Japanese business traveler rankings, I have made so many overseas trips: more than 30 in recent years, not counting travel for personal pleasure. But even if I am always dashing overseas, I still spend most of my time in Japan. Naturally enough, the domestic market in Japan is my top concern. Of necessity, then, my overseas trips are short. I am fairly used to spending one night in the United States, followed by one night in Europe. Since 2002, I have taken the idea further by making more day trips to Europe: I leave my office before 8:00 p.m. to catch Air France flight 273, which takes off at 9:55 p.m. I arrive in Paris shortly after 4:00 a.m., transfer to the first flight to my destination in another major European city, and reach there before 9:00 a.m. After a day of meetings, I take ANA flight 210, which leaves from Frankfurt at 8:39 p.m. and has me back at Narita, the Tokyo international airport, before 3:00 p.m. I am back at the company by 6:00 p.m. Since I haven’t spent the night in a hotel, I can call it a day trip. I am told that airline crews call it ‘three days, no nights.’
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Given that schedule, you can understand why I hate to go on business trips. They are tiring. But as soon as a meeting starts, my fatigue disappears. I love the passion with which Germans, Dutch, French, and Chinese talk about i-mode. ‘Our market research produced a mind-blowing result.’ ‘This content is amazing.’ ‘Marketing has to be easy to understand.’ ‘It’s not technology. It’s content.’ ‘Net business and the telecom business are totally different.’ The local members of i-mode’s global team work really hard to achieve consensus. Everyone shares the goal of creating a value chain for i-mode. It isn’t a question of exporting or importing services from Japan. By sharing the know-how acquired through i-mode’s success in Japan, we create an i-mode for each individual country. Yusuke Kanda, the leader of our European i-mode team, has said, ‘In Europe, we have created a totally new service by blending input from both Europe and Japan.’ His observation gives a real sense of the shared thinking and attitudes fostering its growth. Currently, our team in Europe is not quite 10 people, both men and women, all young, all very impressive. In Taiwan, KG Telecom CEO Leslie Koo is personally directing the introduction of i-mode. He and Roger Chen, the warmhearted and capable manager responsible for i-mode, argue their way through meetings every day. I have really learned from watching them. Their flexible and rational leadership leave me impressed. In March 2002, E-Plus launched the first European i-mode, in Germany. The launch was timed to coincide with CeBIT, Europe’s largest IT tradeshow, in the German city of Hanover. DoCoMo had a booth, and I was there to give speeches, hold press conferences, and give interviews. I was startled to find that E-Plus had constructed a gigantic booth with 90 European-specification i-mode phones on hand, to give visitors a taste of the i-mode experience. Visitors flocked to this booth, then stared intently at the phones’ small screens. Those large Europeans were bent over tiny keypads, tapping away at the tiny keys. Close at hand were pamphlets and other marketing tools prepared by E-Plus. On a big screen, a German appeared in a German-style i-mode commercial. The scene was unfamiliar and so was the language. But the familiar i-mode logo really stood out.
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A reporter for the Mainichi Shimbun asked me, ‘How do you feel about the launch of i-mode in Europe?’ The question was unexpected, but what popped out was this: ‘It’s like marrying off a beloved daughter.’ The child raised with so much sweat and effort has suddenly become an adult and is ready to leave home. Suddenly you find her wearing unfamiliar garments and behaving in unfamiliar ways. She is slipping away. That is a bittersweet experience every parent must go through. While I do not have children, I can now appreciate what parents must feel. Sink your roots deep and grow, grow, grow, i-mode.
Afterword
It is characteristic of Internet-based businesses, with so many elements combining in complicated ways, that there is always something new to be done. Whenever we think we have arrived, we find new vistas stretching out before us. Not all those vistas, however, lead in constructive directions. Look in the wrong direction and what we see has nothing to do with growing a business. If you head off into a desert, a desert is all you will find. I always try to stay oriented, to keep in mind the main direction in which I am moving, when making business decisions. Then, even if I go off track, it is easy to make a correction. ‘Is this a business that DoCoMo ought to be in? Or is it a market that will grow more without DoCoMo’s involvement?’ ‘Should we form an alliance with this partner? How serious are they? Will it lead to concrete results?’ ‘Why is the debate about standardization going this way? Where and how should we act to achieve the necessary course correction?’ ‘What features should be added to our next model? If we cannot add every feature we’d like, which should get a higher priority? ‘When another company sells this phone, is it selling well because of its features? Or only because it is cheap?’ We confront new challenges daily. The issues are complex. The Internet grows organically, in many different ways. Where, then, should our company be positioned? Whenever we confront this question, we return The i-mode Wireless Ecosystem Takeshi Natsuno 2003 John Wiley & Sons, Ltd ISBN: 0-470-85908-3
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to our major objectives. We can’t know when we will achieve them, but we can choose near-term objectives that bring us closer to them. Our mission is to make the world a more convenient and enjoyable place. We believe people want every feature possible in the mobile phones they carry when they set out from their homes or offices. What they are looking for is a wallet, a credit card, a commuter pass, a company ID, a watch, a notebook, and an address list. Sure, a computer can do that, but few people carry computers around. Our target is ordinary people. But making that all happen is something that no one company can do by itself. That is why what we must aim to create is an open environment. Our technology, our network access, and our Java features must all be open, so that anyone can use them. The issues that require the closest attention are sequence and timing. When introducing new technology, moving too soon is bad, but moving too late is worse. Our business is a complex ecosystem of many elements: give it the right stimulus, without disrupting it, and it will grow. In my previous book, i-mode Strategy, I used the term ‘complexity’ while introducing the thinking behind a service called i-mode. In this book, I have backpedaled on ‘complexity,’ making frequent use instead of ‘ecosystem’ and ‘value chain.’ It is like carrying coal to Newcastle to explain to those who have read this far, because they will understand that what I have tried to do in this book is present my thinking about complex systems while using more ordinary and inclusive language. The postscript at the end of each chapter mentions some of the people who have contributed to this effort. There is, however, one person who deserves special mention – DoCoMo Director Kei-ichi Enoki, whose name appears repeatedly throughout these pages. Consulting company Dream Incubator CSO Noboru Kotani says that, ‘Every hit product and every successful product-development team have something in common. In every case, there is a crazy leader who stakes his career on this product and a more senior manager who approves of the project, sponsors it, and protects it from internal friction.’ In the case of i-mode, I am, no doubt about it, the crazy leader, and Enoki was the manager who understood and sponsored the project from the start. From the point of view of the rest of the NTT Group, though, Enoki may well have looked crazy, but that implies that the DoCoMo
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senior management were, on their part, also the accepting, understanding sponsors who supported him. We can only hope that this successgenerating pattern continues to operate. Right. I have admitted that I am crazy, so in love with my work that it goes without saying that my work is my hobby, my obsession. This obsession has not made life easy for my spouse. All too often, we have to cancel vacations or skip concerts because a new task or sudden business trip has popped up. Plus, those of us who work for the NTT Group are not fated to see our salaries increase, however big the businesses we launch. All I can say is that I am sorry for being far less than the ideal husband. I also would like to use this opportunity to apologize to my friends, whom I keep letting down. They invite me out, and if I say I can go at all, I end up either late or canceling at the last minute. Sorry, guys. I really hope you can forgive me. One final apology must go to my parents, who have seen very little of me the last few years. I regret neglecting them. To them all, I can only say by way of recompense that I have been part of creating a huge new market. I have been truly blessed to be part of creating i-mode and i-αpplis and to have seen them used and enjoyed by so many people. It has been a wild, wonderful experience. To make the world more convenient and more enjoyable: that is my life’s work. To achieve this goal, and not disappoint the many people who have encouraged me, I will keep moving forward, exploring those new vistas. June 2002 Takeshi Natsuno
Further Reading Kauffman, S., At Home in the Universe: The Search for Laws of Self-Organization and Complexity, Oxford University Press, Oxford, 1995. Minsky, M. L., The Society of Mind, Simon & Schuster, New York, 1986. Farrell, W., How Hits Happen, HarperCollins, New York, 1998. Gell-Mann, M., The Quark and the Jaguar: Adventures in the Simple and the Complex, W. H. Freeman, New York, 1994.
With thanks to the youngsters in the i-mode Business Division for their assistance in writing this book.
Index
αppli-Carrot: Pac-Man, 71 µITRON, 48 .NET, 129 .NET Passport, 129 .Net My Services, 129 251i series, 43 3G, 26–29, 46, 50, 51, 78, 131 501i Series, 7, 62, 109 502i Series, 4, 7 503i Series, 8, 9, 66, 67, 77, 84, 115 504i Series, 43, 71, 74, 75, 93, 96, 114, 144 Access [name of company], 46, 54 account agglutination, 122, 123, 126 adult content, 39 Amazon.com, 118 America Online (AOL), 116, 119, 120, 124–126, 133, 134 American Express, 124 ANA, 161 Anywhere Asovegas, 52, 61 ARPU see average revenue per user Asahi Nikkan Sports [newspaper], 37 AT&T, 116, 118, 131 ATOK, 48 average revenue per user, 33, 34 The i-mode Wireless Ecosystem Takeshi Natsuno 2003 John Wiley & Sons, Ltd ISBN: 0-470-85908-3
Bandai, 12, 14, 15, 52, 54, 61, 110 Bandai Networks, 12, 52, 54, 61 banking services, 122 Banner advertisements, 108 Bluetooth, 76 Bouygues Telecom, 152 bug, in software, 49 business-to-consumer, 138 buzzer sound, 44, 45 cable television, 118, 127, 129 CATV see cable television CeBIT 2002, 149 CERN, 11 change on horizontal axis, 88, 106 Chen, Roger, 162 Chiba, Koji, 85 clicks and mortar, 140 closed user group, 101 Cmode, 98–102, 104, 145 Coca-Cola (Japan), 88, 90, 96, 98–102, 104, 142, 145 connect, 46, 87, 90, 93, 105, 111 Connect [name of company], 54, 82 consumer, 9, 50, 57, 76, 77, 91, 95, 106, 135, 145, 149 content platform, 122, 125, 127, 129 content proper, 35, 41, 42, 82
170 COSMOBIC Technology, 51 Crazy About Fishing, 52, 62 critical mass, 108 CRM see customer relationship management CUG see closed user group customer relationship management, 102 customization, 68–70 Cybird, 51, 52, 54, 146 D2 Communications, 106, 108, 109 Daiichikosyo, 75, 76, 82 Daiwa Securities, 146 De Facto Standard, 11, 49 digital content, 35, 39, 40, 95, 138 digital television, 22, 23 DION, 131 Disney, 19, 145 Disney-i, 37 DLJ direct SFG Securities, 41 DoCoMo, 1, 3, 5, 7–9, 11–13, 16, 17, 19, 22, 23, 26, 29, 33, 34, 36, 41, 47, 49, 54–56, 58, 61, 65, 70, 73, 74, 78, 83, 85, 88, 91, 94, 98, 102, 106, 109–112, 114, 120–122, 124, 125, 131, 132, 141–147, 149, 151–155, 158, 159, 162 DoCoMo.com, 62 DoJa, 54, 85 Dokodemo Asovegas, 52 download service, 5 Dreamcast, 62 Dwango, 52, 61 e-commerce, 30, 39, 41, 42, 82, 124, 142, 146 e-commerce market, 41 e-mail advertising, 106 E-Plus, 149–151, 154, 157, 158, 162 e-ticket, 39 Ebisu, 24, 25 ecosystem, 1, 3, 5–7, 9, 11, 19, 20, 22, 24, 27, 29, 35, 44, 55, 149 Eisner, Michael D., 145 electronic settlement service, 41 electronic ticket, 39
The i-mode Wireless Ecosystem Enix, 52 Enoki, Kei-ichi, 61, 83, 84, 132, 140 entertainment content, 62 Ericsson, 19, 21, 47, 51 European Laboratory for Particle Physics, 11 Excel, 127 Faith, 63 Farrell Winston, 65 fee-based content, 36, 40, 41 file, downloading, 10 Final Fantasy XI, 105 first mile, 118 France Telecom, 124 Freedom of Mobile multimedia Access (FOMA), 26, 46 Fujino, Kishiro, 146 G@me Park, 71 Gateway Business division, 16, 17, 61 Gell-Mann, Murray, 87 Geo, 81, 82 GIF, 158 GigaNetworks, 62, 63 Gigno System Japan, 146 G-Mode, 52 God of Love DX, 52, 72, 73 Hello Kitty Divination, 72, 73 Hello Kitty Ekireki, 72, 73 Hello Kitty Mobile News Navigation, 74 Hello Kitty no Machiuke Navigation, 74 Hewlett-Packard, 117, 133 Hirosue, Ryoko, 83 Hollywood Channel, 28 Hori, Kazutomo, 146 horizontal specialization, 132, 133 Hotmail, 127 HTML, 11–15, 47, 91, 92, 156 Hudson, 52, 71, 79, 80, 145 Hypernet, 29, 31 i-αppli, 74 i-αppli API, 54 i-mode ARPU, 33
Index
171
i-mode Business Division, 16 i-mode incident, the, 83 i-mode jiken, 83 i-mode Strategy, 84, 88, 142 i-mode Ticket Pia, 38 i-motion, 28 IBM, 116, 117 Iida, Keiko, 146 IIS see Internet Information Server, 128 iLawson, 92 iLawson Print Service, 94, 95 Imagineer, 72–74 iMapFan, 74 iMenu, 24 Index [name of company], 52, 54, 72, 73, 146 infrared interface, 71, 72, 75, 76, 80–82, 101, 144 initial public offerings, 51, 54 Internet Explorer, 127, 128 Internet Information Server, 128 Internet service provider, 29, 30, 116, 118, 129, 131, 133, 134 Internet White Paper 2001, 1 Internet White Paper 2002, 56 IPO see initial public offerings IrMC see infrared interface ISP see Internet service provider ITRON, 48, 133 Itsudemo Kyarappa!, 12
JEITA see Japan Electronics and Information Technology Industries Association Jobim, Antonio Carlos, 69 JOYSOUND, 37
J-Phone, 60, 78, 131, 152, 154 J2ME CLDC, 54 Japan Airlines, 41, 146 Japan Electronics and Information Technology Industries Association, 22, 33 Japan Telecom, 131 Japanese, theories of uniqueness of, 18, 155 Java, 8–10, 17, 45, 52, 54, 65, 68, 70, 71, 74, 76–78, 82, 84, 85, 92, 111, 114, 115 JavaOne, 70
M-stage music, 141 Magic Carpet, 126 Mail de Koishite, 61 MasterCard, 124 Matsunaga, Mari, 83 Matsushita Communication Industrial, 50 Matsushita Electric Industrial, 50 MeloDAM/DAM Remote Control, 75, 76 Message Free advertising, 106, 107 Mickey Mouse, 19 Microsoft, 48, 84, 116–118, 126–130 MIDI-base, 63 Minsky, Marvin, 33, 113, 149
K Laboratory, 54 Kagiwada, Hiroshi, 110 Kanda, Yusuke, 162 Kasemsri, Birathon, 145 Kauai, 85 Kauffman, Stuart, 1 Kawakami, Nobuo, 61 Kayama, Tetsu, 144 KDDI, 60, 78, 131, 154 Kenmochi, Tomoaki, 83 Konami, 52 Koo, Leslie, 159, 162 KPN Mobile Group, 149 Kunishige, Atsushi, 146 Kurita, Shigetaka, 62 Kutaragi, Ken, 110, 137 Kyarappa Anytime, 12, 15, 54, 61 last mile, 118 Lawson, 88, 90, 92–96, 138, 140, 142, 146 Liberty Alliance, 124, 126, 129 Linux, 49 Livin’ on the Edge, 52, 54 Loppi, 93, 96 Love by Mail, 61
172 Mitra, Samir, 84 Mitsubishi Electric, 51 mobile Internet, 17–22, 24, 36, 41, 42, 44, 47, 50, 51, 54–58, 60, 61, 63, 78, 87, 121, 133, 144, 154, 155 mobile-specific content, 41, 145 Motorola, 21, 47 Movie Television, Inc., 28 MPEG-4, 28 MSN, 127, 129 Nakamura, Harunaga, 83 Nakanishi, Masato, 63 Namco, 52, 71 Namidensetsu, 52 NEC, 50, 51, 85 new economy, 116, 118 Nifty, 133, 134 Nishihata, Tomohiro, 146 Nokia, 18–21, 136, 157 NTT, 83, 106, 131 NTT Communications, 131 Nursery School Model, 153 Ochiai, Masami, 146 OCN, 131 OELD see organic electroluminescent diode official sites, 41 Ogawa, Yoshimi, 146 Okada, Minoru, 146 Okamura, Satoshi, 83 old economy, 116 online commercial services, 122 organic electroluminescent diode displays, 44 Pac-Man, 71, 116 Panasonic, 50 PDA see portable digital assistant personals sites, 57, 60 PhotoNet Japan, 146 Pioneer [company], 15 Pippin, 12, 13, 61 PlayStation, 90, 105, 106, 110–112, 136, 143, 155
The i-mode Wireless Ecosystem PlayStation 2, 90, 105, 110, 128, 136, 137 PlayStation BB, 105, 106, 111, 136, 137 Pocket PC, 127, 128 point of sale, 76, 88, 138 PokeMelo, 37 Pokemon, 19 portable digital assistant, 9, 119, 122, 127, 128, 135 portal, 5, 41, 120, 121, 126 POS register, 90, 96, 138 POS see point of sale positive feedback, 3, 6, 7, 22, 78 program size, 78, 79 program, downloading, 9, 10 Ren’ai no Kamisama DX’, 52 register, POS, 76, 81, 82 Ricoh, 62 ringing tones service, 7 ringtone, 4, 5, 7, 10, 15, 35, 44, 45, 52, 62, 63, 69, 101, 121, 133, 144, 158, 159 ringtone appli, 52 Rohm, 44, 63 role-playing games, 79 Saito, Masahiro, 83 Saito, Shigeru, 145 Sakamura, Ken, 48 Sanada, Tetsuya, 146 Sanyo, 44 Sanseido Dictionaries, 37 Sato, Makoto, 145 SCEI see Sony Computer Entertainment scratch pad, 77–79 screen name, 120, 126 secondary display, 43 Sega, 62, 88, 102–105, 144 Seiko Epson, 44 set-top box, 129 Sharp, 44 Shimizu, Ryo, 61 Shimizu, Takeshi, 61 Shinjuku Park Tower, 25 SimCity Classic for i-mode, 71
Index single sign-in, 123, 126 Sony, 51, 90, 112, 124, 128, 129 Sony Computer Entertainment, 88, 104, 110, 136, 137, 142 Sony Ericsson Mobile Communications, 51 sound chip, 44, 45, 63, 65, 114 Space Invaders, 71, 116 spam, 57–59 special connection service, 58 Sprint PCS, 155 step by step, 94, 109 STN see super twisted nematic technology strap, 69, 156, 157, 160 success stories, 15, 160 success, experience of, 14–16 Sumitomo Bank, 146 Sumitomo Mitsui VISA Card, 38 Sun Microsystems, 8, 54, 84, 117, 124 super twisted nematic technology, 43 Surflegend, 52 Suzuki, Yoshihiro, 63 Taito, 52, 71 Takahashi, Toyoshi, 61 Take the A-Train, 71 TCP see telecommunications protocol telecommunications protocol, 46 telemetering, 100 TFD see thin-film diode TFT see thin-film transistor thin-film diode displays, 44 thin-film transistor displays, 44 third-generation mobile phones, 50 ticket reservations, 41, 77 Tohge, Yoshitaka, 62 Tokusuru (‘to your advantage’) menu, 106 Tolliver, Mark, 84 Toshiba, 51 transactional content, 39 TRON Project, 48 Tsuribaka Kibun, 52 United Airlines, 124 Unix, 119
173 unofficial i-mode sites, 41 user experience, 7, 10 value chain, 4, 19, 22, 24, 26, 29, 31, 32, 120, 122, 129, 132–136, 138, 140, 162 vertical evolution, 88, 92 VF Net, 103, 104 VF4 Character Access Card, 103 video clipping service, 28 Virtua Fighter, 103, 104, 144 virtual pet games, 72 Vodafone, 124, 152, 153 voluntary i-mode sites, 41 W-CDMA see Wideband Code Division Multiple Access wallet PC, 84 wallpaper, 8, 35, 69, 101, 114, 153, 158 WAP see Wireless Application Protocol WAP Forum, 21 WebTV, 127, 129 Weekly i-Guide, 108 White Paper on Information and Communications in Japan, 41 Wideband Code Division Multiple Access, 28, 46, 131 win–win, 31 Windows, 69, 84, 127, 132 Windows CE, 127, 128 Wireless Application Protocol, 14, 21, 22, 46, 47, 136, 156 Wireless Markup Language, 14, 156 Wireless TCP, 46 WML see Wireless Markup Language Wnn [name of front-end processor], 48 WorldNet, 131 Xbox, 127–129 Xing, 63 Yahoo!, 116, 118, 134, 135 Yahoo! BB, 135 Yamaha, 44 Yebisu Garden Place, 24 Zentek Technology Japan, 54
