The Six Immutable Laws of Mobile Business

THE SIX IMMUTABLE LAWS OF MOBILE BUSINESS THE SIX IMMUTABLE LAWS OF MOBILE BUSINESS PHILIP SUGAI MARCO KOEDER LUDOVIC...

Author: Philip Sugai | Marco Koeder | Ludovico Ciferri

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THE SIX IMMUTABLE LAWS OF MOBILE BUSINESS

THE SIX IMMUTABLE LAWS OF MOBILE BUSINESS PHILIP SUGAI MARCO KOEDER LUDOVICO CIFERRI

Copyright © 2010 by John Wiley & Sons, Inc. All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permission. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and speciﬁcally disclaim any implied warranties of merchantability or ﬁtness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of proﬁt or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic formats. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Sugai, Philip. The six immutable laws of mobile business / Philip Sugai, Marco Koeder, Ludovico Ciferri. p. cm. Includes bibliographical references and index. ISBN 978-0-471-74146-6 (cloth) 1. Cellular telephone services industry—Japan. 2. Cellular telephones—Social aspects—Japan. 3. Mobile communication systems—Economic aspects. 4. Cellular telephone services industry— Management. 5. New products. I. Koeder, Marco. II. Ciferri, Ludovico. III. Title. HE9715.J3S84 2009 384.5⬘350952—dc22 2009019349 Printed in the United States of America 10

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CONTENTS

FOREWORD

vii

PREFACE

xi

ACKNOWLEDGMENTS

xiii

INTRODUCTION

xv

CHATPER 1

Immutable Law No. 1: Value Over Culture

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CHAPTER 2 Immutable Law No. 2: The Law of the Ecosystem

22

CHAPTER 3 Immutable Law No. 3: Mobility Empowers

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CHAPTER 4 Immutable Law No. 4: The Value of Time Zones

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CHAPTER 5 Immutable Law No. 5: Mobile-Speciﬁc Business Models are Essential 106 CHAPTER 6 Immutable Law No. 6: The Future Is Simplexity

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CHAPTER 7 Parting Thoughts

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BIBLIOGRAPHY

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INDEX

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FOREWORD

When you talk to managers in the Japanese automotive industry about their worst rival, it is often not another car manufacturer that is on their mind, but the mobile phone. Even before the 2008 world economic crisis, passenger car sales in Japan had been shrinking for years. According to an industry insider, one reason was because the vast majority of young men who used to spend signiﬁcant sums of money on cars now prefer shelling out $100 or more per month for the voice and data services of their mobile companion. This little anecdote shows that something quite extraordinary is going on in Japan. While physical mobility is taken for granted, the mobile phone is about to supersede the car as a symbol of freedom. The attraction is understandable. The car offered people in the analog age the dream of individual mobility—to go everywhere, whenever you liked. Whereas the mobile phone enables people of the digital age to communicate and to link with almost everything and everybody on this planet from anywhere anytime. This process is happening ﬁrst and foremost in Japan (and to some extent in South Korea), where the use and development of 3G handsets and mobile internet services is 2–3 years ahead of that in many other developed countries. Just imagine, 85% of the > 100 million mobile phone subscribers have already subscribed to 3G services. Several mobile services already boast > 10 million subscribers, and they are making money too. At the same time, online commerce is booming. The handsets have become the personal life hub of homo digitalis, offering not only traditional calls, but also internet access, e-mail, calendar, reading device, still and video camera, TV, radio, electronic key, purse and credit card, GPS tracking, plus additional services like text and voice recognition, and other applications. While quite a few books and articles have been written about why the mobile internet made its breakthrough in Japan ﬁrst and not in other countries, there is still a vii

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lack of understanding about what, if any, universal lessons apply to the development of the mobile internet, which Japan offers to the rest of the world. That is where this book, The Six Immutable Laws of Mobile Business by Philip Sugai, Marco Koeder, and Ludovico Ciferri, comes in. As outsiders working inside the Japanese system, and as academic researchers under Professor Sugai at the International University of Japan, as consultants and scouts for western mobile phone carriers and handset manufacturers, advertisers, and hands-on application and content developers for a broad range of Japanese and foreign companies (and, of course, as users), the authors are uniquely positioned to separate myths from facts, microdevelopments from macrotrends, and cultural characteristics from universal rules of the mobile internet. In this book, they start by dismantling the deeply rooted belief still held by many in the industry, that Japan’s mobile industry is an exotic Galapagos Island, with little meaning for the rest of the world. Certainly, the global rise of Apple’s iPhone and the hype about the entry of the global giants of the computer internet like Google, Microsoft, YouTube, or Facebook into the realm of the pocketable web clearly shows that the world is playing catch up. The authors remain convinced, however, that Japan is still the biggest ﬁeld laboratory of the mobile net. As such, it offers valuable hints for successful business models for carriers and especially for content and service providers in the new era of the mobile internet. One important message the authors impart in this book is that to leverage the power of the mobile device for economic success, the companies have to put the user needs ﬁrst and stiﬂe the urge to shoot for quick returns. Fortunately for Japan, mobile carriers in that country understood the concept already in the late 1990s and chose instead the role of a gardener, who carefully nurtures a ﬂourishing “ecosystem”, as the authors call it. In contrast to their peers overseas, Japanese carriers charged only small fees from professional content providers on the ofﬁcial sites and focused on data-transfer fees. This created a positive feedback loop: Because all organisms of the ecosystem from the handset manufacturers to the service and content providers could make some money, they developed more content and more phones with new functions, thereby creating rapidly increasing demand for ever-richer data services. In addition to lofty business models, the book also analyzes the biggest success stories in Japan, to give the industry some practical hints on how to create appealing sites. The common denominator is that big successes span two important “time zones” of the mobile internet: the “in-between time”, in which users kill time with quickly consumed contents while waiting on the train or a date, and the “golden time”, which is for consuming richer content-like ordering online or reading novels that others may type on their mobile phone. The book highlights the fact that the biggest challenge is to create “simplexity”; in other words, to combine a highly complex, high-tech device with an enriched service in such a way that both are easy to use. The authors state: While other players struggle to make larger screens and wider keypads, or pump their content and services, simplexity will be what truly empowers individual users through their mobile devices. Based on a centuries-old tradition of serving customers’ needs (the customer is not king in Japan, but god), Japan is pushing the envelope even in this ﬁeld. Under

FOREWORD

ix

the slogan of “universal design”, Japanese electronic and car manufacturers want to create goods that are easy to use for the greatest number of people, regardless of age or disabilities. The iPhone is a good Western example for the realization of what the authors have in mind. But they name numerous Japanese examples as well. Hopefully, this book about developments in Japan, these remote islands at the edge of the Eurasian landmass, will offer some thought-provoking impetus to the global mobile industry. MARTIN KOELLING Japan Correspondent, Financial Times Germany Tokyo, Japan 2009

PREFACE

At the time this book goes to press, the economy is struggling under the weight of the worst economic crisis of our generation, with market caps, salaries, employment levels, and consumer conﬁdence having fallen sharply around the globe. Within this context, however, a strange and compelling fact has gone relatively unnoticed. That is, that the pace of mobile subscriber growth has continued to rise, almost undaunted by such “minor” details as the economic tailspin that has engulfed the entire world. Now we have surpassed the 4 billionth mobile subscriber, and in a few more years may soon ﬁnd mobile operators and handset vendors having to look beyond the human species (after pets, machines perhaps?) to maintain their momentum. All joking aside, if nothing else can convince you of the unprecedented power that the mobile phone is bringing to consumers, businesses, governments, and societies around the world the fact that mobile subscriptions continue to grow even within our current global economic turmoil should do the trick. However, as we will show you throughout this book, subscriptions to voice and SMS services are only the beginning. The real excitement that the mobile platform brings rests in the myriad of content and service offerings that are built upon this foundation of voice and text-based communications. As Apple’s App Store, Google’s Marketplace and other competitive and complementary solutions continue to evolve and expand in both their scope and their capabilities, the Six Immutable Laws of Mobile Business are becoming clearer and more vital to understand. And the point we will continue to make is that because of the astounding levels of adoption of mobile phones around the world, whether or not you, your organization or your company have currently embraced the mobile platform, all indications that we can ﬁnd suggest that you ultimately must and will; a fact that makes the Six Immutable Laws of Mobile Business essential reading for any individual or organization looking to gain a competitive edge in the coming months and years. xi

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PREFACE

In looking back at the changes that have already occurred since we ﬁnished writing this book a few months ago, we are even more convinced today than ever before that you are holding in your hands a guide to the future of mobile business. With more than 4 billion mobile phone subscribers walking around on this planet, we might even be so bold as to say that you are simply holding in your hands a guide to our collective future. And as that future moves closer to becoming the reality within your market, country, or region, we are conﬁdent that those who understand these Six Immutable Laws that are shaping this future, will be able to position themselves to take the greatest advantage of the seismic shifts in how businesses and individuals will soon navigate the course of their daily lives. The difﬁculty with a published version of this book rather than the form that these laws typically take in our seminars and executive training sessions is that the pace of change within the mobile industry is lightning fast. Once we have written and published our thoughts in the form of a book like this, we run the risk of appearing “out of date” with the events and trends of your “today”. We have done our best to remove examples and ideas that will surely fade in relevance as time goes by, and focus instead on the fundamental meanings of the examples that we use. But for the most recent examples, ideas, and discussions, we have created a companion site for this book, www.siximmutablelaws.com, which we hope that you will visit. As these Six Immutable Laws continue to shape the evolution of mobile content, services, and solutions around the world, we will be using this website to integrate these developments, and collaborate with you, and others shaping the world’s wireless development. We are looking forward to continuing the conversation that we begin here within our book The Six Immutable Laws of Mobile Business with you at www.siximmutable laws.com. PHILIP, MARCO, and LUDOVICO Tokyo, Japan

ACKNOWLEDGMENTS

The list of people, who at different stages and in different ways assisted us through the preparation of this book, would be too long to name them all. Yet, because our original book idea goes back a number of years, we would ﬁrst like to thank the many people we interviewed or those who assisted in those interviews, including Takayuki Nozaki and Mikito Ishida, who each spent a considerable amount of time discussing the outcome of this project, while helping with Japanese translation; and Yukie Masuda, who relentlessly assisted in setting up interview appointments. Additionally, our deepest gratitude should go to the interviewees (and their organizations) for generously devoting some time from their busy schedules to share their knowledge and vision. These include (in alphabetical order) Dr. Majid Anwar, Guillaume Briand, Jasper Cheung, Chiaki Fujino, Akihisa Fujita, Kazutomo Robert Hori, Keiiko Iida, Dr. Tomihisa Kamada, Kenji Kasahara, Imran Khand, Hideo Kobayashi, Misao Konishi, Ted Matsumoto, Dr. Hitoshi Mitomo, Brent Mori, Yosuke Morioka, Tom Moss, Dr. Hitomi Murakami, Steven Myers, Masato Nakanishi, Hiroshi Nakata, Tomoko Namba, Takeshi Natsuno, Ikuo Nishioka, Yoshimi Ogawa, Hiroshi Ohta, Motohiro Okubo, Dr. Keisuke Onishi, Haruna Sagao, Mika Satake, Dr. Sachio Semmoto, Akira Tanii, Tsuyoshi Takenouchi, Yoshiharu Tamura, Keith Taniguchi, Susumu Taniuchi, Keisuke Toji, Kiyoshi Toriumi, Takenori Ugari, Satoko Utsugi, Jun Yamada, Yasuyuki Yamamoto, and Hiroshi Yoshino. A very high level of support also came from the discussions with students of the Graduate School of International Management, International University of Japan (Niigata). The case studies and the ﬁnal reports of the students from the International University of Japan proved an open-minded source of stimulus. At different points of this book’s evolution, we met with several people whose advice has been invaluable in ﬁne-tuning the work, and to whom we are equally indebted: Lawrence Cosh-Ishii, Christopher Billich, Kei Shimada, Arjen van xiii

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Blokland, Gerhard Fasol, Francesco Fiore, Peter Fuchs, Eran Harel, Michele Manfro, Jake Myrick, Laurence Mcdonald, Iku Mohamed, Yusuke Otsubo, Daniel Scuka, Fuminori Takemura, Glenn Mayhew, Donghun Kim, and Christian Waroquier. Many thanks to the entire team from John Wiley & Sons, inc., who made the book possible, and to Cindy Mullins, our agent and advisor, who relentlessly stuck with us throughout the book development and writing process, from the ﬁrst proposal, through continuous support and encouragement, to the ﬁnal editing. On a more personal note, we wish to especially thank our families and loved ones, who were patient enough to tolerate our bad tempers, late nights, and long meetings while the book was under preparation. Finally, a disclaimer: Although much care has been taken in providing updated ﬁgures and in checking all names and facts, any inaccuracies, omissions, or mistakes are exclusively the fault of the authors and not our sources.

INTRODUCTION

THE SIX IMMUTABLE LAWS OF MOBILE BUSINESS

The future is already here. It’s just not very evenly distributed. —SF author William Gibson, 1999

Currently, more than one-half of the world’s population owns a mobile phone, and we are slowly arriving at the point where the world’s entire population will live in range of a mobile network. Mobile phones have become the most ubiquitous and indispensable digital devices on the planet. In fact, by 2009 the International Telecommunications Union (ITU) showed that there are four times more mobile phone subscribers than Internet subscribers. They also outnumber PC owners 3:1, and television owners 2:1. They even outnumber ﬁxed line telephone subscribers. No other service or technology has ever reached a similar diffusion level in such a short time. If those ﬁgures do not impress you, let us put the phenomenon into ﬁnancial perspective: At the end of 2007, global revenues from mobile phone related services reached parity with those derived from total worldwide crude oil production— ﬁgures no business executive can ignore. Andrew Robertson, CEO of BBDO Worldwide, a subsidiary of the Omnicom Group, the world’s largest advertising agency holding company, stated “We are rapidly getting to the point where the single most important medium that people have is their wireless device.” This book charts the future of the mobile platform. We were going to show you where we were, where we are today, and where the many dazzling developments in mobile and wireless technologies, services, and solutions that are being created and deployed globally are leading us. More speciﬁcally, we identify the key drivers powering this evolution and assess the impact they will have on our jobs, businesses, and lives. xv

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INTRODUCTION

We are already witnessing the vast changes in society that a mobile phone carrying population brings. From microcoordinating meetings to negotiating the streets and shops of foreign cities, the mobile phone has evolved from a relatively straightforward communications device into the hub of power for more than one-half of the world’s population. People are using their mobiles to navigate the ebb and ﬂow of daily life, all just 26 years after personal cellular technology ﬁrst became a commercial reality. No Digital Divide Global PC Internet diffusion led to a stark “digital divide” between the information rich and poor. The mobile channel has not and will not. According to C. K. Prahalad, author of The Fortune at the Bottom of the Pyramid and an expert in global poverty reduction, “emerging markets will be wireless-centric, not PC-centric”. The quickening spread of mobile services in both developing and developed economies is a key to the mobile platform’s burgeoning power. We will focus on the growing technical capabilities of mobile phones, related services, and the long-term effects these will have on consumer behavior. In fact, consensus is growing that the mobile phone will soon replace television in the minds (and budgets) of the advertising industry. With Digital Video Broadcasting-Handheld (DVBH), One-Seg and other mobile digital broadcasting technologies being deployed globally, the mobile phone has actually become the television and will help to lead the way for the next generation of television (Internet Protocol Television (IPVT)) in the next years to come. Simultaneously, it has become a camera, a house key, a corporate security card, a credit card, an airplane boarding pass, a game machine, a music player, an Internet browser, a watch, an alarm clock, an excuse to leave a meeting early, a scheduling tool, and a wallet, all while retaining its original function of plain old telephony. Putting such capabilities in billions of people’s hands in 150 countries, the question becomes not if the powers of mobile phones will change our personal and professional lives, but how and when. A Little Focus Here, Please We have chosen Japan as our focus. At ﬁrst glance, this may not be the most obvious choice. As of December 2008, Japan boasted more than 100 million mobile phone subscribers in a population of slightly over 127 million. While 70% is a respectable penetration rate, there are more contracts for wireless communication services than inhabitants in Hong Kong, Israel, Italy, Luxemburg, Singapore, Sweden, Taiwan, the United Kingdom, and 50 other nations, meaning mobiles are theoretically in the hands of every citizen there. Japan’s wireless population is the world’s fourth largest behind China, the United States, and Russia, but its mobile phone subscriber base represents < 3% of all users. If we probe deeper, however, we ﬁnd some astounding ﬁgures. For example, of those 100 million subscribers, 80 million were active high-speed (3G, third generation) mobile data users, accounting for 17% of all 3G subscribers. The Japanese mobile

INTRODUCTION

xvii

market also accounts for more than 40% of total revenues generated globally from mobile data. Moreover, the Japanese mobile industry business model, which NTT DoCoMo’s i-mode strategic visionary Takeshi Natsuno calls “the wireless ecosystem”, has spawned some of the most relevant players in the mobile industry. Japan has also experienced 10 full years of a robust and rapidly developing mobile platform, since NTT DoCoMo’s i-mode service was commercially launched in 1999. While there are several lessons to draw from the Japanese market, we will target the success of the mobile Internet and a thriving worldwide mobile platform. The economic implications are clear. As we discussed above, there are more mobile phones in use today than PCs, TVs, ﬁxed-line telephones, PDAs, or any other consumer electronic device. The mobile phone is a killer platform. But until now the development of a fully functioning value system has eluded the West, as well as most of the East, North, and South, save for Japan and South Korea. At the same time, we will concede that global attention has shifted away from Japan to the United States and European markets as the innovative giants of the PC Internet world (Google, Microsoft, Yahoo!, My Space, YouTube, Facebook, Amazon, and others) realign to target the mobile platform. This book distills the most important lessons from how Japanese businesses and consumers have optimized the mobile channel into Six Immutable Laws for mobile business, and through these provides the most viable path forward for global success of mobile Internet content, services, and solutions. The End-User Game There are a number of reasons for the mass diffusion of any technical innovation. The end user, however, remains the constant, as well as the most critical decision maker. Throughout the book we will analyze these developments and trajectories from the consumer’s viewpoint. Here is why. After working with network operators, handset manufacturers, and content and service developers within the mobile industry, as well as many other ﬁelds, we have discovered that a huge gap often exists between the development of mobile technology and the end user. Device complexity leaps exponentially, often from month to month, but upgrading the “internal processor” of most consumers to handle the new complexity is not easy. From the engineer’s perspective, end users are the biggest barriers to technical innovation and product diffusion. When the mobile phone was ﬁrst introduced, for example, it was simply a wireless, bulky, exorbitantly priced cousin of the ﬁxed-line telephone. Mobiles got smaller and cheaper, but also far more complex, adding mail functions, mobile web access, and personal information management tools that transformed them into digital Swiss army knives that now come with massive instruction manuals. Impressive? Yes. Usable by the average person? Unfortunately, no. To us, the issue is not how many more cool functions or features we can cram into mobile devices, but how these devices and their related services can become accessible again. This concept of simplicity merged with complexity (what we call simplexity) will serve as the foundation for many of our ideas on how to make mobile services

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proﬁtable in world markets. This simplexity concept even goes beyond mobile services and has the power to reshape the current technology related consumer industry into a posttechnology society that focused not on the gadget, but on the user. Chapter and Verse Chapter 1 deals head-on with the importance and relevance of the Japanese mobile market in global terms. We will explore a number of common myths that have been given as reasons the mobile Internet has succeeded in Japan, but not elsewhere, and debunk them. Our ﬁrst law of mobile business focuses on the value of mobile services rather than the cultural environment within which they are developed. Chapter 2 presents our second law, the law of the ecosystem. We explore the different wireless technologies that have been deployed globally, and the achievements of the operators in Japan in developing a platform for mobile innovation unlike any other in the world. We will also get into why Japan’s ecosystem model is imperfect, and has not traveled well. Yet the spirit of such development is worthwhile, and has valuable implications for the growth and expansion of global mobile markets. Chapter 3 will introduce our third law, focusing on the empowering nature of the mobile platform versus any other communications channel deployed to date. This vibrant, robust mobile platform has had a great impact upon consumer behavior in Japan, empowering consumers in unprecedented ways, and bringing wide-ranging consequences as well. For example, we will show you how the mobile platform empowers modern businesses to attract and retain more loyal customers. We will also examine negative elements that arise, including breaches of security and privacy. Our fourth immutable law of mobile business, covered in Chapter 4, describes new “time zones” peculiar to the mobile channel. We will introduce you to the idea of “in-between” versus “golden” time, and what each means for businesses hoping to obtain high loyalty levels from mobile consumers. Chapter 5 introduces our ﬁfth immutable law, which focuses on the emergence of some of the most viable mobile business models to date, using a number of short case studies to show how the more advanced mobile services in Japan are folding Web 2.0 applications into their service offerings. In Chapter 6, we present the concept of simplexity and its importance to the evolution of mobile Internet services and beyond, both in Japan and globally. In exploring this concept and its overall impact on the technology related industry and society itself, we return to where we began, looking out at the world, on the brink of the true Big Bang of mobile Internet innovation that will empower consumers and businesses in ways we cannot imagine, all based on one important subject: the user. Those overall innovations are coming soon. While Japanese consumers have already grown accustomed to robust mobile services and solutions woven into the fabric of their lives, the real source for innovations appears to be all of us. The ﬁnal section, Chapter 7, is designed to give you food for thought as you evaluate your next moves relating to the mobile realm and maybe even beyond. The

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Japanese mobile market is both a testing ground and an early warning system for the possibilities that a fully functioning mobile ecosystem can provide. Linking current consumer behavior and market realities will reveal many opportunities for you, both in business and on a personal level. This book should also serve you as the springboard for new ideas required to take the mobile platform to its next evolutionary step.

CHAPTER 1

IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

Our excitement and determination in writing this book stems from our belief that the lessons learned in the Japanese mobile market can serve as effective guides for the global evolution of the mobile Internet and the products, services, and solutions created for it. While presenting our research and insights in a variety of international forums, however, we found that many audience members do not share our views. When we say those who study and learn from the Japanese mobile market will hold a competitive advantage in their own markets, for example, the typical reaction is “Gentlemen, is that not just a Japanese thing?” No, it is not. If you will take our word for that, or already believe Japanese culture has had no signiﬁcant impact on the success of the mobile Internet in Japan, please jump to Chapter 2. If you are still in doubt, however, we are here to convince you. First, let us provide some essential background. Japan has had an advanced mobile data market since NTT DoCoMo launched its i-mode service in February 1999. (Japan Telecom’s J-Phone actually launched its “SkyWeb” mobile Internet service 3 months earlier in December 1998, but regionally rather than nationwide.) The Japanese market has also racked up a number of innovations over the years. In addition to being the ﬁrst to successfully offer 2.5G data services above and beyond SMS text messaging (in February 1999), it introduced the camera phone, third generation (3G) services, and full-song downloads through a wireless network. The ﬁnancials are there as well. As Figure 1.1 shows, Japan’s mobile subscriber base accounts for less than 3% of the world’s mobile subscribers. Yet data from Chetan Sharma’s “Global Wireless Data Market Update 2007” shows that the Japanese market accounts for nearly 40% of all global revenues generated from advanced mobile data use. The Six Immutable Laws of Mobile Business, by Philip Sugai, Marco Koeder, and Ludovico Ciferri Copyright © 2010 John Wiley & Sons, Inc.

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IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

Figure 1.1

Japan accounts for just a fraction of all mobile phone users.

The politically incorrect view that many have expressed is that Japanese culture has unduly inﬂuenced the country’s mobile market. They claim that it makes the Japanese more “susceptible” to the mobile Internet, and things are different everywhere else. We have examined a number of speciﬁc arguments, which we call “meta-myths”, that support these claims. While the exact reasons for the disparities between Japan and the rest of the world are too long and involved to include in detail here, we have categorized them into the four meta-myths below. These meta-myths are all prefaced by the phrase “The mobile Internet succeeded in Japan because … ”. THE FOUR META-MYTHS 1. Japan is a land of gadget-lovers. 2. The Japanese live in small houses and lack the space for a computer, so mobile phones became the primary channel for accessing Internet content. 3. The Japanese spend a lot of time on public transportation. 4. The Japanese are naturally polite and quiet, so mobile phone-based communications suit the culture. As a counterpoint, we offer the words of Takeshi Natsuno, one of the founding fathers of the i-mode service and a true visionary in the wireless communications industry. In a 2004 Washington Post interview about Japan’s mobile industry, Natsuno commented: “Everyone wants to say, ‘Oh, the Japanese are strange. They love tiny and miniature things and that’s why cell phone services have taken off here.’ But the truth is that we are normal, and it’s the other guys who are something odd. It’s not about being Japanese. It’s about knowing what people want and how to sell it the right way.”

META-MYTH NO. 1: JAPAN IS A LAND OF GADGET-LOVERS

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So, which perspective is correct? Did the mobile Internet succeed in Japan because of indigenous cultural characteristics that make Japanese consumers especially prone to becoming mobile Internet users? Or did the Japanese mobile industry create the operating model—along with the right handsets, content, and services—that consumers in Japan wanted to use? Answering this question is fundamental to our premise. If we can remove culture as a deciding factor in Japan’s mobile Internet success, we feel that others will agree that the lessons learned from the Japanese market can and should be applied to other mobile markets. We are going to investigate each of the four meta-myths in detail to see if we can remove culture from the table. META-MYTH NO. 1: JAPAN IS A LAND OF GADGET-LOVERS Variations of this meta-myth include “the Japanese are the world’s early adopters”, and “the Japanese love small, miniature things”. Let us start by examining what that all suggests. If Japan is a land of gadgetlovers, we can logically assume that any gadget popular elsewhere would ﬁnd a loyal following here. How then can we explain Research in Motion’s abject failure to sell Japanese business executives on the BlackBerry™, and Nokia’s continuing inability to achieve market dominance in Japan as it has in other mobile markets? The logical conclusion is that Japanese consumers are just like consumers in most advanced markets, only falling in love with gadgets they ﬁnd appealing and useful. Forrester Research published a report in 2006 that makes our job a little easier, comparing gadget adoption levels across many leading markets around the world. Figure 1.2 reveals that South Korea actually has the highest level of gadget adoption, followed by Hong Kong and Japan. Gadget-lovers do not just live in Asia, either: after those three

Figure 1.2 Gadget-lovers around the world (copyright © 2006, Forrester Research, Inc.).

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IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

we ﬁnd Italy, Sweden, Australia, and The Netherlands. According to a 2007 paper by Gordon Bruner and Anand Kumar in the internationally acclaimed Journal of the Academy of Marketing Science, there is actually a Gadget-Lovers demographic segment distinct from citizenship and culture. If a love of gadgets had a direct correlation to mobile Internet adoption, we would expect South Korea and Hong Kong to be the hottest mobile Internet markets around. China and Italy would be only slightly less avid than Japan. Since this is not the case, we believe we can eliminate this rationale for Japan’s rate of mobile Internet adoption. While Japanese consumers acquire mobile gadgets at a higher rate relative to consumers in many other countries, no direct correlation exists between this and the success of the mobile Internet in Japan. META-MYTH NO. 2: THE JAPANESE LIVE IN SMALL HOUSES AND LACK THE SPACE FOR A COMPUTER, SO MOBILE PHONES BECAME THE PRIMARY CHANNEL FOR ACCESSING INTERNET CONTENT Bill Ray gave the best summary of this argument in a July 2007 article entitled “Culture Matters” for The Register: “ … the way in which the Japanese live drives them toward mobile content in a way that just doesn’t exist in the West … Japanese houses consist of spaces that are multifunctional depending on what the occupants are doing. Walls may be moved around during the day, and it’s extremely unlikely that a child would have its own room. Entertaining at home is also unusual—socializing is done in restaurants, bars and coffee shops.” “ This makes Japanese youths the perfect mobile consumers—they have no TV or computer in their bedroom because they have no bedroom of their own. In such a market it’s unsurprising that Internet access from a mobile phone has been so popular, and equally unsurprising that Western youth haven’t proved so receptive to the idea.”

While Ray’s hypothesis may be true, let us analyze his argument. First, Japan does have a highly urbanized population: Approximately 45% of its 127 million people live within the major metropolitan hubs of Tokyo, Osaka, and Nagoya.1 Since the entire Japanese archipelago is about the size of California, it is reasonable to assume that Japanese houses are smaller than those in America or similar, but less urbanized markets. Still, this housing situation is not unique to Japan. In addition, Japan’s mobile Internet was launched in 1999, long after laptop computers had appeared and gained wide acceptance in the world’s second-largest economy. It is therefore tough to imagine that the size of houses has had an impact on PC-based Internet adoption. Even if house size is not the reason, doubts about Japan’s adoption of PCs and the Internet have been aired repeatedly over the years. Take, for example, this excerpt from a January 2000 article in BusinessWeek by Irene M. Kunii and Stephen Baker: “Japan has long lagged behind the U.S. in PC and Internet penetration, largely because of a lack of familiarity with the keyboard. But personal electronics are another story. 1

Source: Statistical Handbook of Japan, Japan Statistics Bureau, 2007.

META-MYTH NO. 2: THE JAPANESE LIVE IN SMALL HOUSES

5

This is the country that gave the world the calculator, the Walkman, the pocket TV, the Game Boy, and the camcorder. Millions of Japanese grew up playing video and pocket computer games—the so-called push-button generation. Many are now migrating to Net-ready cellular handsets, often bypassing home computers altogether. They form a perfect testing ground for new Net appliances.”2

What these and many other authors are suggesting is that the Japanese bypassed purchasing computers and using the PC Internet, moving directly to the mobile phone for their online needs. For the sake of our investigation, let us look at what the International Telecommunications Union (ITU) has to say about information communication technology deployment and diffusion rates across more than 200 countries annually since 1960. Figure 1.3 and Table 1.1 show the ITU Internet user data per 100 inhabitants in 13 countries between 1999 and 2006. While Japan’s Internet usage in 1999 did

Figure 1.3 Internet user data for over a dozen countries between 1999 and 2006 (copyright © International Telecommunications Union, 2008). Source: International Telecommunications Union. 2

Available at http://www.businessweek.com/2000/00_03/b3664010.htm.

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IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

TABLE 1.1

International Internet Users

Internet Users Per 100 Inhabitants (Source ITU World Tele communications Indicators)

United States Japan Korea (Rep) Finland France Germany Italy Spain Sweden Switzerland United Kingdom Australia New Zealand

1999

2000

2001

2002

2003

2004

2005

2006 CAGR

36.6 21.4 23.8 32.3 9.2 20.8 14.3 7.0 41.4 20.5 21.0 29.6 29.0

44.1 29.9 41.4 37.2 14.4 30.2 23.0 13.6 45.6 29.1 26.4 34.5 39.3

50.1 38.4 51.5 43.0 26.4 31.5 26.9 18.0 51.6 38.6 33.0 39.7 45.4

55.2 46.5 55.2 48.6 30.3 33.9 35.1 19.1 57.3 41.0 42.3 45.8 48.4

55.6 48.3 61.1 49.1 36.3 40.0 39.5 25.8 63.0 44.8 43.7 47.8 53.5

63.0 62.2 65.7 51.4 39.3 43.3 46.0 35.1 75.5 47.2 47.0 50.2 58.9

66.3 66.6 70.2 53.3 43.2 43.2 48.2 40.4 76.2 50.9 53.8 52.6 68.4

69.1 68.3 72.8 55.6 49.5 46.7 49.6 42.8 77.0 58.1 56.0 54.2 78.8

10% 18% 17% 8% 27% 12% 19% 29% 9% 16% 15% 9% 15%

Source: ITU World Telecommunications Indicators.

lag behind that of Sweden, the U.S., Finland, Australia, New Zealand, and South Korea, it topped the United Kingdom, Germany, Switzerland, Italy, France, and Spain when i-mode appeared in February that same year. Comparing the Internet diffusion rates versus the compound annual growth rate (CAGR) between 1999 and 2006, we ﬁnd that Japan’s PC Internet growth was actually fourth highest at 18%, even though Japan had the most robust mobile Internet platform in place over this entire period. So while we can accept the general statement that homes in Japan may be on average smaller than those in the United States, the correlation between house size and PC Internet adoption appears nonexistent. Similarly, if a correlation existed between house size and mobile Internet adoption, the mobile Internet would succeed in any country where the average house is small. That argument clearly does not hold up. The truth is, Japan’s PC Internet adoption rate matches closely with many other developed markets, and therefore does not represent a reasonable explanation for Japan’s successful mobile Internet deployment. The mobile Internet therefore did not succeed in Japan because Japanese people live in small houses. META-MYTH NO. 3: THE JAPANESE SPEND SO MUCH TIME ON PUBLIC TRANSPORTATION As previously mentioned, Japan’s population is heavily urbanized. The Japanese typically use public transportation to avoid the dense trafﬁc in major metropolises like Tokyo, Nagoya, and Osaka. According to the Japan Statistics Bureau, which gathers information on how the Japanese occupy their time during a typical day, the average citizen spends

META-MYTH NO. 3: THE JAPANESE SPEND SO MUCH TIME

7

approximately 31 min per day on public transportation. That is a lot of commuting, especially considering that the ﬁgure mentioned represents an average for Japan’s entire population, from babies to the bedridden. A quick trip on any urban train or bus will inevitably reveal at least a few passengers staring at their mobile phones and frantically working the tiny keypads. Clearly, a strong correlation must exist between this high rate of commuting “downtime” and the mobile Internet, right? Well, let us dig deeper. First, anyone who has ridden public transportation in Japan knows there is nothing unique about the country’s buses and trains. So no factors related to the speciﬁc types of public transportation available in Japan can account for differences in mobile Net use. Japanese commuters are also far more likely to be doing something other than ﬁddling with their mobile phones, including sleeping, listening to music, and reading. Only a small percentage of the typical commute is devoted to mobile phone use. (We will provide evidence of that later in this chapter.) Sitting on a close-packed commuter train or bus, it is hard to tell exactly what commuters are doing as they tap away on their handsets, which are packed with a dizzying array of features, capabilities, and functions that require no Internet connection. A lot of them, however, are undoubtedly playing games, doing data entry (e.g., scheduling or editing phone book records), or browsing through pictures, videos, or music ﬁles. To get more detail on the environments in which people use their mobile phones, we ﬁrst consulted with the research division of Japan’s largest media and advertising agency, Dentsu, which conducted a 2005 study on mobile phone related services, including traditional voice calls, e-mail, and Internet browser use. Dentsu found that the location people cited most often for e-mail use was at home, while they were commuting, work, or school, and then other locations. These ﬁndings provided us with some overall usage trends, but not how much people are using their phones in each location. To answer that, this book’s coauthor, Philip Sugai, conducted a comprehensive study in March 2007 that asked mobile phone subscribers in Japan to rate their mobile use in four primary environments (home, work or school, leisure time, and while commuting). While the international media regularly report about excessive mobile phone use by Japanese commuters, which the Dentsu study supported, Sugai’s study showed that for both genders and across all age categories, overall mobile data usage while commuting was the lowest of all four environments. For men, the environment of most intensive use was the workplace, at their desk or ofﬁce; for women, it was at home in the living room. When comparing these results to Japan Statistics Bureau data, it turned out that mobile Net use closely matched the general time and location allocations that Japanese citizens follow during their day. As Figure 1.4 shows, mobile phone use followed the general time allocation by location, with the most time spent at home, then work or school, then leisure time, and then the commute. While these results looked somewhat similar to time allocation for the three other categories, we found that Japanese consumers spent nearly 10% of their mobile Internet time during their commute, which only required 2% of the average day.

8

IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

Figure 1.4

The Japanese use their mobiles less during their commute.

Japanese consumers were spending a signiﬁcant percentage of their overall mobile Internet time during a very limited interval. That is undoubtedly why the media and visitors to Japan believe the local commute was such a vital piece of the mobile Internet’s success. However, our results show mobile Internet use mostly took place at home and at the ofﬁce. Our ﬁndings make perfect sense when we set these results against the marketing of mobile phones as “anytime, anywhere” devices, not just while users are out and about. Since at least 90% of mobile Internet use occurs outside commuting hours, we can conclude that long commutes have not driven the success of the mobile Internet in Japan. Just in case you think this may be conﬁned to the Japanese market, here is another parallel. The French mobile game company IN-FUSIO conducted a survey in 2002 to understand their mobile game customers better. IN-FUSIO went in ﬁguring that subscribers mostly used its games during daytime leisure times and commuting. To the contrary, the company discovered that subscribers mostly played games at home during the night. META-MYTH NO. 4: THE JAPANESE ARE NATURALLY POLITE AND QUIET, SO MOBILE PHONE BASED COMMUNICATIONS SUIT THE CULTURE Variations of this myth typically include references to singular elements of Japan’s culture that supposedly make Japanese consumers more “susceptible” to the mobile Internet than consumers elsewhere. Since the Philippines, Europe, and the United States have become avid users and advocates of Short Message Service (SMS) messaging and e-mail messaging via mobile phones or more advanced smart phones, such as the BlackBerry, it is difﬁcult to say that texting is only for a “quiet” culture, such as Japan. (Even the notion that Japan is a quiet country is suspect, as anyone who has lived there can tell you.) But we will leave that debate for a different forum and get back to the underlying issue related to this meta-myth.

META-MYTH NO. 4: THE JAPANESE ARE NATURALLY POLITE AND QUIET

9

Of all the pushback we have received while presenting our research on Japan’s mobile market, the culture argument is by far the most difﬁcult to dismiss. This claim occurs mostly because Japan’s culture is rich, distinctive, and mysterious to many outside (and even inside) Japan. To counter this claim and convince skeptics that the lessons learned in the Japanese market can boost the global expansion of the mobile Internet, we will have to get into the science of culture. In 1980, cultural anthropologist Geert Hofstede called culture “the software of the mind”. We could easily argue that if Japan’s culture is the impetus for local mobile Internet and mobile phone use, Japanese consumers must view the mobile Internet differently than consumers in other cultures. In that case, just as DVDs from Japan will not play in U.S. DVD players, insights from Japan’s mobile market would not “play” in the United States—or likely any other world market. We are not talking about language, layout, or user interface design, either, but something more fundamental in how groups of consumers view the value, impact, and importance of the mobile Internet. The operative question for the cultural researcher is how to examine this software of the mind. Even opening up someone’s skull to study their brain will not reveal the details of this particular “software”, so gaining a clear understanding of culture remains a controversial area of academic research. Psychologists have one perspective, sociologists another. Do not even think of ignoring the viewpoints of anthropologists, market researchers, management scientists, and the vast array of other academics, all with their own cultural software models in place to try to understand culture. We chose to take a simpler and more direct approach: Do respondents from distinctly different cultures have similar views of the mobile Internet, its value, and uses? If so, it would help eliminate culture as a viable reason for the differences in mobile Internet use. The trick was to ﬁnd a culture (or cultures) distinctly different from that of Japan, and a culturally unbiased way of assessing views on the mobile Internet. Satisfying the ﬁrst criterion turned out to be far easier than meeting the second—we simply opened a copy Geert Hofstede’s 1996 book “Cultures and Organizations: Software of the Mind”. Hofstede conducted one of the most comprehensive studies of culture ever undertaken, and in the process developed four widely accepted scales to “measure” cultures: power distance; individualism; masculinity; and uncertainty avoidance.3 He rated each country using those criteria and a vast amount of international data he collected. To ﬁnd countries with cultures very different from Japan’s, we took the absolute value for each variable and added them up. Japan and the United States, for example, had the scores shown in Table 1.2. Hofstede measured 68 countries. Table 1.3 shows the 10 countries whose cultures differ the most from that of Japan. This table also includes the mobile penetration 3

Power Distance Index (PDI) is the measurement of how members of a society accepted inequality of power. A higher score indicates greater acceptance. Individualism (IDV) measures how much a society stresses the importance of the individual over the group. A high score means that a society values individual welfare over the welfare of the group. Masculinity (MAS) measures the level of assertive and/or competitive “male” characteristics within a culture versus the more “feminine” (modest and caring) characteristics. Uncertainty Avoidance Index (UAI) measures the level of discomfort a society experiences when dealing with new or unstructured situations. The higher the UA index, the more averse people within that society are to such situations.

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IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

TABLE 1.2

Culture Match: Japan and the United States Culture Match – Japan and the U.S.

Japan U.S. Difference Absolute Value of Difference Sum of Absolute Values TABLE 1.3

Power Distance

Individuality

Masculinity

Uncertainty Avoidance

54 40 40 14

46 91 45 45

95 62 33 33

92 46 46 46

138

Looking for a Culture to Compare to Japan’s Hofstede’s Comparisons and Mobile Phone Penetration Levels

Rank

Country

0 1 2 3 4 5 6 7 8 9 10

Japan Denmark Sweden Singapore Norway Malaysia Netherlands Vietnam Indonesia Guatemala U.K.

Difference from Japan (Hofstede)

Mobile Penetration Rate % (2003)1 — ITU

0 212 201 177 175 171 170 159a 149 148 148

67.9 88.3 98.1 85.8 88.8 44.4 81.1 3.3 8.6 16.5 91.2

a

Estimated.

rates for each country as reported by the International Telecommunications Union in 2003 when we originally conducted this research. Because we were looking for consumer images of the mobile Internet originating from truly different cultural experiences, we also chose to focus on the level of mobile phone adoption within each of these culturally distinct countries. If both the culture and the level of mobile technical deployment were radically different than in Japan, we believed we would be able to negate the impact culture (including mobile phone culture) had on consumer perspectives of the mobile Internet. As outlined in Table 1.3, the two countries with mobile phone penetration levels far below the rest were Vietnam (3.3%) and Indonesia (8.6%). However, because Hofstede’s measurements of Vietnam’s culture were based on estimates rather than actual data collected in the country, we chose to use Indonesia as our comparative culture. The second issue involved ﬁnding an unbiased way to explore differences in how these two cultures viewed the mobile Internet. Culture being the software of the mind, we needed a different “diagnostic tool” that would not taint the results by inﬂuencing the people we were studying.

META-MYTH NO. 4: THE JAPANESE ARE NATURALLY POLITE AND QUIET

11

After considerable research, we chose a relatively new method called the Zaltman Metaphor Elicitation Technique (or ZMET) developed by Dr. Gerald Zaltman of Harvard with the support of Dr. Robin Coulter at the University of Connecticut. The fundamental logic behind ZMET—and what appealed to us as we examined the similarities and differences in perceptions of the mobile Internet across cultures—was its use of photos and other images as the primary sources of research information. Zaltman and Coulter state that at least 80% of human communications is nonverbal in nature. Most modern research methods, however, rely exclusively upon data in written form taken from surveys or derived from phone or face-to-face interviews. To circumvent that, ZMET begins the research process by asking a simple question: When you think of “X”, what images come to mind? Our variation was When you think of the mobile Internet (deﬁned as any nonvocal use of a mobile phone requiring network connectivity), what images come to mind? We asked our respondents to go home and collect 8–10 pictures—including personal photos, pictures from magazines, newspapers or the Internet, and their own drawings—that reﬂect those images. The respondents returned 1 week to 10 days later and were guided through a structured interview process to create a “mind map”: A structured view of how that individual perceives the mobile Internet. These individual mind maps from each country were combined to form aggregate country maps. This was a fascinating process to follow, especially because we were looking for cultural differences between the two countries as we did our analysis. Although the pictures collected in these disparate cultures differed signiﬁcantly, we found the underlying reasons for choosing them were very similar. In fact, they were so similar that the fundamental ideas about the mobile Internet and its value clearly extend beyond culture. Figure 1.5 combines two mind maps, one for Indonesia and the other for Japan. Shared concepts included “anytime/anywhere; access (to information); and communication (for both business and personal use). Differences arose not because of culturally speciﬁc elements, but from the state of the underlying mobile infrastructure. For example, Japanese consumers might be expected to talk about their “cool devices”, while Indonesian respondents would not. That proved untrue. Respondents from both cultures stressed the importance of handsets within the context of the mobile Internet. In Japan, where mobile Internet use has been widespread since 1999, our 2003 survey found that the mobile’s convenience had made it essential to daily life. In Indonesia, however, where major technical and price barriers prevented most Indonesians from taking advantage of mobile telephony, the mobile Internet was considered high tech, but riddled with infrastructure-related inefﬁciencies. The paper published about the study details these results.4 However, we can tell you that culture did not appear in respondents’ views of the mobile Internet. We therefore concluded that Japan’s culture was not responsible for the country’s widespread use of the mobile Internet. To paraphrase an October 2000 interview that Jupiter Research 4

Sugai, Philip (2005) “Mapping the Mind of the Mobile Consumer Across Borders”, International Marketing Review, vol. 22, no. 6, pp. 641–657.

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IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

Figure 1.5

Mind maps.

director Seamus McAteer gave the BBC, the idea that the success of mobile data services in Japan can be attributed to cultural factors is a “handy cop-out”.5 While a country’s culture will surely inﬂuence the design and capabilities of handsets and the popularity of speciﬁc content, services and service plans, mobile-related businesses must focus on developing a compelling value proposition for consumers. To emphasize this point, we would like to repeat part of Takeshi Natsuno’s quote: “It’s not about being Japanese. It’s about knowing what people want and how to sell it the right way.”

To understand just how well the Japanese mobile industry has grasped what people want, and how to sell it, we need to examine how the content and services are used. We chose to divide them into four broad categories according to what users are trying to do. These four categories (Inform, Transact, Entertain, and Express) are shown in Figure 1.6. Offerings in the “Inform” category, for example, include services that allow consumers to learn, either through targeted information gathering like accessing today’s weather or news, or more general mobile data information services, such as search from companies like Yahoo! and Google. 5

Available at http://news.bbc.co.uk/1/hi/business/945051.stm.

META-MYTH NO. 4: THE JAPANESE ARE NATURALLY POLITE AND QUIET

Figure 1.6

13

The four broad categories of mobile content and services.

The “Transact” category covers services in which consumers initiate actions related to the transfer of money. Such transactions can involve mobile banking or investment services, online e-commerce, or point-of-sale purchases using a contactless RFID service, such as mobile Felica. Entertainment-speciﬁc content and services, such as games, e-books, music, and movies fall into the “Entertain” category. The “Express” category includes activities that enable users to better express themselves through telephone calls, e-mail, or SMS messages, blogs or social networking services, or downloading ringtones and background screensavers. To understand the value Japanese consumers place on these four categories, we can check overall usage or the revenues they generate. The numbers will undoubtedly have changed by the time you read this; these are snapshots of what Japanese mobile consumers have embraced as valuable, and provide evidence that compelling mobile content and services are being created in Japan, and that they are not unique to the Japanese culture. Japan’s Mobile Marketing Data Labo surveyed over 3000 mobile subscribers in November 2008 about how they use 35 different types of mobile content and services. For consistency, we further categorized them into our four distinct usage categories. As shown in Figure 1.7, the services Japanese consumers use most often are in the “Inform” category, such as weather forecasts, news sites, and search services. The next level comes from content and services in the “Express” and “Entertain” categories, including downloads, such as ringtones and songs, as well as mobile games. Last come transaction-based services, such as shopping, auctions, and sweepstakes sites. While some may argue that usage is an acceptable measure of value, others might insist that revenue rules, so let us shift our focus to the ﬁnancial as shown in Figure 1.8. According to the Ministry of Internal Affairs and Communications ﬁgures for 2007, total revenues generated from mobile content services in Japan exceeded ¥11.5 trillion,

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IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

Figure 1.7 Content and service usage in Japan (copyright © Mobile Marketing Data Labo, 2008).

or $107 billion. Of that, 63%, or ¥7.23 trillion, came from mobile commerce (we will call this all “Transact”); the remaining 37%, or ¥4.23 trillion, was from mobile content subscriptions and services. Those services match our “Entertain” category, and include music downloads (¥1074 billion), games (¥848 billion), e-books (¥221 billion), and fortunetelling sites (¥182 billion). Those matching our “Express” category included ringtones (¥559 billion) and screensavers (¥229 billion). Most of the “Other” category of ¥1,122 billion we can assign to our “Inform” category. To get the complete revenue picture, we need to add the nearly ¥6 trillion generated from voice calls through Japan’s top three mobile operators to our “Express”

META-MYTH NO. 4: THE JAPANESE ARE NATURALLY POLITE AND QUIET

15

Figure 1.8 Revenues by category. Source: Japanese Ministry of Internal Affairs and Communications, 2008.

category, and the ¥55.6 billion generated from mobile ads to the advertising-supported “Inform” category. Overall mobile revenues in 2007 surpassed ¥17.6 trillion. The average revenues generated monthly by each of the 100 million mobile phone subscribers exceeded ¥14,000 (or $128) across all four of our service categories. We can see from both sides of the value proposition that Japanese mobile content and service providers have succeeded in providing something of worth to consumers. Now that we have eliminated culture as the driver, Chapter 2 will explore the real reasons for such spectacular results.

Expert Insight Dr. Sachio Semmoto Founder, Chairman & CEO, EMOBILE Ltd. Founder & Chairman, eAccess Ltd. Dr. Semmoto founded eAccess Ltd in 1999. eAccess is Japan’s ﬁrst true entrepreneurial and global IP/telecom company that provides high-speed broadband telecommunication services using xDSL technology. eAccess has grown in to a leading broadband IP operator in Japan, and completed its Initial Public Offering at the Tokyo Stock Exchange Mothers in October 2003 and moved to the Tokyo Stock Exchange First Section (TSE1) in

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IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

November 2004. This is considered to be the fastest listing in the TSE1 whose market capitalization was $1.5 billion. Additionally, he founded EMOBILE Ltd., which was awarded a third-generation (3G) spectrum license in 2005 and entered into the mobile broadband market in 2007. EMOBILE completed its ﬁnancing, total US$3.5 billion, which includes $1.2 billion for equity and $2.3 billion for debt ﬁnancing, to roll out the nationwide mobile network. EMOBILE launched its data service in March 2007 and then the voice service in March 2008. Bundled with an Ultra-Mobile PC (UMPC), EMOBILE’s high-speed, ﬂat rate, and reasonable pricing mobile data communications service dramatically changed the existing mobile scene, creating a “broadband revolution” in the mobile industry. Prior to eAccess, Dr. Semmoto spent 30 years in senior management positions including Nippon Telephone & Telegraph (NTT), Kyocera, and DDI Corporation (currently “KDDI”), which he cofounded as an Executive Vice President in 1984. At NTT, he developed the ﬁrst optical ﬁber system in Japan and led the development of the Information Network System, the world’s ﬁrst digital service, which embodied the ISDN concept. He was Japan’s ofﬁcial representative to the ITU on optical ﬁber and ISDN (1974–1980). He played a major role in bringing DDI up to $5 billion in sales and U.S. $630 million in proﬁt after 7 years of operation. In 1990, he founded DDI cellular group (currently “au”) as an intrapreneur. Subsequently, in 1995 he founded DDI Pocket, a PHS company (currently “WILLCOM”), and became the ﬁrst president. In 1996, Dr. Semmoto became a full professor at the Graduate School of Business Administration, Keio University to teach in the areas of entrepreneurial management and information technology, prior to the establishment of eAccess Ltd. Although he spent most of his career in the telecommunication industry, he has also had a background of academic involvement through extensive lecturing engagements at the world’s leading universities, including Harvard, Stanford, Northwestern, Cambridge in the United States and the United Kingdom. He was a visiting professor at the Carnegie Mellon University and at the Haas School of Business at University of California Berkeley during 1992–1993 and 2000–2001, respectively, and a visiting research fellow at Stanford University in 1997. At present, he is a visiting professor at University of Canterbury in New Zealand. He is a director and the board of Reuters Founders Share Company, Telecom New Zealand, International Christian University (ICU), Tokyo, and a member of the Network of Global Agenda Councils, World Economic Forum and the Trilateral Commission. He is a Fellow of the IEEE and a member of the Royal Swedish Academy of Engineering Sciences. Also, he serves as Vice President of the Fulbright Association in Japan. He published numerous academic papers and books on both telecommunication technologies and high-technology corporate management. He graduated from Kyoto University, Japan, and received his M.S. and Ph.D. of Electrical Engineering from the University of Florida. Six Laws

Dr. Semmoto, if you could give the readers of this book insights into what you believe will be the most important issues going forward for the mobile industry, what would these be?

META-MYTH NO. 4: THE JAPANESE ARE NATURALLY POLITE AND QUIET

Dr. Semmoto

Six Laws Semmoto

17

I would have to say that above all else, government ofﬁcials together with industry executives must work to stimulate far more entrepreneurial activities in this industry. Especially because the mobile industry is strategically linked to all industries within a country or region, as well as for individual governments, it is essential that a healthy entrepreneurial spirit pervades this industry. But even if I look at Japan today, we are still lacking many things related to an open, entrepreneurial environment. For example, if you look at the spectrum allocation that the Japanese government has given to the operators, NTT DoCoMo has almost 50% spectrum, KDDI has 30%, Softbank has 15%, and new entrants only have a very small percentage. This is totally unfair. In America on the other hand, the U.S. government has implemented a cap on spectrum allocation to 30%. A model such as this is much more favorable to new entrants, as they are far more likely to have enough spectrum allocated for their use. But in Japan there really is no room for new entrants. We have arrived at this point from the accumulated results of the past. This issue alone can shape an entire mobile industry, and the companies that ultimately operate within it. If I can point out one critical weakness in Japan’s mobile industry, the one critical issue that the Japanese government must address is the development of a cap on spectrum allocation. Otherwise, there will always be one incumbent who dominates the market. This is one of the reasons why the Japanese government cannot ﬁnd the adequate solution to turn around the Japanese economy in the wake of the global ﬁnancial crisis. I think the best and only exit from our economic troubles is creative entrepreneurship. If we can spark the development of a new industry, create new businesses that can be adopted and used for the beneﬁt of many people, the mobile arena is the key industry where such things can happen. And you believe that this is one of the most important roles for government authorities to play? Yes, I think that is the most important role that a government must play. And in this respect, the Japanese government has not been very successful with its management of Information Communications Technologies, except for the case of ADSL. The ADSL was one of the exceptional success stories for Japan back in early 2000. This initiative was led by both EACCESS and Softbank’s Yahoo BB!. Together with Masayoshi Son, the founder of Softbank, we initiated a strong and open argument to compete against NTTs monopoly in broadband Internet access. These discussions opened the door for the Japanese government to create a fair environment for competition within the broadband Internet access market. From this foundation, we entered into a number of open debates and forums, which invited a wide range of stakeholders including,

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IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

Six Laws

Semmoto

of course, existing operators, new entrants, the media, and representatives from consumer groups. We were able to bring all of these people together in the same place and hold a series of discussions together with NTT. The ﬁnal results from these discussions were very favorable and very fair. This is why ADSL penetration rates in Japan in the early 2000s were so high and why costs remained so low versus nearly every other country in the world. This is also why I always encourage entrepreneurs to create new businesses and new industries. As entrepreneurs, we were able to reshape the discussions in the industry and within the government oversight bodies. Such entrepreneurial activities are a fundamental factor for a country to become increasingly successful. So I am also very happy that the new ambassador from the United States, John Roos, has a very strong background from Silicon Valley. He has been very inﬂuential in encouraging entrepreneurs in the Silicon Valley and, of course, this shows that the Obama administration strongly encourages entrepreneurship, as well as environmental responsibility.The Japanese government has to learn this approach so that our entrepreneurial efforts will keep pace with those in the rest of the world. But even with such a strong entrepreneurial spirit, the United States has been lagging far behind Japan in terms of mobile content and services. This is mostly the result of the actions taken by their former administration. Prior to the Bush Administration, when Reed Hundt— who is on the Board of Advisors for our company—was in charge of the FCC, he emphatically supported entrepreneurship within the US wireless industry. He encouraged incumbents, big corporations, and new entrepreneurs to actively discuss and develop new solutions in the US market. But as far as I know, for the past 8 years the US mobile industry, as well as the overall telecom industry, has been dead. Actually, during this period incumbents like Verizon and AT&T just barely recovered, and because attention was focused on these giants, little attention and support was given to smaller, entrepreneurially minded companies. But now I am very much looking forward to the Obama administration’s policies to encourage entrepreneurs within the US wireless industry. So to summarize, the role of governments should be to help and encourage new entrants, and not to protect the rights and positions of incumbent companies. From my perspective, the mobile industry is the key strategic industry within any country, and its health has far-reaching implications that must be carefully considered.

META-MYTH NO. 4: THE JAPANESE ARE NATURALLY POLITE AND QUIET

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Do you see any countries today whose internal efforts of managing their wireless industries may have a signiﬁcant impact on the rest of the world? I see enormous potential in both China and India. In China, companies, such as Huawei, ZTE, and many of the small start-up companies, have a very fresh and exciting spirit for entrepreneurship and innovation. But the only risk is that these companies are operating within a society that is being actively controlled by the government, including the issue of intellectual property. I actually mentioned this in front of China’s top leaders who visited Tokyo recently for the trilateral commission meetings. During our talks, I frankly and ﬂatly stated that China is a very, very promising market. But the only drawback is government control, especially as it related to the IP issue. As you can imagine, they were not very happy to hear me make these comments. And you also see signiﬁcant potential in India? India is important because they are an English speaking country. Also, their mentality is more closely aligned with the West, and they have the longest history of democracy in all of Asia. So India is also a large market with signiﬁcant growth potential, and they have far fewer issues related to the control and inﬂuence of the government. But I feel that the country with the greatest potential is China. They have a huge population and the quality of their scientiﬁc research is quickly bringing them to the forefront of global technical innovation. For example, we are the ﬁrst Japanese telecom operator to decide to work with Chinese rather than Japanese technology for our base stations. We are working closely with Huawei, and when we ﬁrst announced that we would be using their technology, everyone was shocked and surprised by our decision. They actually hated that we had chosen a Chinese high-tech product, and looked down on us for making this decision. They just could not believe that in the Japanese market a Chinese company could create a competitive technology in such a critical strategic sector, the mobile industry. But now, Huawei has established itself as the number two player in the world, second maybe only to Ericsson. And if China can continue to operate in a very fair, open, and transparent manner while continuing to invest so heavily in research and development, China has the potential to become the world’s technology leader in the years to come. If we focus on the fundamental issue of innovation either here in Japan, China, India, or any other market in the world, what do you believe is the most critical factor that will stand in the way of the success of these innovations going forward?

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IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

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If we look at the mobile industry from the perspective of the consumer, clearly the most important issue will be price. As the price decreases, usage of wireless content and services increases. If I look at the EMOBILE pricing plans, even though we are offering a very competitive price versus the competition, I still believe that our price point is too high. Even though we are offering unlimited mobile data service plans, other companies are choosing to implement technical restrictions that cannot truly be classiﬁed as unlimited use. This is only addressing the issue of mobile data usage. If we focus on voice as well, then there is still a great deal to be done in terms of connection charges between carriers. It is very easy for us to introduce unlimited voice calls within our own network, but it is still impossible for us to even consider unlimited voice calls outside of our network because of the interconnection charges. This issue applies internationally as well. While each country has their own pricing models or policies, there is deﬁnitely room to further decrease mobile data and voice charges globally. As prices decrease, there will again be more opportunities for innovation as consumers will be willing to spend more time using wireless technologies and services. But even if prices decline signiﬁcantly, one thing that we believe is vital for the mobile platform is a clean, simple and intuitive user interface. Yes, this is a very natural way of looking at the mobile industry. But from our standpoint, we are focusing our efforts on further expanding our network and infrastructure. For companies such as NTT DoCoMo and KDDI, they have already introduced easy-touse handsets that are optimized for the elderly. While these phones may have been developed with a focus on what you call Simplexity, we are purchasing our handsets from Taiwan. And since these are developed to a global speciﬁcation, it is not possible for us to currently focus on developing phones that are unique for the Japanese market. Actually, we would like to have the time and energy to focus on this point, as customers do sometimes complain that the handsets are too complex. But something that may go against your argument for Simplexity is our experience with simpliﬁed pricing. Initially, when we launched our services, we introduced only one unlimited plan for our data service. We offered only one price, and in line with your theory, we felt that consumers would prefer this simpliﬁed approach to pricing. But at the same time as we were offering this simple pricing plan, our competitors had developed what is called Double Teigaku, or a two-tiered pricing scheme. They offered an extremely low Tier 1, or price ﬂoor, in order to lower the barriers that consumers might

META-MYTH NO. 4: THE JAPANESE ARE NATURALLY POLITE AND QUIET

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feel in shifting to a ﬂat-rate pricing plan. As customers use these network services more, their monthly prices increase until they reach the Tier 2 price ceiling for their unlimited usage plan. Consumers preferred this type of pricing model, and because of this, we also have begun offering these more complicated pricing plans. From a consumer behavior standpoint, I deﬁnitely can understand why consumers have reacted in this way. But as they adopt unlimited pricing plans, as you have already stated, their usage of wireless content and services will increase. Is EMOBILE focusing on developing an ecosystem similar to those that other operators in Japan have built? Fundamentally at this point in time, EMOBILE is an infrastructure company. We still consider ourselves to be a venture start-up business, and because we are still at the very early stages of our development, it is critical for us to remain focused. Our current focus is almost exclusively on infrastructure. Where we are seeing the greatest opportunity at this point is actually helping people to switch from their ﬁxed-line telephones to our wireless phone services instead. As your research has shown, most mobile phone usage is from ﬁxed locations, so it is very easy to use a mobile device as a ﬁxed line phone. This is where we see a legitimate growth opportunity for our business. As we continue to focus on building our infrastructure, we are doing so with the idea of modularity in mind. By doing so, we have built the capability to integrate different modules for content or service solutions that other companies develop into our network. As we develop new partnerships, we must be able to take the broader view of how to best develop the entire ecosystem. Is this a business model that entrepreneurs in other markets around the world could also implement? I think it is possible and it is an interesting model, but in most cases entrepreneurs focus on new mobile businesses from the service side not the network side. It is actually much easier to enter the market from the service side, because from the infrastructure side you must have access to a great deal of money. An infrastructure business is a huge investment, and it is therefore very hard for a startup to enter from the infrastructure side of the equation. A more traditional model that I see is that the entrepreneur will develop a service business that appeals to a wide audience. At this point it is then possible for that business owner to invest in the infrastructure side of the business. It is actually a very rare case for a venture business to start from the infrastructure side.

CHAPTER 2

IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

While we hope you agree that speciﬁc cultural factors have not led to Japan’s mobile success, some very strange results remain on the table for us to consider. Example: At the end of 2007, Japan’s 100 million mobile phone subscribers represented less than 3% of the world’s mobile phone subscriber population, yet 33% (or 82.3 million) of the world’s approximately 250 million third-generation (3G) mobile phone subscribers were in Japan (see Fig. 2.1). The Japanese market is far more advanced in terms of the network capabilities and types of content and services its mobile subscribers enjoy.

Figure 2.1

Japan accounts for a third of the broadband market.

The Six Immutable Laws of Mobile Business, by Philip Sugai, Marco Koeder, and Ludovico Ciferri Copyright © 2010 John Wiley & Sons, Inc.

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23

The differences do not stop there. Examining the revenues generated from advanced data services, such as text messaging and mobile Internet content use, we ﬁnd that while total global revenues from mobile data stood at $120 billion in 2007, Japanese mobile subscribers contributed $23.2 billion (~19%, Fig. 2.2). Maybe you think short message services (SMS) messaging is too “2.5G” to be considered for advanced mobile data use. Remove the revenues derived from sending SMS or text messages, however, and you will still ﬁnd that Japanese mobile consumers contributed approximately $3.6 billion, or 36% of the world’s $10 billion in nontext-related mobile data revenues, as shown in Fig. 2.3. These numbers tell us that something is amiss when we compare the Japanese mobile market with other markets. How can <3% of the world’s mobile subscribers account for 33% of all broadband wireless users, 19% of all data revenues, and 36% of all advanced data revenues? If these differences cannot be attributed to Japanese consumers, they must be the result of something unique to Japan.

Figure 2.2

Japanese mobile subscribers supply a disproportionate slice of revenues.

Figure 2.3

Revenue from advanced mobile data use shows an even greater disparity.

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IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

As we have shown in Chapter 1, the culture of Japan itself is not responsible for such differences. Perhaps the reasons exist in the underlying technologies applied to the Japanese market. The next step is to investigate the differences between mobile technologies in Japan and the rest of the world. We decided to look at the three most important wireless communications technologies launched commercially after the ﬁrst 1G (ﬁrst generation) Nordic Mobile Telephony mobile service introductions in 1981 in Saudi Arabia, Sweden and Norway (Groupe Speciale Mobile, GSM, CDMA, and PDC).

A BRIEF HISTORY OF GSM The GSM story starts in 1982, when the Confederation of European Posts and Telecommunications (CEPT) formed the GSM to design a Pan-European mobile technology. The European Commission endorsed the GSM Project in 1984. One year later, France, Italy, the United Kingdom, and West Germany signed a joint agreement to develop GSM. Early 1987 brought an agreement on the basic parameters of the GSM standard, and the GSM Memorandum of Understanding (MoU) was promoted. A total of 15 members from 13 countries committed to deploying GSM through the Pan-European Digital Conference. Validation trials in 1988 proved that GSM technology was viable, and in 1989 the GSM became a technical committee within the European Technical Standards Institute (ETSI), which helped to deﬁne GSM as an internationally accepted digital cellular telephony standard. Network operator Radiolinja in Finland placed the ﬁrst GSM call in 1991. The following year, Telstra Australia became the ﬁrst non-European operator to sign the GSM MoU, and Telecom Finland and Vodafone (UK) signed the ﬁrst international roaming agreement. During the same year, the ﬁrst SMS using GSM was sent. By 1993, 32 networks were using GSM in 18 different countries or territories, and the ﬁrst true hand terminals meeting the standard were launched commercially. By 1994, there were more than 100 GSM operators and 1 million subscribers around the world. Within a year those ﬁgures rose to 117 networks and 10 million unique users. By 1996, the ﬁrst GSM networks were deployed in Russia and China, while prepaid GSM SIM cards appeared in Italy. During this same year, 167 networks were ofﬁcially using GSM in 94 countries and GSM had 50 million subscribers. In 1997, the United States alone had 15 GSM networks, and by 1998 there were over 100 million GSM subscribers globally. In 1999, GSM gained another layer, called the Wireless Application Protocol (WAP). This protocol was viewed as the advanced data companion to GSM and other wireless technologies. Wireless Application Protocol trials began in France and Italy the same year, and next-generation (2.5G) GPRS systems were deployed for the ﬁrst time. In February 1999, Nippon Telegraph and Telephone Corporation DoCoMo (DoCoMo stands for “Do Communications Over the Mobile Network”, and the word dokomo also means “everywhere” in Japanese.) (NTT DoCoMo launched its i-mode mobile Internet service in Japan.

A BRIEF HISTORY OF PDC

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A BRIEF HISTORY OF CDMA The second technology standard to consider is CDMA, which stands for Code Division Multiplex Access. When the world’s ﬁrst cellular networks were introduced using analog radio transmission technologies, such as Advanced Mobile Phone System (AMPS) in the early 1980s, it became clear that a higher level of network capacity required accommodating more user trafﬁc within a tighter radio spectrum. To accomplish that, the industry developed a new set of digital wireless technologies—Time Division Multiple Access (TDMA) and Global System for Mobile—that used a time-sharing protocol. In essence, these technologies allocated milliseconds of time to all users accessing the wireless network. The move to digital network access, though, made segmenting network usage by code rather than time feasible. Under CDMA, all mobile network users received a unique code that allowed them to access the network continuously rather than intermittent, timed access. But CDMAs road was not a simple one. In fact, a panel of the world’s leading engineers reportedly met in Japan in the early 1990s to discuss the development of wireless CDMA technology as a standard. They concluded, however, that it was impossible. To the founders of Qualcomm, however, “impossible” simply meant that several thorny technical issues needed to be overcome. With unstoppable entrepreneurial spirit, Qualcomm’s team solved them all, establishing CDMA as a legitimate wireless communications standard (and patenting it to ensure their ownership). Launched commercially in 1995, the ﬁrst CDMA networks provided roughly 10 times more capacity than analog networks, and far more than TDMA or GSM. Besides supporting more trafﬁc, CDMA brought mobile carriers and consumers better voice quality, broader coverage and stronger security, among other beneﬁts. Now, CDMA has over 100 million subscribers worldwide.

A BRIEF HISTORY OF PDC While GSM and CDMA gained massive popularity, Japan bypassed them for a homegrown technology developed by NTT DoCoMo. The NTT corporation created NTT DoCoMo in August 1991 to take over the company’s mobile cellular operations. In July 1992, NTT DoCoMo became an independent company and was listed on the Tokyo Stock Exchange. To some extent, NTT DoCoMos history is the history of mobile communications in Japan. The company launched Japan’s ﬁrst analog cellular phone service in 1992 and its ﬁrst digital cellular phone service in March 1993. The latter was based on a 2G mobile phone standard NTT DoCoMo developed called Personal Digital Cellular (PDC), which was used exclusively in Japan. The PDC (like its main rival, GSM) used TDMA. Personal Digital Cellular became an ofﬁcial telecommunications standard in April 1991. The relatively weak broadcast strength of PDC fostered the development of small, portable phones with light batteries, although this came at the expense of voice quality and problems maintaining call connections.

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In March 1997, NTT DoCoMo launched Japan’s ﬁrst packet data communications service. In February 1999, the company introduced its 2.5G i-mode, the ﬁrst such service with national coverage. Similar to GSM, the adoption of PDC (and more speciﬁcally i-mode services) were a spectacular success. By August 1999, i-mode had already attracted 1 million subscribers, tripling that number by December of the same year, and more than 15 million by December 2000. At the end of 2000, there were 50 million PDC subscribers in Japan. Approximately 24 million of them were advanced data subscribers using mobile data services, such as i-mode or its competitors EZ Web from KDD and J-Sky from J-Phone. By May 2001, i-mode alone had more than 23 million subscribers. But DoCoMo, looking to integrate more robust data content into its network, knew PDC could not evolve into a wireless broadband service. In May 2001, with i-mode subscriptions still climbing, DoCoMo launched the world’s ﬁrst commercial 3G wireless broadband service in Japan, called FOMA, which stood for “Freedom of Mobility Access”. This broad band service was a clear departure, not a next-generation PDC technology, but a homegrown breed of CDMA technology called W-CDMA (for wideband CDMA), its launch was a clear sign that the future of wireless technology was code division based. In September 2003, after achieving a peak of more than 62 million subscribers for PDC services in Japan, the Japanese mobile market embraced next-generation technologies based on CDMA technology.

IS TECHNOLOGY THE REASON? Despite launching a completely different underlying technology (PDC) for mobile network connectivity, Japan was adopting mobile phones in 1999 at a rate similar to other countries. Hong Kong, Taiwan, Iceland, Austria, Italy, The United Kingdom, Finland, Sweden, and Norway achieved penetration rates of over 70%, in fact, while Japan only reached 50%. It would be hard to conclude that PDC technology was responsible for Japan’s differences in mobile Internet use. However, the differences between the Japanese market and the others outlined above were based on advanced data usage, not general mobile adoption trends. Since we are lucky enough to have a technical standard (WAP) that was developed purely for mobile data usage and applied both in Japan and globally, perhaps it will supply our answer.

A WAP PRIMER A global consortium of companies that included Motorola, Nokia, Ericsson, and Phone.com created WAP. The consortium morphed into a formal membership organization that at its high point boasted over 100 members, including virtually all the major names in the industry. The organization conﬁgured the WAP protocol to allow any operator to integrate advanced mobile data content into their network of service offerings. The protocol gave manufacturers, content developers, and other players in the mobile industry

A WAP PRIMER

27

the ability to create a platform for advanced mobile data use. According to the WAP Forum (renamed the Open Mobile Alliance in 2002): WAP is a worldwide standard that empowers mobile phone users to easily access Internet portals rich with information and services—in effect creating a ‘mobile adapted Internet’. A press release from CNN and Nokia at the time of the launch (Fig. 2.4) shows how much hope and hype surrounded WAP.

CNN Interactive and Nokia Join Forces to Develop CNN Mobile, 24-Hour News Service for Digital Mobile Phones

HELSINKI, Finland — (BUSINESS WIRE)--February 23, 1999-CNN Interactive today launched CNN Mobile, the first mobile telephone news and information service to be available globally with pan-regional content. CNN Interactive worked closely with Nokia to develop the platform for CNN Mobile. The service, which is initially targeted at GSM mobile phone customers in Europe and Asia/Pacific, is the latest way that consumers can access CNN while they are on the go and at any time they choose. CNN Mobile is the world's first global value-added service to be built on the Wireless Application Protocol. CNN Interactive commercially licenses and markets CNN Mobile.

"We are living in an active world, and now through CNN Mobile, CNN will offer mobile phone customers the news they want, whenever they want it, from the company they trust," said Mark Bernstein, general manager of CNN Interactive and senior vice president, CNN. "Our close cooperation with Nokia, the market leader in the wireless world, has allowed CNN to develop a comprehensive news service that not only takes advantage of the existing technologies, but also will have an evolutionary path due to the latest developments in mobile phone technology." ….

Figure 2.4 Selling WAP.

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IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

…. CNN Mobile's content is optimized for SMS delivery and supports the Smart Messaging concept developed by Nokia, which today is used by several GSM operators. CNN Mobile also is Wireless Application Protocol (WAP) compliant, and the use of WAP technology will allow CNN interactive to develop multimedia content to be delivered to the screens of WAP mobile phone devices. WAP is an open and global standard, which is optimized to deliver value-added services to digital mobile phones via wireless networks. The CNN Mobile service is independent of mobile phone manufacturer, gateway server manufacturer or network provider.”

Figure 2.4

(Continued)

The consumer and media response to WAP was anything but positive, however, as two subsequent articles from ZDNet and The Register show (see Fig. 2.5 and 2.6): The feedback was clear, but the frustrations expressed were misplaced. Many Japanese companies were WAP Forum members, and while the Western media was proclaiming it a horrible failure, WAP became the backbone for some breakaway successes in Japan’s advanced mobile data space. In fact, WAP worked in Japan right from the start. The two main competitors of DoCoMo integrated WAP directly into the fabric of their offerings. The KDDIs EZ Web data content service, which competed directly with DoCoMos i-mode, was built on WAP, and Japan Telecom’s “J-Sky” service had integrated WAP into its most popular photo-sharing mail service, called “Sha-Mail”. Sha-Mail was considered one of the most innovative, advanced mobile data services yet launched, with millions of Japanese youth scurrying to snap postage stamp-sized photos of themselves to send over the mobile network to friends. As of June 2000, when the ZD Net article quoted above appeared, EZ Web had over 2 million subscribers, and J-Phone had 3 million. By May of 2001, when WAP was still “crap” according to the United Kingdom’s Register, their combined total was close to 14 million subscribers, many using WAP. The newly formed KDDI deemed PDC inferior to CDMA and quickly adopted the latter. The PDC was slated for extinction anyway as Japan switched from 2.5G to 3G services. If PDC were behind Japan’s advanced mobile data successes, surely it would have received more favorable treatment inside Japan and more respect globally. However, this was not the case.

THE VALUE SYSTEM VERSUS THE ECOSYSTEM

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One wireless viewpoint: “WAP is crap” By Nicole Manktelow Source: ZDNet

Too-high prices, a lack of applications and carrier-imposed content restrictions will prevent WAP -- touted as the mobile market's next big thing -- from being more than a "toy" in Australia.

Most WAP (wireless application protocol) users can only view the content prescribed by their carrier. And at an average cost of 20 cents per minute, there's little reason to keep them interested, according to telecommunications industry analyst Paul Budde.

"WAP is crap -- there are a lot of problems in the area. It is a toy for companies to learn about. So far, none of the applications are compelling," Budde told ZDNet Australia. Budde said his prognosis is not surprising, because “in Germany and the UK, WAP has flopped. It is seen as a dead duck”.

Figure 2.5 This posting on ZDNet detailed several WAP shortcomings.

So if cultural differences and the underlying technology do not explain why Japan has embraced mobile data so rapidly and widely, what does? Moreover, what law can be derived from the answer to apply to the rest of the world’s mobile initiatives? Our answer is encompassed in one word: ecosystem. THE VALUE SYSTEM VERSUS THE ECOSYSTEM To understand why we believe Japan’s mobile ecosystem is the answer, we must look at the organizational structure of the nation’s mobile industry.

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IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

WAP is still crap No one's using it, and can you blame them? By Kieren McCarthy Source:The Register, May 24, 2001

Even the foolish people who have bought WAP phones hardly ever use the WAP features, according a Meta Group survey.

Apparently, 80 to 90 per cent of WAP phone owners only ever use the phone for voice calls. Why? Because the few services which do exist for WAP phones are difficult to use, taken ages to work through and are generally more trouble than they're worth.

The Meta Group says "limited content, slow networks, high latency times, and generally poor user ergonomics have not met the high user expectations and hype that accompanied WAP-enabled devices when they were first introduced". Basically: it doesn't live up to the hype.

WAP will not get anywhere either until, well, until it's any good, Meta says.

Figure 2.6

The media pulled no punches in its WAP evaluation.

Let us start with Harvard Business School professor Michael Porter’s concept of competition. According to Porter, who originated the term “value chain”, ﬁrms compete within a value system linked to a speciﬁc product or service offering. Porter says the value chain applies only inside a company, whereas the value system applies to the overall industry. Porter adds: “The value chain disaggregates a ﬁrm into its strategically relevant activities in order to understand the behavior of costs and the existing and potential sources of differentiation”. This value chain is “embedded” within a larger stream of activities that Porter calls the industry’s overall “value system”.

PLAYER CATEGORY 1: NETWORK OPERATORS

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The Value Chain

Human Resources / Infrastructure

rgi Ma

Secondary Activities

Technology Development

n

Procurement

Service

in

Marketing & Sales

Ma rg

Inbound Operations Outbound Logistics Logistics

Primary Activities

The Value System

Supplier Value Chains

Firm Value Chain

Channel & Buyer Value Chains

Source: Porter (1995)

Figure 2.7 Michael Porter’s value chain and value system.

As Figure 2.7 shows, this value system includes all participants within the overall operating framework of an industry. This is typically the way industry structures and business models are outlined. Depending on how you view the mobile industry, there are basically eight categories of players in the value system: network operators, infrastructure providers, handset manufacturers, middleware providers, software providers, content providers, service providers, and the end-users or customers of mobile communications services (see Figure 2.8).

PLAYER CATEGORY 1: NETWORK OPERATORS Network operators can be deﬁned as companies that offer branded mobile services to the end consumer, including voice and data service packages. While there are many types of network operators, from mobile virtual network operators such as Virgin Mobile and Disney Mobile in Japan to more traditional operators such as SingTel, NTT DoCoMo and AT&T, network operator primarily provide network connectivity to subscribers.

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IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

Infrastructure Providers Handset Manufacturers

Consumers

The Key Players Within the Mobile Value System

Network Operators

Figure 2.8

Middleware Providers Application Developers Service Providers

Content Providers

The eight players in the wireless value system.

PLAYER CATEGORY 2: INFRASTRUCTURE PROVIDERS These companies provide the basic building blocks of network operation to the wireless networks. Traditionally global in scale, they include such names as Motorola, Nokia, Siemens Networks, and Huawei. They provide base stations, servers, and subsystems to ensure seamless wireless connectivity for their customers. PLAYER CATEGORY 3: HANDSET MANUFACTURERS These companies manufacture and/or distribute branded mobile phones or handsets for speciﬁc operator networks. They may distribute directly to customers or sell to resellers or network operators. PLAYER CATEGORY 4: MIDDLEWARE PROVIDERS Middleware providers supply intermediary services linking the back-end databases and mobile devices that enable a seamless user experience irrespective of the device. Their services include security systems and sales force automation solutions. PLAYER CATEGORY 5: APPLICATION DEVELOPERS This category includes a wide range of companies developing and selling speciﬁc software applications—anything from QR code readers to advanced scheduling software—to network operators and handset manufacturers. PLAYER CATEGORY 6: CONTENT PROVIDERS These folks create content for end users, including everything from music clips and games to more sophisticated content like mobile-phone novels and cartoons.

THE WAR FOR SCARCE RESOURCES

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PLAYER CATEGORY 7: SERVICE PROVIDERS While content is king, the services that distribute it are also vitally important. The two typically go hand-in-hand, such as navigation software and social networking services, but they are not always directly related. Service providers can also offer services directly to other members in the value system. For example, a targeted advertising service sold to network operators lowers access costs or subscription fees to end users, even though the end users never directly subscribe to the advertising service.

PLAYER CATEGORY 8: CONSUMERS Consumers are arguably the most crucial element of this value system because they represent the ultimate target for offerings from all the other players. Although the end users may not directly pay the above players, they ultimately drive industry revenues by subscribing to network services and purchasing handsets. Each of these players is essential to the health and robustness of the overall mobile industry. For Japan, however, the most important relationships include only ﬁve players: network operators, handset manufacturers, content providers, service providers, and customers. While application developers, infrastructure providers and middleware providers are also important, relationships between these B2B players appear to be similar globally, so they shed little light on the dynamic differences between Japan’s mobile industry structure and those in other markets.

THE WAR FOR SCARCE RESOURCES Harvard’s Porter introduced the concept of a value system to help explain the dynamics of competition between companies. His early work mostly focused on how companies gain a competitive advantage within an industry or market. His analyses traced that advantage to a ﬁrm’s ability to capture scarce resources within a speciﬁc industry and in the process preventing competitors from obtaining them. In the mobile industry bandwidth is a scarce resource, and companies spend major sums to acquire the rights to spectrum licenses. Other scarce commodities include consumer loyalty, consumer preferences, and external inﬂuences (e.g., my friends all subscribe to AT&T, so I will too). In markets outside Japan, players compete head to head within their speciﬁc segment (e.g., operators compete with other operators), and also vie against companies in other segments for these scarce resources to derive maximum revenue and proﬁts for themselves and key stakeholders. To understand the dynamics of this competition, we need to dive into industrial economics. Researchers classify industry structures by how difﬁcult it is for a business to enter or exit. When a business holds a monopoly, for example, the barriers to market entry are so daunting that potential competitors are unwilling or unable to enter the fray. In such a model, the seller has tremendous power and the buyers virtually none.

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The other extreme is known as “perfect competition”, in which many businesses selling essentially the same products compete for market share. Buyers hold incredible power in this scenario and sellers depend almost entirely on the mechanism of price to gain business. Most industries fall between monopolies and perfect competition. The mobile industry, however, throws up extremely high entry barriers to both network operators and handset manufacturers. Network operators, for example, must bid vast amounts for spectrum or obtain spectrum licenses from the government. They also have to invest heavily in infrastructure development and maintenance. Because of these and other factors, most mobile markets have just a handful of network operators competing for subscribers. When only a few sellers exist in a market with many buyers, you have an oligopoly. The entry barriers have a number of effects on how network operators do business. They can charge higher prices because competitors are few. While these prices may be regulated, the network operators can exert strong pressure to keep them high for as long as possible to get a return on their initial investment. When other competitors are present, operators have to inspire consumer loyalty. The longer a customer remains loyal, the more proﬁtable the ﬁrm will be, because obtaining new customers is much more expensive than retaining the old ones. In the mobile industry, strategies for sparking consumer loyalty typically involve offering better handsets, value, service, and support. To prevent consumers from jumping to another operator, they also make switching less attractive by creating attractive e-mail addresses, offering pricing plans that revolve around friends and family, or assigning phone numbers that are not transferable. Handset manufacturers also face imposing market entry barriers, both for making handsets and to entering the mobile markets to sell them. These barriers have limited the ﬁeld in the handset manufacturing industry to a handful of global players, creating a second mobile industry oligopoly. Handset manufacturers typically do not receive additional revenues from their handsets after the sale. Their ability to compete depends on the number of networks that sell their handsets, total sales volume, and whether consumers faithfully upgrade to the manufacturer’s next hot model. The other members of the mobile value system do not face explicit barriers to entry. Content and service providers are relatively free to enter a mobile market and compete for revenues. However, there is a catch. Handset speciﬁcations vary, so to enable use on multiple handsets—even those from the same manufacturer—requires regular communications between the developers and the handset manufacturers. Handset manufacturers therefore hold a more powerful position than content and service providers in the mobile value system. How users access content and services also falls into the realm of the network operator. If consumers have to use the mobile network to subscribe to a speciﬁc service, download content, or perform some other action, these players must communicate directly with the network operator to promote, distribute, and arrange compensation for the sales of their products or services.

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Application Developers

Consumers Service Providers

Handset Manufacturers Network Operators

Middleware Providers Content Providers

Infrastructure Providers

Figure 2.9 The traditional wireless value system.

This ﬁnding has led to complaints by content and service providers. They claim it is impossible to standardize their offerings because models and maker speciﬁcations vary so drastically. They also say operators have a stranglehold on revenues, making it commercially unfeasible to create proﬁtable mobile solutions for consumers. Within traditional mobile markets, then as shown in Figure 2.9, network operators and handset manufacturers hold the keys to the industry, and that appears to come at the expense of a ﬂourishing content and service market outside of Japan. Additionally, operators and handset makers compete with one another to “own” the customer. But is a Nokia customer using the AT&T network more loyal to AT&T or Nokia? In the world of SIM based services and unlocked phones, the handset manufacturer is typically more powerful than the network operator.

TEAMWORK AND QUALITY Within Japan’s mobile arena, one of NTT DoCoMos key visionaries and strategists behind the launch of i-mode, Takeshi Natsuno, did not use Porter’s value system concept in explaining Japan’s mobile market. Instead, he chose the term “ecosystem” to describe DoCoMos approach to creating successful advanced mobile data solutions in Japan. To understand this difference, we ﬁrst need to know the ecosystem concept. According to PBSs Bill Moyers and his 2000–2001 special reports entitled “Earth on the Edge”, ecosystems are deﬁned as “communities of interacting organisms and the physical environment in which they live”. Within an ecosystem, the roles of the various members remain in collaborative balance. If its resources are overextended, the entire ecosystem can (and usually will) collapse. While analysts and company executives in other markets have tried calling their own value systems “ecosystems”, there are fundamental differences in the Japanese market that have made it unique and worthy of the title. Within the European wireless

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markets, the handset manufacturers form the nucleus. Network providers have challenged that role, but had limited success because of their lack of relative size. The United Kingdoms largest wireless carrier, Vodafone, is an exception, dealing on nearly equal terms with handset manufacturers like Nokia. In Japan, the network operators are the nucleus of the Japanese wireless industry. In fact, they are considered “benevolent dictators”: They dictate speciﬁcations to handset manufacturers in return for endorsing these speciﬁcations. On average, network operators have agreed to subsidize up to 50% of the R&D costs required to develop these phones. Network operators also guarantee to purchase phones directly from manufacturers, and bear all of the costs associated with sales and distribution. The operator’s role as benevolent dictator also extends to content and service providers. In DoCoMos compelling business model, it keeps just 9% of subscription revenues, passing 91% to these companies. That revenue-sharing model is unheard of outside of Japan. In fact, the percentage held by mobile carriers abroad typically runs from 50 to 60% at the highest to single digits at the lowest. While many might consider such a high level of revenue sharing outrageous, DoCoMo and other operators understood that the bulk of their revenues would come from packet fees generated during mobile Internet content use in which one packet is 8 kilobits of data. They share 0% of those fees with the content and service providers who drive usage. Both DoCoMo and its industry peers saw that the mobile Internet would ﬂourish only if the right content and services were developed and deployed in a way that Japanese consumers could easily understand and adopt. Rather than attempting to create content themselves, they had the courage and vision (or restraint) to leave that to the experts. Operators spent their time making sure the whole system functioned effectively (Figure 2.10). Operators also knew that in addition to guarding their walled gardens of approved subscription content, they needed to promote the development of off-network, “unofﬁcial”

Infrastructure Providers Application Developers

Handset Manufacturers Network Operators

Middleware Providers

Consumers

Service Providers

Figure 2.10

Content Providers

Relationships in the wireless ecosystem revolve around the network operators.

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content and services. All i-mode phones can therefore access URLs for unofﬁcial sites, even when full browsing at the time was still outrageously expensive and technically ﬂawed. That gave any mobile-savvy entrepreneur with valuable, compelling content or services for Japanese mobile subscribers a path to instant visibility, and the possibility for massive revenues. However, unofﬁcial content providers received none of the perks that came with ofﬁcial walled-garden status (e.g., as automatic payment processing, advertising, and promotional services), where DoCoMo still collected packet fees on all of the content sites its mobile consumers accessed. So while Japanese culture may not have created unique consumer needs or behaviors in the Japanese mobile market, it may have given rise to the idea of a wireless ecosystem. As many cultural researchers have said, Japan’s culture still values the group over the individual. For example, in a March 2008 article for one of Japan’s leading newspapers, the Nikkei Weekly, columnist Michael Zielenziger reported “A signiﬁcant body of contemporary research in social psychology tells us that whereas Westerners most often ﬁnd happiness in empowering the individual self, Japanese report they tend to be most happy when ﬁnding ways to express their interdependence, their need to act together with others. Ingratiating oneself, or doing favors for others, is one of the most important ways Japanese ﬁnd to express their sense of well-being. Likewise, Japanese enjoy coordinating collective experiences and are less likely than Westerners to venture off on their own in search of solitary pleasure.”

Teamwork is at the heart of the Japanese model. All members of the ecosystem are members of the larger team, and their overriding goal is ensuring the health of the entire ecosystem. The network operator is the team leader, setting speciﬁcations and detailing how the ecosystem will function and ﬂourish. According to Takeshi Natsuno, one of the true visionaries in the development and evolution of i-mode: “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.”

One reason for the successful deployment of i-mode, WAP and the mobile Internet was the underlying agreement and collaboration between all members of the value system to make it work. On top of that, there would be a benevolent yet galvanizing force—NTT DoCoMo and the other operators—concerned with the ecosystem’s overall health. A second, related part of this equation can be linked to the concept of kaizen or ongoing improvement, in which the goal of ultimate quality is constantly sought, but never attained. In his best-selling book entitled Kaizen, the Key to Japan’s

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Competitive Success, world-renowned author Masaaki Imai stated that the most important concept in Japanese management strategy, was in fact the dedication to constant improvement. This dedication to a “process-oriented” way of thinking differed signiﬁcantly from the management thinking of the West. The WAP, i-mode, and the mobile Internet itself all worked in Japan from the start. They were launched from a position of high quality, and through constant improvement have become increasingly useful and valuable to Japanese consumers. The WAP was slow and cumbersome outside Japan. From the Japanese perspective, such an approach to mobile content delivery would have been unacceptable. While network operators abroad touted WAP as “the Internet in your pocket”, that claim was never made in Japan. Experiencing the Internet on a mobile phone does not compare to surﬁng on your PC. Wireless Application Protocol just offered practical, valuable new capabilities that people could use to better their lives. The mobile Internet has ﬂourished in Japan because it arose in a cooperative environment. Most other markets have evolved through regular and heated competition among all the players in the system. We are not saying that is wrong, or that the Japanese model is perfect. However, Japan did create the right environmental cocoon to ensure the widespread adoption and use of advanced mobile data services and solutions. THE COSTS Japan’s mobile market successes have had some signiﬁcant consequences, however. The NTT DoCoMo made several high-proﬁle investments in mobile network operators overseas in an attempt to replicate its domestic successes. With the possible exception of France’s Bouygues Telecom, all have failed. These results support our case. The ecosystem was designed for Japan. Without a similar environment supporting it abroad, the system was bound to fail. A second and perhaps more disturbing consequence of the domestic success of the wireless ecosystem model has been the disappointing failures of all of the Japanese handset manufacturers outside of Japan. While Panasonic, NEC, and Sharp regularly outperform their domestic rivals, Japanese handset manufacturers collectively hold under 5% of the global market. Why is this? Basically, Japanese handset manufacturers have abdicated their decision-making authority to Japan’s network operators. Unlike their foreign competitors, who viciously compete for business in world markets, Japanese manufacturers have built their manufacturing capabilities around this relationship, letting DoCoMo and other operators dictate speciﬁcations for future handsets. Domestic operators heavily subsidize the handsets they develop for the Japanese market; selling the same handsets in the global market on a straight-up cost basis is next to impossible. TWO-WAY FAILURES The failure is not unidirectional, either, with Nokia and Vodafone providing two high-proﬁle examples. Although Nokia remains the dominant handset manufacturer

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globally, it would have to radically alter its business practices to thrive within the Japanese ecosystem model. So far, that has not been considered proﬁtable enough based on the relatively small size of the Japanese market. Nokia has chosen to keep a low market proﬁle here rather than develop a special manufacturing process that meets the speciﬁcations of Japanese network operators. Vodafone arguably suffered the most embarrassing fate with its rationalized, global strategy for entering Japan’s mobile ecosystem. As proof that it was the management approach to the Japanese market rather than the technology or cultural uniqueness of Japanese consumers, after Softbank acquired Vodafone’s mobile network assets in Japan it became the fastest-growing network operator. It outpacing both rivals in new subscriber acquisitions for 12 consecutive months between 2007 and 2008. These realities led many to consider the Japanese market unique, similar to the Galapagos Islands, with local innovation and developments that do not and cannot translate out to the rest of the world. Our job is to disprove that, and to show that Japan offers a number of immutable lessons that will shape the future of the world’s mobile industries. To use this discussion as the foundation for presenting our second immutable law, let us take a look at Google’s Android. GOOGLE ANDROID’S ECOSYSTEM There was a great deal of hype and cynicism surrounding Google’s November 2007 announcement of Android and the Open Handset Alliance. At the most fundamental level, however, Google’s model aimed to replicate the Japanese wireless ecosystem concept within the realities of global mobile markets. Therefore we will discuss it here, even at the risk that Android will fail before you read this book. The Open Handset Alliance (OHA) is a strategic partnership among 34 leading companies in mobile communications technology, content, and services. The alliance focus was the development of Android, which according to Google cofounder Sergey Brin is “a new open-source operating system and software platform for mobile phones”. Actually, Android was ﬁrst a mobile-focused business, cofounded by Andy Rubin and acquired by Google in 2005 shortly after it purchased mobile SNS service Dodgeball. Google’s vision for Android and the OHA appears quite simple. With billions of mobile phone subscribers worldwide, and indications that global penetration will continue rapidly over the coming years, the opportunities related to contextual search (including location, time, and information interest) will grow exponentially. Google’s revenue opportunities from targeted mobile ads are obvious. The need to develop innovative, compelling mobile content and services that create “sticky” mobile experiences suitable for ad placement is clear, and was reﬂected in Google CEO Eric Schmidt’s announcement of the Android platform: “This partnership will help unleash the potential of mobile technology for billions of users around the world. A fresh approach to fostering innovation in the mobile industry will help shape a new computing environment that will change the way people access

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and share information in the future. Today’s announcement is more ambitious than any single ‘Google Phone’ that the press has been speculating about over the past few weeks. Our vision is that the powerful platform we’re unveiling will power thousands of different phone models.” —Eric Schmidt, Chairman and CEO, Google, November 5, 2007

If the success of Google’s mobile search efforts rely upon a robust and fully functioning mobile value system, then the reasons behind Google’s 2005 acquisition of Android and 2007 announcement of the Open Handset Alliance are clear. Robust Mobile Internet ⫽ Robust Mobile Ad Revenues

Within this framework, how could Google succeed in selling mobile ads? As stated publicly at the Android launch, they clearly believe they can only accomplish this goal through the development of a new and highly functional ecosystem. Learning from NTT DoCoMos failures, they have not attempted to replicate the Japanese wireless ecosystem model in the United States and other markets; instead, they have focused on establishing the same spirit behind this ecosystem model internationally. To do so, they formed the OHA, which places Android in the central role (Figure 2.11) to create a common framework within which all industry players must function. In this model, Google does not “own” the customer like Japanese network operators do, but instead seeks to optimize interactions between all players. If successful, the mobile Internet will grow, and so will Google’s ad revenues. The key differences between Android and competing platforms are as follows: 1. Android is an open source, providing a free alternative to Symbian and Microsoft. 2. Android is a being promoted by Google, not a smaller open source company. 3. Google has a much broader vision for the overall health of the mobile ecosystem rather than the individual success of their software.

Infrastructure Providers Application Developers

Handset Manufacturers Google Android

Service Providers

Consumers

Network Operators

Figure 2.11

Content Providers

How Google structured Android’s ecosystem.

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Whether or not you believe that Google can succeed in transforming the mobile industry, they clearly intend to try. “The headlines have been about Google and its open source handset. But it’s about much more than that. The search ﬁrm’s effort to tackle the device market through a Linux alliance model goes way beyond devices. It touches on smartphones, business models, mobile data, industry partnering and the future of mobile itself. It’s that big.” —Robert Clark, Telecom Asia, December 10, 2007

Android and the OHA face massive challenges, but the potential payoff will be far larger for Google and the other players within the wireless ecosystem. Google’s model is not new, but instead is built upon the foundation successfully established in Japan over the last decade. For Android and the OHA to succeed, they must learn both from the successes and failures of the Japanese wireless ecosystem model. With Android and the OHA, Google has introduced a wireless ecosystem concept that has the potential to bring the United States and other developed markets back into the lead of mobile Internet development, a role that they ceded to Japan (and Korea) since the launch of 2.5G mobile services in 1999. If they are able to successfully overcome these obstacles, the mobile Internet will become increasingly integrated into the lives of billions of people globally, and has world-changing potential because the mobile phone is the most widely distributed consumer electronics device ever created. Google is addressing this issue correctly, and in an open and inclusive manner. Our feeling is that Google may be the only company currently capable of overcoming the barriers blocking the development of a robust wireless ecosystem globally. Similarly, in Japan NTT DoCoMo is the only company at present that could unite so many disparate groups and organize their efforts toward a common goal. However, even if Google fails in its attempts to secure a strong future for Android, it is clear that the Googleplex executives grasp our Second Immutable Law of Mobile Business. THE TAKEAWAY While mobile technology is killer cool, the handsets amazing, the magic of wireless communications and technologies truly life-altering, and the applications, content, and services built upon them equally so, our second immutable law states that the ecosystem itself must be the winner. Many companies claim they have created a ﬂourishing ecosystem. In our analysis, this is mostly marketing hype conjured up to make their applications and services sound different. For innovation and expansion of advanced mobile content, services and solutions to succeed globally, we must focus on effective ways to create a mutually beneﬁcial environment for value, innovation, and growth. In Japan, that model was architected from the beginning. In other markets, the challenge lies in front of us. Whether it is Google or another company, government, or industry consortium leading the charge, a robust and fully functioning ecosystem built in a similar spirit as the one in Japan means everyone will ultimately win.

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Expert Insight Takeshi Natsuno Professor Graduate School of Media and Governance Keio University Takeshi Natsuno, Professor of Keio University was formerly Senior Vice President of NTT DoCoMo. He developed the business strategy of all of NTT DoCoMo’s multimedia-related services, including i-mode strategic alliances with global application–content providers and key Internet players. Mr. Natsuno, one of the key developers of i-mode business models, managed the Japan launch of i-mode in 1999. i-Mode is the world’s most popular mobile e-mail–Internet service. Already achieving tremendous success, it has attracted some 48 million subscribers to date, while taking a pioneering role in the world’s nonvoice communications market. Mr. Natsuno also led the development of additional services, such as mobile games, credit card settlements, and other e-wallet functions. Widely regarded as a leading expert on the Internet and multimedia, he was named one of the world’s 25 most inﬂuential e-business leaders by Business Week in 2001. Mr. Natsuno started his career with Tokyo Gas, one of Japan’s largest utilities. He later held key executive positions with HyperNet, a leading Internet venture company. He joined NTT DoCoMo in 1997, and in 2008 began a new career as a professor at Keio University. Mr. Natsuno is the author of i-Mode Strategy (Nikkei BP Planning, Inc., 2000), a la i-mode (Nikkei BP Planning, Inc., 2002) and Keitai-no-Mirai (The Future of Mobile Phones, Diamond, Inc., 2006). He graduated from Waseda University (B.A. Political Science and Economics, 1988) in Japan, and received an M.A. in Business Administration from the Wharton School of the University of Pennsylvania in 1995. Six Laws

Mr. Natsuno

As we have discussed in this chapter, the idea of an Ecosystem is vital for the success of the mobile Internet. But looking back to 1999 and earlier, I wonder if I would ever have thought to take such an open, inclusive approach with all members of the value system as you and your colleagues did. Why did you decide to take such a positive approach? We approached the idea of mobile data services from the perspective of the Internet instead of as something that we exclusively should own. To do this, we had to clearly understand how the Internet works,

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because when you are trying to introduce multimedia services on top of a telecom platform, you are actually introducing two different things. One obvious approach from the telecom way of thinking is how to set up all of those base stations that will enable universal coverage. That was the ﬁrst piece. Second, we then had to focus our attention on applications or content that would function on that platform. But this second way of thinking is much different from the infrastructure side, right? So this was one of the things that was much different for us in that we had to understand how to get the real applications and the real content to work on our platform and infrastructure. This is a much different way of thinking, because most infrastructure specialists can never provide creative content that would appeal to mobile users. So I tried to set up an infrastructure that would nurse the ecosystem, and foster the development of creative content on our platform, and not to own both the platform and the content. That is a natural way of thinking from the perspective of the Internet, is it not? Yes, you are absolutely right. But as executives and the media from outside Japan are quick to point out, the PC Internet “boom” ﬁrst happened outside of Japan. If these businesses clearly understood the Internet, why could not they replicate this model for their mobile platforms? Why did this happen ﬁrst in Japan? I believe this happened for two reasons. One reason is standardization. In Japan, the operators were the main players to create the ecosystem because they positioned themselves to take the highest risk in its development. From the vendor’s perspective, they did not need to create an actual ecosystem, as long as what was there would help them to sell more handsets. But at the same time, they did not mind the ecosystem as it also helped with handset sales. But if you really want to spark usage of mobile content and services, this is the most important thing for network operators, and for them, the ecosystem is necessary. So, in this sense, the most likely main player to set up an ecosystem would be the operator. And in Japan at the time, there was no agreed upon standard that we needed to use or adopt. And because of this, I had the freedom to mandate the technology that would be used for i-mode rather than having to accept something that had been standardized. Because I could do this, I had more freedom to create a robust ecosystem that was unique, rather than being able to do only what everyone else could do. If the WAP Forum could have provided a better foundation, things might have been much different, but unfortunately, the WAP Forum provided a technology that was not extremely helpful in creating a ﬂourishing ecosystem. But in this chapter, we have spent time discussing the fact that WAP as a technology was not the problem. Are you disagreeing with this point?

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Natsuno

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No, I am not saying that WAP is inferior from the technical point of view. What I am saying is that in its ability to help foster the ecosystem model, WAP was very bad. And then, very unfortunately, the entire telecom industry chose to adopt WAP. Because of this, all of the operators outside of Japan had adopted a platform that really could not support an ecosystem. So that is the ﬁrst reason for the differences between Japan and the rest of the world. The second reason is that nobody seriously believed that mobile multimedia services could generate high proﬁts. And since everyone had already convinced themselves that there were not any signiﬁcant rewards from mobile multimedia services, few people were willing to risk investing in such services. They simply positioned mobile multimedia as an extension of communications services like SMS, and never understood the full potential of what mobile multimedia could offer. From their perspective they could at least make a little bit of money from implementing such services in this way. They did not feel the need to take a radical or innovative approach. Many people actually hate to have to create something innovative that will provide real value to customers, and instead prefer to provide something that is easy. These two reasons are why we have such a robust ecosystem in Japan. With the success of the iPhone and Google’s forays into the mobile industry through Android, would you say that the rest of the world is starting to understand the true power of the Ecosystem? Very, very interesting things are starting to happen now as everyone has started to understand the necessity and proﬁtability of mobile multimedia services because of the successes in Japan and in some ways Korea. But the funny thing is that the leaders in the mobile Internet outside of Japan are not the telecom operators, but are companies such as Apple, Google, or even Microsoft. Instead of the telecommunications operators, these companies are now leading the entire innovation process in the mobile industry. For example, look at Research in Motion’s Blackberry. Their main point of differentiation is e-mail, right? Does the excitement around their services make sense? This type of functionality was available in Japan 10 years ago. Even now, in many Nokia phones, you cannot get your e-mail pushed to your phone, which is why Blackberry has been able to successfully develop their applications. Actually, Blackberry has a very strong market position in the high-end, corporate market and the Apple iPhone has enormous potential in the larger multimedia market. Is not it strange that the operators and their traditional vendors, such as Nokia, could not take advantage of this? I ﬁnd this to be a very ironic situation.

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One more important thing to focus upon here is that these Internet companies have never paid any attention to standardization. The Microsoft guys are taking their own approach; Google guys are doing the same. And the Apple guys … well their technology is 100% proprietary. I also ﬁnd this to be a very ironic situation. In this chapter, we compare Google Android with i-mode, in that Google is positioned to make more money from advertising revenues as more people use the mobile Internet, which is similar to NTT DoCoMo making more money from packet fees as mobile data usage grew. Actually, I talked with Google about their Android strategy and I feel that we have a very similar perspective. From their point of view, they are extremely frustrated. For them, it is not about the success of Google phones. They are thinking about how to best enable users to access the Internet from their phone. And the biggest obstacle to implement this, at least 2 years ago, was that the handsets provided by traditional handset vendors could not access to the Internet in the real sense. Of course, these phones had a browser and they had POP mail, but neither of these worked very well. Maybe from a technical sense such things could theoretically work, but in real usage situations users could not access their POP mail accounts because the amount of text was too large or the size of the attached ﬁle was too big. So now both Apple and Google, along with some other companies, have entered into the mobile industry, and have created platforms that appear similar in spirit with what you developed with i-mode. Do you feel that they may be sharing too small of a percentage of revenues with content providers or network operators to truly spark a global mobile Internet revolution? Well, if Apple and Google had not successfully created these types of platforms in the ﬁrst place, content providers would not have had any opportunities for revenue in the ﬁrst place, right? So what has been created now is much better than nothing. And looking at operators, it is clear that they have already lost the game because Google can bypass their on-deck content already. Google is not even concerned about the operators any more. They are, of course, watching the portal sites that these operators manage. If an operator’s portal site can capture user’s attention, then Google would like to have that operator use the Google search engine and generate advertising revenue, which they will share with that portal if that portal is strong. But they are deﬁnitely not interested at all in their networks anymore. I am sorry to say that network operators all over the world have already lost the game.

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Natsuno

So based on this reality, if you could give advice to an executive outside of Japan who is still struggling to bring content or services onto the mobile platform without this ecosystem in place, what would it be? I believe that the most important issue for them is timing. Currently, nobody from the telecom side is ready to take a risk. So, from the content provider’s side, the most important thing to focus on is how to reach the customer. Even though membership in the Open Handset Alliance is growing, the actual number of Android handsets in the market is still very small. So at this moment, we cannot yet call Android an ecosystem. Of course, they do have a signiﬁcant opportunity to succeed. But before we can begin to talk about an Android Ecosystem, they need to establish a much larger market share. Otherwise, there will be no incentive for content providers to create content or compelling services. I remember you saying in your book, The Wireless Ecosystem, that you considered the magic number for having achieved critical mass for i-mode was 10 million subscribers. Do you think that number applies to markets outside of Japan as well? Yes, 10 million subscribers in one country or market is a very good indicator of critical mass. We could consider 10 million subscribers in Europe, North America, or Asia to be critical mass for those regions. Achieving these milestones will be very important for Google Android, the Open Handset Alliance, and any other player or industry group developing an ecosystem. But I think in Japan, Android will not be a big hit because all of our phones already have beautiful functionality. But for markets, such as the United States, which is kind of a black continent in the mobile world, along with China and Africa—these three regions are really, really behind, and will likely offer the greatest opportunities going forward. So, if you look at the state of the mobile industry globally at this point, what do you feel are the most important things that we should be paying attention to? What areas or issues do you feel will truly change the landscape of the mobile industry going forward? At this stage, I am most interested in emerging markets much more than advanced markets. For example, markets like China, India, and the South Asian countries, as well as Arabic countries and the African continent. Each of these areas offer enormous possibilities both in terms of the number of potential users, as well as their demand for handsets. Let me give you an example of what I mean. One of my friends is now operating a mobile banking service in Uganda. This type of

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mobile banking service still has not been implemented in Europe or the United States, because in more advanced countries we have a number of options related to banking and ﬁnancial services. So we do not have the need to develop a mobile banking service in advanced countries. But in a developing country, such as Uganda, more people have mobile phone accounts rather than banking accounts. And if one of these people would like to send money from their account to someone else’s account, they now have the ability to use the mobile phone rather than a bank. Looking at the mobile industry through these lenses, the importance of mobile applications and services for individuals in emerging markets is much greater than similar types of services targeted toward the European or American markets. But if you go visit Europe, the United States, or another advanced market in the world today, and sit in on any of the meetings being held in the telecommunications industry, you are most likely to ﬁnd those guys just talking about standardization. They are all waiting for standardization to arrive. And once they begin to use the word standardization, they avoid the need to innovate. It is as if just saying “standardization” allows them to wait. They do not feel the need to rush into the innovation process. They do not need to take any great risks at this point. But if we ﬂy to an emerging market, they are not wasting time and waiting for standardization to arrive, but are embracing the huge potential that the new world of the mobile platform offers, and are taking risks and embracing the entire process of innovation. Another market where incredible innovation is taking place is in China. China Mobile, which is China’s dominant mobile phone operator, has decided to adopt one domestically developed technology to enable mobile wallet functionality. China Mobile did not wait for the standardization process to arrive at a conclusion for Near Field Communication technology. They simply decided on the one technology that they believed would work best for their needs and avoided the entire standardization process surrounding NFC. China Mobile decided on a technology that is completely different both from Japan and any other technology implementation of the NFC format. They do not need to worry about conforming to international standards because they have a huge domestic market, and because of this, they have decided to use 2.4 GH3 RFID as their mobile wallet solution. So what does this mean? Basically, this means that consumers in China will be using mobile wallet services well ahead of Europe or the United States. These are the kinds of things that are really taking place, and because of it, innovation and excitement in the mobile industry has now shifted to these developing economies.

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Six Laws Natsuno

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But we are also seeing a similar approach being taken by Android and the other Internet players who are moving into the telecom industry. They also do not think much of standardization. So the entire process of discussing exciting technologies or innovative services for the telecom industry is becoming obsolete. The entire telecommunications industry is going through a conversion to the Internet. I ﬁnd this to be another ironic situation. Do you now see Japan also moving in this direction? Yes. Japan is now becoming more like the model established in Europe. How it used to work in Japan was that operators used to take a high-risk, high-return business model by subsidizing handset development costs and differentiating their on-deck content and handset features, and then from this foundation heavily competing against each other. But from last year, the telecommunications companies in Japan have abandoned this model and have turned their attention to a short-term, ﬁnance-driven approach. If you look at the ﬁnancial results that these companies have now achieved from this switch, you can clearly see the short-term gains in corporate proﬁt they have made. But if we switch our perspective to look at the longer term impact of these decisions, we can also clearly see that the competitiveness of these traditional operators in Japan will are decrease signiﬁcantly going forward. And as this happens, Japan, will also become increasingly less important in terms of global innovativeness, and emerging markets will become more and more exciting. Yes, at this point I have students from developing countries working on how best to apply mobile banking services in their own countries. That is perfect. Because the impact that these services will have on the local people within these emerging markets is much more signiﬁcant than similar services would have on consumers in individual markets. It is more like the old telecom operators deciding to target the younger generation rather than the older generation, which led to enormous success. By doing this, they do not need to attack the established, senior market, which is very difﬁcult to convince of new services and innovations. These types of older consumers hate to spend additional money on new technologies. But the younger generation does not follow that same model. They are open to explore new ideas and new technologies. And that is how I also see the difference between emerging and developed markets these days. The true excitement and innovative thinking is mostly in emerging markets. That makes me think about our Sixth Law of Mobile Business, called the Law of Simplexity. Will innovating in emerging markets or even advanced markets around the world require a simple, easy-to-use front-end coupled with a far more advanced and complex back-end?

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Exactly. What is most important is to provide the most ideal services for end users. This is far more important for business executives to consider than endlessly discussing the best common standard for technology development around the world. And in creating these ideal services, do you see fundamental differences between how content developers should approach their PC Internet content versus mobile Internet content? Of course. How to display content on the mobile device and how to make an elegant user interface is much different from the PC world. But at the fundamental level, the basic services that consumers want to use and experience remain the same. From the user’s point of view, they cannot be in close contact with their computers for 24 h a day. I would say that the maximum time they can spend their nonwork life with their computer would be maybe 2 or 3 h, and the remaining hours would be supported by the mobile phone. The mobile phone then is in a complimentary position to the PC. And mobile applications should provide almost all the functionality that is available on the PC. But if we just try to think about making services only available on the mobile phone and not the PC, we will probably run into trouble, right? So, we do not have to think that there is so much difference in terms of the fundamental uses or value of the services between the mobile phone and PC platforms. But what you must think about in terms of differences is the user interface. The user interface is the most important thing. A good example of this would be full browsers. Almost all the phones in Japan are now equipped with full browser functionality, but nobody is using them. Why? It’s because the user interface is terrible. It is like a backup service in case the user cannot ﬁnd a mobile Internet site, so they will switch from the mobile browser to the web browser. But that is just in case of an emergency. Nobody really wants to use the full web browser from their mobile phone if they do not have to. The user interface is terrible, absolutely terrible. So can you draw any conclusions from the experience with full browsers on mobile phones? The best conclusion would be for those in the telecom industry to focus their time and attention listening to the real voices of their consumers and not in countless meetings discussing international standards. Mobile industry executives always like to think that the telecommunications industry is leading the changes in people’s lifestyles. In reality, this belief is so far away from what the actual users are thinking. Seriously speaking, for mobile content and service offerings to succeed in the future, we must review what was wrong in the past and what we therefore must do to provide real services, real applications in the future.

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I completely agree. And if I had to pick the one real service that I think will completely change the face of the mobile industry it would be the creation and deployment of mobile agents. For example, senior executives and the very wealthy have the luxury of an executive assistant. But because the mobile phone is with you, and is evolving to help you to navigate the ebb and ﬂow of daily life, these phones will eventually evolve into a truly helpful and necessary executive assistant for all of us. Actually, I totally agree with you. This is the next big area for innovation related to mobile services. Mobile agents have the potential to be huge successes. If you look at the most recent phones by DoCoMo, you will see that I was already thinking in this direction when I designed the i-Concier service. We will introduce i-Concier service in Chapter 6, which we agree is a very clear indicator of what may be possible for the future of the mobile platform. Would you say that any company could pursue this type of mobile agent solution, or are there special types of businesses that are better suited to offer such solutions to consumers? Let me ﬁrst say that using the mobile platform in this way is a very, very dangerous approach for some companies. I believe that if you have too much personal data about your customers that you run the risk of an information leak. And even if a company has a huge database of information, such as a credit card company or portal company, these companies still cannot see all of the dimensions of an individual’s lifestyle. There are a lot of times that I am not using that credit card or accessing the Internet. Nobody can track these points. Also, if you try to target too much, the probability that you will make a mistake increases. This is also an ironic situation. But this is an important point. I am regularly saying that too much database marketing, too much target marketing does not really beneﬁt the end user. Who does it beneﬁt? Mostly, the systems vendors and the consultants, right? To effectively target advertisements and information you actually need more people involved to select that information or recommendation for me. I understand that the cost for analyzing the data is getting smaller and smaller, but actually the cost to provide an actionable recommendation is increasing. Another important point is that you have to think about who you are actually targeting with these ads. We are now in a Google world, where everybody can just enter some keywords and search for the information that they would like, and they can easily reach that information by themselves. Within this context, I think McDonalds Japan is actually doing some very exciting things. They are very aggressively promoting the mobile phone as a platform for delivering electronic coupons to

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their customers. They are using the mobile phone as a very effective marketing engine. They currently have >10 million registered members for their e-Coupon e-mails to mobile phones. And within these 10 million users they have nearly 4 million people who have downloaded the McDonalds e-Coupon application to their phone. The beneﬁt for customers is that they receive a discount on the food they order at McDonalds. The McDonald’s Japan strategy is to shift from paper coupons to e-Coupons, and it is already proving to be very effective. So in this case, McDonalds is using the mobile platform as a vehicle to decrease costs and increase operating efﬁciency. And to do so, they are offering incremental beneﬁts to their customers who opt-in to their e-Coupon service. Exactly.

Expert Insight Tom Moss Head of Asia Paciﬁc New Business Development Google Tom is responsible for Android partnerships and operations in the Asia-Paciﬁc region, including relationships with carriers, manufacturers and software development companies. Previously, Tom helped to drive Android partner strategy and partnerships in the United States, including many of the charter members of the Open Handset Alliance. Tom received his Juris Doctorate from the University of California, Los Angeles School of Law, and a Bachelor of Arts degree from the University of Oregon. Six Laws

When I ﬁrst learned about Google Android and the Open Handset Alliance, my ﬁrst reaction was a sense of relief that “ﬁnally” the idea of an actual ecosystem had been introduced in the rest of the world. After years of presenting my research in international forums and without fail hearing that Japan was just simply different from the rest of the world, the announcement of the OHA provided me with a real example of how the Japanese wireless ecosystem model could be successfully implemented outside of Japan. After hearing the Japan mobile market described as the modern embodiment of Darwin’s Galapagos Islands one too many times, I would ﬁrst just like to thank you for giving me such a great example to

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show that these ideas are fundamentally ﬂawed. But at the same time, I have to wonder why you, Andy Rubin and the larger Google team, would even think about building an ecosystem. Especially as NTT DoCoMo had tried and failed many times in replicating their model successfully in other markets around the world. Well, even from the beginning, Android has been much larger than just a Google initiative. The Open Handset Alliance (OHA), even before it was formally announced had speciﬁc categories of stakeholders as you have already outlined in this chapter of your book, where groups of companies had invested in and actually helped develop the basic foundation. So, from the very beginning of Android and the OHA we wanted to make sure that it was an ecosystem. But why does this concept of an ecosystem really matter? Are you not losing the opportunity to extract higher proﬁt margins and revenues from the mobile platform by thinking about the value system collectively? Why not just try to own the entire system? The way we look at it, for us Android is not just about an operating system with a better browser, which is one of the most simplistic ways that people have assessed what we are done. By fostering an Ecosystem, we can create a way to help foster the innovation and growth that has existed on the full Internet and have that brought over to the mobile Internet. The Internet is a platform for innovation, and that is one of the things we think that has made the Internet become such a vital part of our everyday lives. It has allowed for such a rapid pace of innovation. You have an idea for an app, let us say you are in a university and think it would be neat if all the people in university could see each other on a website and write comments to each other on that site. And boom, you create Facebook. There is not that much code that you need to write to do it. In fact, it is not that difﬁcult to write. It is the same story for mixi in Japan. All these websites that have been created and offer a wide range of new services, applications, and business models have evolved because the Internet has been created as a platform to spark such innovations. But at least outside of Japan, all of these innovations were focused within the realm of the PC, not the mobile phone. Up until now, in the United States at least, there really has not been any application that originated on the mobile Internet and really took off and shaped something new. That is where Japan really has outpaced innovation in the United States and other markets. So, if we build an ecosystem where everybody can be a stakeholder, where there were no, or very low, barriers to entry for you to get your application distributed, if we allowed access to the APIs so that you can create new and interesting applications, and that you really know how to take advantage of everything we are giving you,

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then we are conﬁdent that this type of innovation will be possible for the mobile internet as well. In coming up with this perspective, were you actively looking at what was happening in Japan? Of course, yes. Japan is a very important market for Google overall and a critical market for Google’s mobile business. You cannot do anything on mobile without keeping Japan in mind. And the i-mode model that Natsuno and the others came up with, it was great for showing all of us what was possible and it was also great in showing us what limitations existed. So it was the best and fully grown walled garden, but in the end it was still a walled garden. It was the most beautiful walled garden with the biggest variety of trees and the best user experience, and it has been amazingly beneﬁcial for users in Japan. But at the end of the day, the edges are starting to show, and the walls are starting to crumble. So Japan helped us see both what was possible for an ecosystem and also why creating another walled garden is not necessarily the model that is going to take off with the rest of the world. Walled gardens cannot compete with the full Internet, the types of innovation that happen, and the speed at which they happen in the full Internet will always outpace the speed of a walled garden. And do you see the mobile platform itself changing what we understand to be the Internet today? Looking at what Apple’s iPhone and iPod Touch have done for full Internet browsing on mobile devices, it is easy to see that content creators are changing the way that they organize and present information. I remember interviewing the former head of Walt Disney Internet Group’s Japan division, who told me that the mobile platform was a far more exciting challenge than the PC. He thought the PC screen was too big, and that it offered too much room for banner ads and popups that simply distracted their customers and did not challenge their developers to focus on the essential. So for him, the mobile platform changed perspective on the overall value of their content and service, as well as how they presented that to their customers. If this type of thinking takes hold globally, do you think we will see a completely new model for thinking about the Internet and its capabilities emerge? Absolutely. It is going to be a dramatic shift and the effects will not just be limited to phones. It is going to also include mobile internet devices, netbooks, and all these devices that are always on, always connected, and always with you. Just think about the things that these devices are capable of doing even today, but we still have not ﬁgured out the way to harness their capabilities. These devices will have information about

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you and your surroundings that will offer ways for you to interact with your surroundings that are just not possible on a PC. For example, location-based services are going to be a big part of the mobile internet, much more so than the traditional internet, because when you are using your mobile phone you want information that is relevant to where you are right now. You want to know the nearest restaurant, if any of your friends are around, or if there is a sale going on at a nearby department store. And your phone will be able to know these things for you and help you ﬁnd them in ways that are well beyond the capabilities of a PC. And if you think about the way that you interact with your phone, voice is such an integral part of how you use this device. But as of today, voice-based interfaces are still really just at the formative stages of their development. We think that there will be a lot of growth and innovation in the voice space for mobile devices, especially those that allow people to interact with the content and services available through the mobile phone. For example, things like surﬁng the web, interacting with e-mail, searching for new information, using various phone and internet-based applications, and whatever else you would like to do with your mobile phone, will soon be shifting to voice-based interfaces. On a PC you are more inclined to use a keyboard, but with a phone, why have we not already shifted to voice- and touchbased interfaces? A touch screen makes so much more sense on these mobile devices, and we are already seeing that these will soon replace keypad interfaces. These developments are going to shape a new growth spurt and level of innovation on the mobile platform that has never been seen before; not even for the PC-based internet. And once these innovations are introduced, we will begin to be able to take full advantage of the capabilities of mobile devices that go well beyond those of desktop computers. So then, how does Android ﬁt into this overall framework that you have described? We hope that Android will be an engine that helps bring these innovations to market much sooner than was previously possible. And from your viewpoint, as you look at what you have accomplished to date, and what the future holds in store for Android, what do you see as the major milestones that lie ahead of you? The way I look at it, there is the short, the long, and the very longterm. For the short-term, we have focused on achieving our goals of getting a critical mass of mobile communications devices out into the market. We are already starting to see good traction on this point around the world, and so we have already started to build a platform for innovation and the distribution of applications that are

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truly new to the world. I think within the next year, or year and a half you will see many new devices, supported by many carriers in hundreds of countries around the world. So in the short-term, I think Android is on track, and we are very happy about that. In the long-term, we are seeing a lot of ubiquity plays with Android, which means manufacturers of all different types of electronics or consumer devices are beginning to understand the implications of the wireless ecosystem. Especially in the area of content distribution, business executives now understand that content distribution tied to a platform is very important. And because of this, they are looking for new ways to leverage these possibilities even on nonphone devices, including mobile internet devices (MIDs), netbooks, picture frames, e-readers, and every other device that has the potential for wireless connectivity. I think there is a new understanding growing within the industry now that the platform, or the larger ecosystem, is the key for the next wave of the mobile net, and the overall internet itself. Because of this, there is going to be an interesting and fast convergence that happens where Android will be found on all different types of things. And when this starts to happen, you will see different devices becoming specialized or optimized for different aspects of the same mobile web, on the same ecosystem. This is when I think the mobile platform is going to get very interesting to watch. And how about the very long term? In the very long-term we are already starting to see how things might evolve because of the innovations that people are making with the user interfaces of the many different Android devices currently in development. Application developers that have no direct relationship with Google have started to create a number of different ideas or approaches, such as augmented reality, and other new and novel user interfaces that we think will be really revolutionary. And the most exciting part of all of these developments is that the killer apps for Android will not necessarily come from Google or some other big company. Instead, they will come from independent developers who take advantage of the openness of the Android platform. Because they are able to access the APIs from the device, they can really use these to create an entirely new experience that has never been possible before, and that most people today have not even thought about. And as these developments take place, do you see devices becoming more specialized like the Kindle or other e-Book readers, or do you see mobile devices continuing to be more like Swiss Army Knives that can do just about anything? People are using their mobile devices or the internet from their mobile devices quite differently than they are their PCs. And I think that we

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are going to see innovations take place in both of the directions that you mentioned. In our discussions with OEMs and manufacturers around the world, it is fairly certain that both approaches are going to be thoroughly tested. And the interesting thing for us, and where the strength of Android really comes into play, is that you can use it to run both the Swiss Army device and for speciﬁc devices and tasks. I am not sure what we can call them, but these new, servicespeciﬁc devices are likely to have the same developers working on them. And if they are using the same code as a base, they will save on development resources and other related costs. And once they start to use Android in this way, they will be able to use the same base, which will enable them to achieve device compatibility, but then on top of these devices they will be able to build services and solutions that can interact with each other. Irrespective of which type of device the consumer ultimately chooses, do you see a fundamental requirement for a clean and simple user interface emerging? Absolutely. I mean at the heart of it, although I do not like to use this phrase so much because it is already a cliché, that is what cloud computing allows for. And it is not just about Android. It also applies to the iPhone, and webOS from Palm is also a great example of this. These are all examples of simple, clean user interfaces that heavily rely on the back-end work that occurs in the cloud in order to get content and services to users in an easy, quick way. So the growth of HTML 5, carriers increasing their network upload and download speeds, and other related technical advances that enable these types of devices to work effectively are what consumers are looking for. An easy way for developers or content owners to look at this is to create a simple UI with almost endless possibilities through a connection to the cloud. And is Android being developed in such a way that separates it from other competing platforms to achieve these kinds of end results? The main point for Android is that from the start, we developed it to be an open platform. This is not a Google operating system. It was developed by an alliance of companies known as Open Handset Alliance. From the very beginning when Android ﬁrst started formalizing, the idea of an ecosystem was the key component to our thinking. Maybe because of the lessons we had already seen from Japan, we were always thinking of developing Android in partnership with the industry, of keeping it open source, and of fostering the positions of all the key stakeholders. From the very beginning, the thinking was that the operating systems you use and license and pay money for, there is only one company that can really

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control it. If you say to them, “Hey, you’ve really got to ﬁx this bug because this bug makes it incompatible with my hardware” or “This type of device does not work on my network”, you have to wait for that company to get around to repairing it. From the inception of our efforts with Android it has never been within Google’s business model to be a support company. So our point has always been that Android requires an ecosystem to exist. Android is an ecosystem. There is nothing without the ecosystem. And so what I think many people still do not realize is that the entire Android ecosystem can operate without Google’s involvement at this point. So if all of the folks at Google took off for another planet tomorrow, the ecosystem and Android would not only survive, but I believe it would thrive. Today many people are still looking to Google for what we will do with Android, and are judging the future success of Android by Google’s day-to-day announcements. But I think these people are missing the bigger picture. The question is not what Google will do with the Android. The question is what will the world do with Android? What will consumers demand? What will manufacturers create? What will carriers be willing to give up in exchange for direct interactions with these consumers? I think one of my main problems in watching all of these developments unfold is that I hear many people use this word “ecosystem” and have no idea about the collaborative and open mindset the use of this word requires. And while they may think the use of this word sounds great in their Powerpoint presentation, they do not seem to have a real interest in making a thriving ecosystem a reality. Instead, they have an interest in appearing to support an ecosystem, but instead they make an environment where they will be dominant, and everyone else subservient to their role. Exactly. That is exactly why we took the opposite approach. It is going to be an interesting few years to watch what actually happens. Absolutely.

CHAPTER 3

IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

“I love power. But it is as an artist that I love it. I love it as a musician loves his violin, to draw out its sounds and chords and harmonies.” —Napoleon Bonaparte

Our discussion of the Third Immutable Law of Mobile begins within the conﬁnes of a dark, damp, windowless, cramped solitary conﬁnement cell in prison. Why prison, and why solitary conﬁnement? Because this is the only way to grasp the true power the mobile platform brings to users, irrespective of race, nationality, creed, or socioeconomic level. Except for a few extraordinary individuals, such as monks and ascetics, human beings ﬁnd the thought of being alone in a prison cell upsetting if not terrifying. Studies conducted over the past ﬁve decades on inmates across a number of different countries and regions—including Europe, North America, Africa, and Australasia— all reached similar conclusions: solitary conﬁnement has measurable, long-term negative effects on the human mind. These negative effects are experienced at the human rather than cultural level. A group of Danish psychologists conducted one of the largest of these studies, comparing over 200 male and female prisoners between the ages of 18 and 60 being held in solitary conﬁnement with those in regular prison cells. They found that solitary was far more detrimental to mental health. Speciﬁcally, prisoners thus isolated were much more likely to develop a psychological disorder while “on remand” than those who were not.

The Six Immutable Laws of Mobile Business, by Philip Sugai, Marco Koeder, and Ludovico Ciferri Copyright © 2010 John Wiley & Sons, Inc.

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“Complete” Perceived Control Over Surroundings

4

3 Lack of Communication

Robust Communication

1

2

Solitary Confinement No Perceived Control Over Surroundings

Figure 3.1 Control over environment and communications.

These and other studies led Johann Louw and Catherine O’Brien from the Department of Psychology at the University of Cape Town in South Africa to ﬂatly conclude “solitary conﬁnement is indeed psychologically harmful”. What causes these extreme psychological effects? As shown in Figure 3.1, solitary conﬁnement strips the individual of the power to control his or her physical environment and communications with the world outside. Information ﬂow stops, including sensory information, such as the sounds, sights, smells, textures, and tastes associated with freedom. Outbound communications from the incarcerated individual come to a virtual halt as well. The prisoner may talk, scream, cry, beg, or whisper, but there is unlikely to be any response. In addition, the administrators operating the facilities dictate the circumstances of information exchanges speciﬁc to the prisoner’s location, time, environment, feelings, desires, and needs. For almost anyone, this situation would be both terrifying and life altering. If solitary conﬁnement represents a nearly total lack of control over these two axes, what is the opposite end of the spectrum? The opposite of solitary conﬁnement would be total control over our surroundings and the multiple levels of communications ﬂowing through them. Authors, such as Harold Innis and Marshall McLuhan, have done outstanding work in classifying and highlighting the importance of individual media channels throughout human history. Within the context of our discussion, we can see that different technical innovations have provided key advances in our level of control over our surroundings and our ability to communicate. In quadrant 3 of Figure 3.2, we see that local area maps allow us to better understand what is around us and how to effectively navigate to points of interest.

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“Complete” Perceived Control Over Surroundings Advanced Mobile Phone Analog Mobile Phone

Map/Area Guide Empowered silence

Lack of Communication

Optimal, Full Control

Empowered communication

Robust Communication

Fixed Line Telephone

Solitary Confinement

Powerless silence

Powerless communication

No Perceived Control Over Surroundings

Figure 3.2 The evolution of control.

However, maps have virtually no communications capabilities. If you ask a map the color of the building you are looking for or where the front entrance is, the map stays mute. Quadrant 2 in the same ﬁgure presents a slightly different picture. When Alexander Graham Bell invented the telephone, he gave us a completely new level of communication. While the telegraph allowed us to send messages across town or around the world, the telephone added our voices and interactivity. Body language, eye contact, and touch remain missing, however, so Figure 3.2 places the ﬁxed-line telephone mark to the left of truly “robust” communications. For all the wonders of communication that ﬁxed-line telephony provides, these phones also remain physically anchored to our homes, ofﬁces, and other buildings. They offer limited control over our immediate physical surroundings, or at least those surroundings beyond the radius that a cordless phone reaches. While several other technologies could arguably occupy the fourth quadrant of our illustration, we placed analog (1G) and advanced (3G) mobile phones there. With the launch of commercial mobile cellular networks in the late 1970s and early 1980s in world markets, the telephone gained a newfound power over place. And as 2.5G phones enabled mobile phones to generate and receive text messages and view mobile Internet sites, our control over our surroundings and communications activities expanded again. In fact, if we look at any other technology or innovation, from wirelessly enabled PCs to PDAs to walkie-talkies, the advanced (3G and beyond) mobile phone is by far the most effective technology to enhance our control over our surroundings and communications exchanges within such settings.

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NODES, LINKS, AND MESSAGES Every introductory communications course teaches that all communications networks consist of three basic elements as shown in Figure 3.3: 1. Nodes: The communicators in the system. 2. Links (or the network) that connect these nodes. 3. Messages: The information that ﬂows between those nodes and links. As network operators bring wireless coverage to both the national and international levels, our ability to link into such networks goes well beyond that of the ﬁxed-line or wired networks, making the mobile phone the most widely distributed communications device on Earth. Joining the wireless revolution by buying a mobile phone turns us into “nodes” within these larger wireless networks, enabling us to link together with other “nodes” to exchange messages. Before you get angry at us for calling you a node—you are so much more than that, right?—let us imagine that you are the most important and powerful node in the entire global wireless network. You can connect with any other node and communicate with information databases providing content, such as current weather forecasts, news, and downloadable games. You can also connect to other nodes that are animate, such as your cat or dog, and inanimate, such as your stereo or refrigerator at home. If you are the primary node in this vast system, all the messages that ﬂow through the links will relate in some way to you and your needs. To see just how powerful a mobile phone makes you, imagine that as primary node you can be anywhere the wireless signal reaches. (For the sake of discussion, let us agree that network connectivity is a prerequisite for “übernode” status, and

NODES

Figure 3.3

LINKS

MESSAGES

The three basic elements of communications networks.

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that traveling anywhere out of range will cause you to lose that status as the network removes you from the system.) You have two basic ways to react relative to your environment: Embrace it by becoming more actively involved, or escape, emotionally withdrawing from what is going on. Dr. Mary-Jo Bittner did what is probably the most detailed behavioral analysis on this theory, observing modern consumers to develop her theory of “servicescapes”. What are servicescapes? Here are a few scenarios to help you grasp the concept. Have you ever walked past a bakery and been greeted by the heavenly smell of freshly baked bread? Or perhaps been enticed into a bookstore by comfortable couches silently urging you to take a break and browse through a few books? Consumers are drawn into a retail space through appealing sights, smells, and sounds that make them want to “embrace” the store’s environment. By understanding servicescapes, business managers can tweak speciﬁc elements of their retail environments to draw consumers in rather than drive them away. Some servicescapes, of course, are anything but appealing. Think of where you renew your driver’s license, or of sitting in a rundown airport lounge as a voice announces another ﬂight delay. In these situations, our natural tendency is to escape from our surroundings, or at least lessen our awareness of them, since just walking out is usually not an option.

EMBRACING OR ESCAPING WITH PEOPLE, DATA, AND THINGS Aided by your mobile phone, you have the power to embrace or escape that situation by linking to any other node in the system, including data, things, or other people as outlined in Figure 3.4.

ESCAPE

Location-Based Services, etc.

Games, etc.

Ce n

ter

Sta

ge

EMBRACE

Person in Context

Current

Situation

Ba

cks

tag

e

Access to

People People

Figure 3.4

DigitalContent Content Digital

Things Things

Mapping out the choices for embracing or escaping.

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People Nodes Another person (a friend, family member, or colleague) is the most obvious node. One essential new option mobile phones give us is the ability to precisely orchestrate meeting times and places. Think back to when you did not have a mobile phone (yes, some of us still can). It was easy enough to set up a place and time to meet someone, and you would both do your best to be there on time. But if one of you arrived late or could not ﬁnd the meeting spot, chances are pretty good that you would not meet that day. Enter the mobile phone. You can describe where you are and what you are looking at or wearing, and give regular, instant updates until you ﬁnd each other. This is a perfect example of embracing the situation by connecting with people. Mobile social networking services provide another example, allowing users to send text messages announcing where they are. Heading to a seafood restaurant in Soho? Send a short message advertising the fact and any acquaintance also registered with this service will know it. Interestingly enough, so will any friend of your friends who are within 10 blocks of you. This enhanced social reality allows subscribers to reach out and touch people that they otherwise have no idea were there, conjuring up a party out of thin air. More recent startups in this area have focused on speciﬁc bars or restaurants, where subscribers entering the place become part of a social game. If they see other people they want to talk to but are too shy to introduce themselves face to face, they can send a text message to ﬂirt ﬁrst virtually. These examples clearly show the power of the mobile phone to help us embrace our surroundings by connecting with other people. On the ﬂip side of this, imagine that you know your friend will be 15 min late. You decide to wait, but call a different friend to complain about your friend’s tardiness. Then you check your e-mail and send a few text messages to people. You are escaping the conﬁnes of your surroundings with your mobile phone, connecting with other people similarly able or willing to escape their current situations. These escape or embrace behaviors have gained widespread attention from researchers studying the sociological impact of mobile phones. Mizuko Ito and her colleagues at Keio University have conducted some very interesting research focused on Japanese teens and their navigation of everyday life within large metropolitan cities, such as Tokyo and Osaka. For example, countless “intimate” strangers typically surround big-city dwellers wherever they go. They may be right next to each other on trains, in restaurants and elevators, and on the street, but interact only on a very superﬁcial level. While Japanese teens live in the same crowded, impersonal world, Ito and her fellow researchers found that they do not view their surroundings as impersonal. Instead, they feel that their mobile phones connect them with their entire network of family and friends wherever they might be. This phenomenon is occurring globally as SMS and mobile blogging become normal behaviors. Within any environment or situation a wireless signal turns the big city into a village where our friends and family are always virtually with us, “on call” and available any time and from anywhere. The mobile platform allows us to escape the impersonal nature of the big city.

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Information Nodes Let us focus next on the vast information systems mobile phones open up to us. With the advent of advanced mobile data services, mobile phones have become Internet access devices as well. Imagine that you are on a trip to a new place and need to learn about your surroundings. While several of your traveling companions whip out their dog-eared tourist guides, and a few ask local people for information, you power up your trusty mobile phone and quickly use it to “embrace” your surroundings. Let us say you are at a resort area in Nagano, the home of the 1998 Winter Olympics. The photo in Figure 3.5 shows a hill leading up to a small shrine, with a few stone statues along the way. You spot the sign with a message and a strange square ﬁlled with what looks like static. The square is actually a barcode called a “QR (quick response) code” invented by a company called Denso Wave. (While there are competing technologies, they basically function in the same way.) Taking a picture of this barcode using the barcode reading software all cameraenabled phones in Japan have summons a website that describes the surrounding area, the shrine and its history, and those stone statues. Many businesses have quickly understood the signiﬁcance of this new power over our physical surroundings. For advertisers, the appeal is obvious. Advertising via the

Figure 3.5

An information barcode at a shrine.

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mobile phone is a major and growing part of overall Internet revenues; such ads cost relatively little compared to the other advertising expenditures of modern businesses. The line between ofﬂine and online advertising is blurring, however, as the capability of mobile phones to act as intermediaries between physical ads and incremental digital information available when the consumer chooses to “embrace” them grows greater. As the photo in Figure 3.6 shows, for example, even political parties are putting barcodes on posters and billboards, allowing passersby to simply “click” on the poster and access the candidate’s mobile website for more details. The use of special software and camera phones are relatively cumbersome, however. As mobile Internet search capabilities become more powerful, advertisers are bypassing the barcode–visual search by supplying simple search terms, as shown in Figure 3.7. And as for “embracing” people, Figure 3.8 illustrates innovative attempts to extend the use of barcode searches to people’s clothing, and even their skin. Beyond print advertising, the mobile phone is also being used to promote locationspeciﬁc information and advertisements on a pull rather than push basis. One example is Goopas, a service created by Omron and Odakyu Railways that is directly linked with the Japanese transit system. Users register on the Goopas site and select categories they want to receive information about. When the user enters the train station using a commuter pass, the Goopas system knows the person is on the move, and retrieves important location-based information to review during the commute. As the person exits the station, Goopas sends an e-mail alerting them to any special deals or information relevant to previous requests. For example, users wanting to know more about lunch specials in the area will receive a list of restaurants offering coupons or discounts on selected items for that speciﬁc date. What impact will this have on doing business? To answer that, let us tell you about Scan Search, a relatively unknown service Amazon Japan offers mobile subscribers.

Figure 3.6 Using barcodes to help voters.

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Figure 3.7

Search terms on product ads take advantage of faster online search capabilities.

Figure 3.8

Shirts and skins: new venues for barcodes.

A free downloadable Java program, Scan Search creates a new model that may radically alter how companies compete. Imagine browsing the shelves in a bookstore. The back cover of almost any book bears a traditional barcode printed by the publisher (see Fig. 3.9). With Scan Search on your camera-equipped mobile phone (and if it is not, you can visit the Amazon.co.jp mobile website and download it in seconds), point your phone’s camera lens at the barcode. Your mobile browser will take you to the Amazon mobile website and the page that shows the same book you are holding, only with a competing price from Amazon. Plus reader reviews, suggestions for other books, and so on. Through your mobile phone, Amazon has inserted itself in a competitor’s store, eradicating the disadvantage of not having a physical presence and using its

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Figure 3.9 bookstore.

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With your mobile phone in hand, this barcode can take you far beyond the

competitor’s stores as a physical adjunct to its rich database of information. Scan Search provides you with more knowledge and power than you could ever have without your mobile phone. What else could we use Scan Search for? Computers? TVs? Beyond packaged goods, how far could such services extend? Current initiatives related to mobile visual search indicate a great deal of thinking is going into answering this question. With the mobile phone, the world becomes “clickable”. As long as we ﬁll databases full of information available to view and review after such clicks are made, then the world becomes easier to navigate. We can extend this beyond just text, picture, and video information. The NTT DoCoMo surprised many of us by announcing the smell-o-phone, which uses a simple hardware plug-in to create a wide range of smells to accompany mobile website browsing. Around the same time, Sadao Hasegawa, a retired schoolteacher, and Tsukuba University of Technology professor Nobuyuki Sasaki created software for mobile phones that basically repurposes Braille to function within a digital environment by vibrating when creating and reading text messages. These supercharged capabilities allow mobile phone users to further embrace their surroundings by accessing data and information. They also create new and unprecedented opportunities to compensate for physical disabilities, including the senses of touch and smell within the context of mobile content and services. Switching gears now to focus on escaping our surroundings through accessing mobile data, we come back to the more traditional and readily available mobile data applications, such as downloading and listening to music, downloading and playing games, or just surﬁng the Web from our mobile phones. As we will describe later, advances occurring in this space will reshape how we think about mobile content and

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its applications. Data that allows us to mentally escape from our physical surroundings certainly qualiﬁes. For a more concrete explanation of that, let us return to the bookstore scenario. After checking the detailed information from Scan Search, you order the book from Amazon because it is heavy and you do not want to carry it around. You still have 20 min to spare until you meet your friend at Starbucks, so you decide to play the latest Brain Training game. As you become engrossed in trying to optimize your brainpower, the bookstore slips away until you go for a latte. “Thing” Nodes The third category of nodes consists of the vast number of things (e.g., “clickable” devices and objects in your environment or connected to the Internet) you can access from anywhere. To see how you can better “embrace” your surroundings by connecting and communicating with things, let us look to one of the world’s most powerful brands, Coca-Cola. Coca-Cola Japan has launched thousands of vending machines across Japan called “cMode” (see Fig. 3.10) that customers can interact with directly using their mobiles. Through special barcodes e-mailed to members of Coca-Cola’s club, or interactions directly with the RFID chip (based on FeliCa technology) embedded in their phones, consumers can buy drinks, download specialized content from the vending machine, such as music clips and images, and accumulate points for discounts on future purchases. Interactions like the above that use the mobile handset to identify individual users within their current surroundings reveal a multitude of important applications beyond buying a soda. For example, a number of important identity-based applications have been created using embedded contactless RFID technology from FeliCa and Philips’ Mifare. From ticketless airport check-in to home security systems that allow us to open

Figure 3.10

Coca-Cola’s cMode vending machine with RFID reader.

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or lock doors of our apartments or ofﬁce buildings, the RFID enabled mobile phone is allowing unprecedented opportunities to embrace much of what surrounds us. Money is arguably the most important thing the mobile phone can embrace. Carrying a wallet ﬁlled with credit cards, cash, and membership cards is outdated; all these payment methods are integrated into the mobile phone using contactless RFID technology. Meanwhile, on the “escape” side, the infrared capabilities of the mobile phone turn it into a remote control for TVs and video recorders. Once our homes and ofﬁces are wired, mobiles will also serve as remote controls even from halfway around the world. To understand the potential here, imagine that you are in a boring business meeting. As you try to focus on what is being said, you remember that you have forgotten to set your DVR to record your favorite TV show tonight. Fortunately, your DVR is connected to the Internet, and your trusty mobile phone can access it remotely, so you quietly connect to the Electronic Programming Guide, set the correct program code, enter your password, and return to your scintillating meeting. Panasonic has unveiled many similar new services in Japan. They are on display at the company’s major showrooms, the Panasonic and National Centers in both Tokyo and Osaka. Panasonic has also developed services linking home security and monitoring with mobile phones. For example, let us say a package arrives at your home while you are still in that meeting. Typically, your mail carrier would leave the package at your local post ofﬁce for pickup. Your mobile phone, however, offers another option. When the mail carrier rings the bell, the small video camera on your front door sends a low-bandwidth video to your mobile phone. You see who it is and quietly exit the room. You enter into a quick videoconference with your mail carrier and ask him to leave the package at the door. He can even insert the package delivery slip into a special slot in your mailbox that stamps it with your signature. With your package now safe, you decide to check on your cat. She has apparently eaten all her food and seems thirsty, so you send an e-mail request to your “wired” pet food dispenser to give her more water, and do the same for your houseplants. As you return to the meeting, you do so with the newfound conﬁdence of an executive who has escaped the conﬁnes of your current environment and managed several important tasks all from several miles (or even time zones) away.

The Catch As the übernode, you have the ability to embrace or escape your surroundings by linking with any other available node. But there is a catch, and it is a big one. We have stretched the truth, because in fact no existing mobile network power structure can differentiate you from any other phone-carrying human. While your mobile phone gives you unprecedented control over your environment and communications wherever you may be, so do the mobile phones of everyone

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else. They have your number, your SMS or e-mail address, and (if you allow it) your GPS location, and perhaps much more. Your friends, family members, and work colleagues all know you have a mobile phone. When they have the urge to escape or embrace their current situations, they might contact you. And they are not the only ones. So, for the young woman in the photo in Figure 3.11 and every other mobile phone user, we have a question: Is the phone on your leash, or are you on the phone’s? Despite the power mobile phones provide, they also disempower us because we never know who or what will want to reach us, or when. We cannot, in fact, exert total control over our situation. For example, imagine that you are at an important business lunch and your signiﬁcant other calls. Do you answer? Or say you are at a concert with your spouse on your anniversary and your boss calls. Do you pick up then? Alternatively, you are expecting an SMS message or a call. The longer you wait, the more uncomfortable you get. Your concern may make it difﬁcult to concentrate on the current situation and communicate with those around you. That is anything but empowering. Now imagine that the information or money you downloaded into your phone is somehow locked, and you cannot ﬁgure out how to retrieve it. Will you abandon your other plans to resolve this problem? Will you panic?

Figure 3.11

Who is really on the leash here?

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Perhaps those are some of the reasons the Massachusetts Institute of Technology found in their annual surveys that the mobile phone topped the list of devices that Americans “hate the most but cannot live without”. The mobile phone aggravates as often as it empowers. Besides the relatively minor annoyances outlined above, mobiles are put to much more heinous uses, including bullying, stalking, rape, and even murder. Understanding and overcoming these ﬂaws is essential if the mobile phone is to serve as the antidote to solitary conﬁnement. In this reality lies an important clue for further innovations within this law. While much time and attention have been devoted to empowering individuals, we must develop protection for consumers to overcome the effects of disempowerment. Japan and the world’s other advanced mobile markets have yet to create effective solutions. Different ring tones for different people are not enough. The true power of the mobile platform will only be unleashed when we discover how to alleviate mobile disempowerment. We believe the answer is worth millions of dollars, and as global adoption of mobile phones grows, will be a requirement for the future of mobile services and solutions.

HOW MOBILITY EMPOWERS BUSINESSES We can extend the concept that mobility empowers to include businesses and their quest for long-term proﬁtability. Especially as we consider the mobile phone’s role as a marketing channel for media, such as TV, radio, newspapers and magazines, and the PC Internet, it is crucial to understand the role that the mobile platform could and should play in business to consumer relationships vis-à-vis these other channels. When comparing the mobile phone to the PC, familiar complaints about tiny screens and keypads, limited processing power and memory, and many others emerge. But as we have seen in previous chapters, those limitations have not slowed the global spread of mobile phones or the use of mobile Internet-related content and services. So while we should take these limitations about the mobile platform into consideration, we can conclude that they are relatively unimportant in the march toward ubiquitous mobile penetration and usage. In comparing the way that consumers behave on the mobile platform versus the other platforms available to them, however, academic research in this area suggests that people actually behave in different ways relative to the technology platform they use. Probably the most famous proponent of such thinking was Canada’s Marshall McLuhan, who gained international recognition for his theories related to “hot” versus “cold” media channels, and his assertions that consumer behavior fundamentally changes based upon the unique qualities of the medium. Since his groundbreaking work in the mid-1960s, a number of subsequent studies have clearly conﬁrmed his hypotheses that different media invoke different consumer behavior. Researchers have also compared how we behave in online versus ofﬂine environments, with similar results. With the sending of the world’s ﬁrst SMS message in 1993, and the successful launch of 2.5G mobile services by NTT DoCoMo in 1999, the mobile phone platform has the capability to integrate text communications and

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Internet data access with wireless telephony, sparking an entirely new era of human communications. As a result, the deﬁnition of “online channels” must now expand to include the mobile phone. So the question to ask is whether the mobile phone’s limitations (a small screen and keypad, limited memory, etc., along with beneﬁts like anytime, anywhere access) make it a different marketing and business platform from the PC. Of all of the types of measurable consumer behavior, loyalty is one of the most coveted intangible assets. Recently we6 attempted to answer the above question by measuring how much consumers to the same content provider would pay to remain loyal to that provider through the mobile phone or the PC. Why is this relevant? Because as Frederick Reichheld has repeatedly proven in his outstanding Harvard Business Review articles and books, a direct link exists between consumer loyalty and long-term proﬁtability. Attracting a new customer costs more money than retaining a current one. We used the “willingness to pay” concept as a proxy for measuring loyalty. We tested the ability of two popular content providers—Walt Disney and Yahoo!—to hold onto consumers faced with varying prices and levels of service quality. According to the 2005 Nikkei Brand Japan survey, they were the two highest ranked Internet content and service companies in Japan. Walt Disney Internet Group offers subscription services through broadband PC and the mobile phone. Disney ranked as the top entertainment content provider, boasting more than 6 million unique paying subscribers. Yahoo! was the dominant search and portal site in Japan on both the mobile and PC platforms, with more than 80% of domestic Internet users accessing its content at least once a month. Yahoo! has fee-free PC Internet and mobile portal services. Both Disney channels offer similar content to subscribers, including character photos, sound clips, games, and shopping and fortunetelling services. Subscribers can browse, download, and interact with Disney content in similar ways. The richness of the content offered differs, however. For example, broadband PC subscribers can view full movie shorts, while mobile subscribers cannot. The PC site offers detailed information on the Disney theme parks that the mobile channel does not. Disney mobile content subscribers can access Disney’s mobile Internet content through the “walled garden” of each carrier’s network. Yahoo! mobile subscribers had to enter a separate mobile Internet URL. While Yahoo! mobile subscribers may see different banner ads than the PC subscribers, the site categories and search services are nearly identical. So what did we ﬁnd? Believe it or not, mobile subscribers to both sites were much more loyal than PC subscribers. Without a statistical doubt. Why? Because the mobile platform is such a powerful communications enabler that it now dominates all consumer electronics devices in terms of adoption levels and usage. When mobile consumers ﬁnd a site they like, they are less likely to switch to a different site, even when a more attractive offering comes along. 6

Philip Sugai and Donghun Kim, Ph.D.

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This was particularly true for the fee-free Yahoo! site. Although there are many free alternatives, Yahoo! mobile subscribers remain loyal, and are even willing to pay more money not to switch away from Yahoo! mobile than Disney subscribers are willing to pay for their loyalty. THE TAKEAWAY Any businessperson can see that the mobile platform is a loyalty platform. Get customers to subscribe to your mobile services and they will remain more faithful than PC subscribers, and may even be willing to pay more. This level of empowerment the mobile platform brings companies is similar to what consumers enjoy. Our third law generates two compelling opportunities for the evolution of mobile business. Speciﬁcally, you can create a sustainable, long-term competitive advantage via the mobile platform by (1) further enhancing the consumer’s ability to escape or embrace his/her surroundings; or (2) providing consumers with greater control over their roles as nodes within the wireless ecosystem. Expert Insight Jun Yamada Chairman and President QUALCOMM Japan Jun Yamada serves as the Chairman and President of QUALCOMM Japan since March 2009. In this role, Mr. Yamada is responsible for QUALCOMM’s business operations in Japan and with Japanese licensees. Yamada previously served as Chairman from June 2008, and was appointed President in March 2005. Yamada began his carrier at Qualcomm Japan in 1998, when QUALCOMM Japan Inc. was established. He worked on standards, new technology development, technology marketing, carrier and industry relations, promotion of application platform, BREW®, and so on. Prior to joining QUALCOMM Japan, Yamada served as technical director of AccessLine Technologies, which founded One Number Service Inc., a NTT and NTT DoCoMo joint venture, and provided value-added telecommunication services to consumers. Yamada began his career at Matsushita Communication Industrial Co., Ltd., after graduating from Tokyo University in 1978. He was engaged

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in developing digital communication systems for land mobile and cellular, including systems for North America. He has Bachelor of Electronics Engineering. Six Laws

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From your perspective as President of QUALCOMM Japan, what do you believe have been the most important contributions that Japan has made to the overall mobile industry? From my perspective, the most important contribution that Japan has made is the i-mode business model. This was actually the ﬁrst business model that proved to the world that an open platform applied within the mobile environment is an extremely powerful combination. The Internet had been in existence long before the rise of i-mode, but until the i-mode business model was introduced, no one had openly identiﬁed how they would create a robust mobile ecosystem. With the i-mode business model came proof that there were clear synergies between the Internet and the mobile platform, and that many different players could participate together to create a win– win environment for everyone. The underlying business model of i-mode is truly outstanding and it has contributed to the success of most every other mobile business model since its launch. During the rise of i-mode many executives from across the globe made trips to Japan to look at what had been built. But all of them failed in making the mobile platform in their markets a bigger success than the one in Japan. Why do you think this happened? I think this happened for two reasons. The ﬁrst is directly related to the technology itself. Even though i-mode tried to leverage internet-based technologies, such as HTML, they were required to make modiﬁcations to these technologies. For example, HTML was changed to cHTML or “compact” HTML so that it could work effectively on mobile phone handsets. And because of this, the limitations that were imposed on the larger internet technologies were not well received in regions outside of Japan. So while the mobile Internet was gaining popularity rapidly in Japan, the rest of the world, especially in the developed markets like North America and Europe, thought that i-mode was similar to the internet, but was not the Internet. From a technical standpoint, this is actually the truth. Because of this way of thinking, they did not see the underlying concept upon which i-mode was built and the value that this delivers to all of the participants involved. Instead, they just thought Oh, this is not the same technology as the internet. And because of this, they waited until the true internet similar to what they were familiar with through wired line technology would emerge.

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The second reason I think mobile data services failed to take off quickly outside of Japan was the business model that was already in existence in these markets, and speciﬁcally how revenue was shared between the operator and the content provider. Until recently, in many regions the operators have tried to squeeze as much revenue as possible from content providers. In some markets, content owners have had to surrender 50% of the revenues that the end user pays for their content in order to guarantee that the network operator will offer that content to their consumers in the ﬁrst place. As you can imagine, this really irritated the content community, and made them de-emphasize their investments and interest in creating new or interesting content for the mobile platform. When we put these two things together, this made the possibility of surpassing or even replicating the success that we have seen in Japan impossible. But I feel as if things have now started to change, especially with the long-term successes that have continued in the Japanese market. In Chapter 2, we mentioned that Apple’s AppStore and Google’s Marketplace have started to replicate the i-mode business model. Yes, that is right. Maybe i-mode was just a little bit too early from the viewpoint of the other regions, but I am certain that the fundamental concept and business model is valid. But when i-mode started, it was basically developed on top of existing 2nd generation (2G) mobile networks. The dream back then was to develop a “voice + data” solution. But today many markets around the world are well beyond this, and we are entering into a world of ubiquitous connectivity. And because of this, we are seeing the concept of the mobile phone as a stand-alone platform being replaced by that of the mobile phone as one component within a larger and evolving network. As QUALCOMM is one of the key players in the development of these future technologies, I am wondering how you are seeing things evolve beyond the mobile platform, and how the mobile phone is going to ﬁt into this larger, ubiquitous framework. I think that there are two important advancements that are currently underway. The ﬁrst is that the mobile device is becoming increasingly like an internet terminal rather than a stand-alone phone. Actually, even the term smart phone does not exactly ﬁt as a description of what the newer devices are capable of doing. These devices are becoming more like terminals that work closely with the services available through the internet cloud, or what many people have called “cloud computing”.

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So as more and more services are available via the cloud, devices that work seamlessly within such a context will surely be an important element of our future technological evolution. Of course, terminals like the laptop PC and personal computer are designed to work together with the cloud. But I believe that there will be more innovations on the horizon that make the terminal optimized for the cloud to be both more efﬁcient and more userfriendly than traditional PCs. Today’s PC has too much horsepower to work as an optimal cloud terminal, while at the same time, our smart phones need extra horsepower than they currently have in order to effectively function as cloud terminals. Efforts to optimize devices in this way are essential at this point in time. One of the things that our research in the Mobile Consumer Lab has shown is that consumers actually behave differently when accessing similar content through different devices. How does that inﬂuence this move toward devices optimized for cloud-based services? That is actually the second piece of the equation. When devices become optimized for taking full advantage of cloud computing, we will also see technical and interface-related innovations that will optimize devices for niche purposes rather than the broad array of capabilities we currently see embodied in mobile devices. Can you give an example of this type of device? Sure, Amazon’s Kindle. Kindle is a device that has been created to work very closely and seamlessly with Amazon’s cloud of internet services, which in this case is their bookstore. To use the Kindle correctly, all you have to understand is how to navigate the Amazon cloud, which is the Amazon bookstore using the Kindle. And just like that, you can select whatever you would like to download, read, and enjoy. In this type of environment, all the user cares about is how to access and interact with Amazon’s store, and the content available through it. What they do not care about is whether the Amazon terminal is Linux-based, or Windows Mobile based, what the hardware and software conﬁgurations are, or anything else related to the underlying technologies. This holds true for Amazon just as much for the entire content industry. Devices must be built that optimize the user experience, and are optimized or customized completely for the sake of the user’s beneﬁt. Do you see the iPhone as a competitor to Kindle, or do you see them as separate?

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I see them as separate. Of course, general purpose devices will continue to be offered to consumers because that is the only way that consumers and companies have been thinking up until today. But I think we will start to see signiﬁcant changes emerge very quickly as applications speciﬁc to these niche devices are introduced. It will all be up to you to decide whether you prefer a more generic device or speciﬁc device, or maybe you will choose both. Either way, from the consumer’s viewpoint they will begin to care less and less about the terminal or the platform, and become much more interested in the services that they can access through them. This seems to ﬁt very well with the arguments we set forth in this chapter, speciﬁcally our Law that Mobility Empowers. Within this context, consumers will prefer those products or services that further enhance their abilities to empower themselves, or help free them from the limitations that ubiquitous connectivity brings. From your perspective as President of QUALCOMM Japan, do you see technologies or services either on the empowerment side of the equation or on the side of protection that will be important to understand and work with going forward? I am certain that the industry should pursue both of these routes and some may try to offer better ways to enrich the lives of consumers through mobile and wireless solutions while at the same time trying to limit the losses that you suggest. And we should then leave it in the hands of the consumer to decide which of these they will use, and how they will be integrated into their lives. Although I know QUALCOMM is involved in many different initiatives related to the mobile platform, one of the areas that I ﬁnd most interesting for us to discuss within the context of this chapter is your effort to give the consumer increasing power over the price that they pay for using different types of mobile services. For example, you have been championing the development of chipsets with dual band or multiband capabilities so that the devices that use these can identify the least-expensive networks available. Yes, this is deﬁnitely an area in which we are working to help further empower the consumer, and Qualcomm will continue to pursue this avenue. As you know, there are many different ﬂavors of air interface technologies whose technical differences are basically ignored by the average consumer. We would like to integrate all of these onto one common chip and make it invisible to the consumer and the device manufacturer. When we do this, the device can be produced at the most affordable level and at the same time we can provide the consumers with the power to pick and choose the networks that

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they prefer based on their individual preferences. For example, if one consumer prefers network speed and the other price, each may utilize a different network based on this, even though they are sitting right next to each other. Are you seeing a growing interest in this type of technology where more ways of accessing wireless technologies are becoming embedded into the device? Yes, definitely. From the consumers’ viewpoint they honestly do not really care which air interface that they are using to access internet services, all that they care about is that they actually do have such access. And for most people, as long as the quality of service is comparable, the cheaper the better. To have a device that is intelligent enough to select the least cost routing will become an important element from the consumers’ viewpoint and I think that the entire industry should continue to pay attention to this. But from the network operator’s point of view, what position should they be carving out for themselves in a future world where the consumer can choose a bundle of network services based on price, availability, and performance preferences? They may not always like this idea and they surely will not be happy with a device that allows the consumers to easily switch between multiple operators. So they may try to do something to prevent this from happening or to make such kinds of switchovers somewhat more difﬁcult or expensive. But I do not think the operators can stop this from happening. This is the natural ﬂow of the industry that the operators must follow, because in the end the consumers will want it and beneﬁt from it. Then, from the operator’s standpoint they may need to continuously evolve to enhance the capabilities of their networks—to make their service offerings more competitive than others. This kind of competitive environment is healthy for the industry and is likely to continue for at least another decade. And would you see there being a critical role for governments worldwide to actively manage this type of evolution, and to ensure this type of market to emerge? Yes, I believe so. Government regulators should encourage such competition to last as long as possible. Otherwise, once a big player begins to dominate the market, then consumers will not have as much freedom to look for alternatives, which would not be as healthy. In listening to the insights from others that we have interviewed for this book, it is clear that developing economies host some of the

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greatest opportunities for technical and service innovation. Are you seeing any exciting new developments speciﬁcally in developing economies or are you creating different approaches to spark further advancements within developing markets? Qualcomm is not doing anything speciﬁc for developing countries but we are seeing several interesting phenomenon or activities underway in these markets. One that seems to have captured everyone’s attention recently is microﬁnance or microtransactions that occur over the air. Using the mobile platform for ﬁnancial transactions, money transfer is possible by using a mobile phone. In this case, the operator is functioning as a quasibank and allowing ﬁnancial value to travel between consumers and even across oceans. We ﬁnd this to be a very interesting innovation that we did not do anything speciﬁc to promote. But instead, leaders in the mobile industry and the consumers who used their services demanded that such functionality be added, and together they just made it happen. I ﬁnd this to be an interesting testimonial for how a developing country can create a new service far in advance of many of the advanced markets in the world. And another interesting approach that we see emerging in these developing countries is a horizontal manufacturing model. Can you explain how this works? For example, in China there is a company called MediaTech, which is a semiconductor company similar to QUALCOMM who has done something very unique in making their chip. This chip has recently been embraced by many Chinese manufacturers who have chosen the MediaTech chip over such strong competitors as Texas Instruments and others. The way they did this was to provide a reference design for the chip that includes the board itself. So they have created their board with the chipset and the software for it already embedded so that the device manufacturer can immediately use it. All the device manufacturer has to do is add some software on to the board and then make the plastic form factor, or body for the phone. That is it. This is an extremely interesting business model, because it allows for rapid changes and deployments, and reduces the burden on the device manufacturers. This is actually something that we at Qualcomm need to learn from and pay more attention to going forward. At this moment we are only providing the chip and the software and all the other components and materials are made by the manufacturer. But now MediaTech is doing much more than that. This is an interesting advancement that has developed in China and Southeast Asia that will have implications for the rest of the world.

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Looking forward then to the overall mobile industry, what do you believe will be the most important technologies or innovations currently in the market or being considered for introduction that will shape the future of the mobile markets around the world? I do not believe that there is one answer to this question, but instead I see four major areas that are important to consider. The ﬁrst of these is power consumption. As we all know and experience, either the mobile device or the consumer who is using it always suffers from the stress related to charging and recharging the battery. Anyone who can create a new technology that lowers this stress on either the device or the consumer will be highly appreciated. There are many possible ways of achieving this goal. One way is to reduce the power consumption in the silicon by advanced silicon technology. Another way would be to make a battery whose density is much higher than today’s lithium ion batteries. Fuel cells, for example, are one way of achieving this. And a third approach to this problem would be the creation of ubiquitous charging facilities for mobile devices that are everywhere that we might need them. If this were the case, then we would never need to be concerned about charging in the ﬁrst place. And while none of these ideas may offer a complete solution, maybe we will also start to see a combination of these approaches that will ultimately lead to solutions that remove the stress and concern for recharging the batteries of the mobile devices that we use. I completely agree that this is a very important area upon which to focus going forward. So what would then be your second important technology for us to consider? The second element is related to interference management. When we think about wireless communications, these systems use radio waves that are prone to interference from the surrounding environment. For example, some frequencies have difﬁculties traveling long distances while others have problems going through the thick walls of modern ofﬁce buildings. While these issues have always existed, as we are beginning to rely on wireless technologies more and more, effectively dealing with these challenges should be a very high priority for all of us in this industry. One way of overcoming this problem is installing more base stations throughout an area, and including smaller base stations within the overall network, which is the approach that femtocell technology uses. When we have more of these types of transmitters installed in what seems to be an almost random manner, it is getting messier and more difﬁcult to manage all of the interference. So the

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industry needs to develop a much more advanced technology to mitigate such interference. The solution for this issue is deﬁnitely not easy, but this is something that we are taking seriously and investing engineering resources to address. That is actually very interesting, and something that I feel gets overlooked in the hype and excitement of deploying new technologies. But this is a fundamental issue for the industry, is it not? That is right. Everybody is talking about LTE or WiMax as the next generation, but we do not think that this kind of a high-speed modem is the ﬁnal answer. If we think about the situation carefully, we can also see the strong possibility that these will make the environment more complicated. And as a consumer, you would expect that by using these new technologies, such as LTE or WiMax, that your device will have a much higher rate of data throughput. But if the network is not properly designed and implemented, even if that network has an intelligent interference management capability, the actual data throughput to your particular device may not be as good as what you are getting with your existing 3G technology. This is because many base stations would interfere with each other, and this is where we believe that a breakthrough idea is waiting for a company like us. So what would be the third important technology innovation that you see as necessary for the future of the mobile platform? The third technology is peer-to-peer wireless communications. Peer to peer is getting very popular in the internet and without peer to peer, I think the internet would now lose its appeal to users. But in the case of the wireless industry, we still have not really ﬁgured out how to apply the concept of peer to peer. As you have described in this chapter, in order to create a compelling and useful peer-to-peer wireless service we would need to create the capability for users to interact with other people, data, and their surroundings. Because when you walk around in the city or the countryside or wherever you may ﬁnd yourself, you are much more interested in what is immediately in the vicinity. Would this idea also apply to the underlying technology as well? We are hearing a lot of excitement surrounding the idea of mesh networks, with many different trials underway on University campuses around the world. Do you also see these types of technologies as important or are you talking more about peer-to-peer services on top of existing wireless technologies? Maybe both, but current peer-to-peer technologies including mesh technology using some form of WiFi, Bluetooth, or conventional air interfaces do not seem to be scalable. So, if many people gather together in a 1-km, or 1-mile radius, then the current WiFi based,

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peer-to-peer or mesh network would not function as advertised. What I am thinking about is maybe one peer a person like you or me and the other peers would be machines. So when you are walking around in Shibuya or New York City and feel like you need a taxi, the taxicab itself may have a peer device so you can easily ﬁnd out where it is and send a message requesting a ride. And if each of us had an agent on our mobile phone, I could bid for when I wanted the taxi to come, where I wanted to go, and how much I was willing to pay. Actually, these kinds of services are technically feasible by using our current 3G or 4G systems, but they would be very inefﬁcient because all of your back-and-forth communications between you and the taxis would go up to the base station and then be routed through the network and then come down to the other device. Why do we have to do it like this? Because when we are only interested in a 1-km range of where we are, peer to peer would be much more efﬁcient. Ok, that is very clear. And this brings us to the last technology on your list for the future of the mobile platform. Actually, my fourth point is not necessarily about a speciﬁc technology, but instead is a more general statement about the user interface for these technologies. In this case, Apple’s iPhone is a very good example of what I am talking about, and I think that this type of intuitive interface must continue to evolve. The ﬁnal Law that we present in this book is called the Law of Simplexity, which is essentially a very intuitive front-end coupled with a powerful and complex back-end. Is this related to your point here? Yes, I think that is absolutely right. If you look at the current mobile phones here in Japan, they are more than complex; they are almost too difﬁcult to operate. So most deﬁnitely, this issue has to be addressed and interfaces must be improved. Apple’s iPhone deﬁnitely set the bar very high for everyone in the industry regarding how a mobile device should be designed to interact with the consumer. And there should now be many companies trying to displace the iPhone as the King of mobile user interfaces. And maybe one way to do this would be to design an interface that is optimized for those with physical handicaps related to their sight or hearing. Is this similar to the RakuRaku phone for senior citizens in Japan? Yes, that phone did a very good job for senior citizens including those who have poor eyesight. Whenever you touch a button, the

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phone could be set so that it would automatically speak what you were doing. In a similar way, e-mails could be read out loud by the mobile phone. I think that this is an interesting attempt to make a device more user friendly especially for those with physical challenges. And if companies were to explore ways to make mobile devices more user friendly in these ways, I think many new innovations could be developed. Because if a device is able to minimize the limitations that some people may face with reduced capabilities of sight or hearing, those solutions may be better for the rest of us as well. Japan may be the one to take a lead in the development of such interfaces going forward, especially as the population continues to age.

Expert Insight Hiroshi Yoshino President FeliCa Networks Hiroshi Yoshino was named President of FeliCa Networks, Inc. in 2007 and has served in this role until today. Mr. Yoshino Received his BA from the Faculty of Law from Hiroshima University, and after graduation joined the Consumer Sales and Marketing Division of the Sony Corporation in Tokyo. While at Sony, he held a number of positions including the role of Senior Corporate Planner (1991–1995), Manager of the Marketing Department in the Consumer Products Group (1995–2000), and Director of the Marketing Department, Financial Services Division (2000–2001). In 2001, Mr. Yoshino took on the role as Vice President and General Manager for the Card Marketing and Services Company, Sony Corporation of America, in New Jersey, a position that he held from 2001 to 2007. Six Laws

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In this chapter, we have discussed the idea that mobility empowers consumers in ways far beyond what has been possible until now. As more consumers and businesses begin to adopt and use FeliCa or competitive technologies, what do you believe will be the greatest gains in power they will receive? Currently, people’s perceptions of FeliCa technology are very, let us say, limited. Because FeliCa is the underlying technology for Japan’s wallet phones, at this point this is the only thing that people

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are really focused upon. Because of this, many people continue to be misinformed and think if you use FeliCa, money will start falling out of their phones or wallets. So our challenge is to help our customers and end users think of FeliCa beyond just a wallet application. For example, digital coupons are an interesting possibility. As you may know, McDonald’s Japan has just introduced digital coupons using FeliCa technology. These coupons have already become successful in Japan, but the capabilities of FeliCa go well beyond that. We can use this technology to create key and lock systems or other types of identiﬁcation cards. Let me give you an example. Let us say I use FeliCa to create a set of digital keys for my apartment. Since I am a fairly messy person, I hire a maid service to clean my home when I am not there. Even though I am not there, I have a key stored in my mobile phone, which I can send the person who will come to clean my apartment. The day she plans to come, I can send her a digital key to her mobile phone using any mobile network. I can simply attach this digital key to an e-mail that I send to her, and she can receive this key as a one-time or limited-use key to get into my apartment that day. Even if I forget to send her the key that day, I can still send it to her from anywhere I am to wherever she is using the mobile phone network. And then from my side, I will get an e-mail update letting me know that the maid came into my apartment at 2:00 P.M. in the afternoon and that she left at 4:00 P.M. Her key is no longer valid, so she cannot re-enter my apartment unless I send her another key, so I know that my apartment is safe. And I also know that she has completed her work, all without having to be at home to monitor the situation. While this is just one example, these are the types of things that FeliCa technology can and will be enabling in the very near future. You spoke earlier about your efforts to get FeliCa used on a wide range of devices from televisions to portable music players, but in this example the mobile phone has taken the central role. When you imagine all of these other platforms where you will introduce FeliCa, does the mobile phone hold a special place or role versus all the others? The mobile phone is especially different from all other devices or platforms because it is and will continue to be the central hub within the ubiquitous network. Even if you carry a laptop PC around with you, still it is big and cumbersome to use. Maybe we will see the smart phone replace the mobile phone, but in essence these are basically the same thing. So as the technologies and applications we are discussing develop further, the mobile phone will remain as the important, central point

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to manage all these other devices. It may be that more and more functionality will be integrated into one device, and, the way I see it, the mobile phone will be that device. And on that device we will continue to see new applications being developed, such as computing applications, TV applications, shopping applications, and many others. In speaking about this with other executives for this book, some have suggested that we will actually see a proliferation rather than a convergence of devices. Are you seeing a different possible future? If I look back to, say, the year 2000, many customers still enjoyed owning new devices. They could buy them, show them to their friends or family members, and get satisfaction from that. They could experience happiness just from owning a cool new device or gadget. But as of today, I think things have changed, and consumers do not care as much about device or content ownership as they did in the past. From now on, customers do not need to own their devices or the content accessed through them. People these days like to carry less and less with them. They also like to own fewer things and enjoy the space they have within their homes, and enjoy the fact that they can live a more mobile lifestyle. As I said earlier, if there is one centralized dashboard, or my personal lifestyle homepage, which organizes all my information and is accessible anytime from anywhere, then I can feel more freedom and do not need to own something in order to access it and use it. These types of services are already coming into existence today, and they are ﬁlling the new desire for customers to feel satisﬁed without the need for ownership. You are suggesting then that not only all our information, content, and services will be going into the cloud, but devices and technologies themselves will also move in this direction. That is right. In a world like this, the FeliCa technology will be the interface between the physical world and this cloud, and the mobile phone or mobile communications device will be the hub for managing all this data and all of these interactions. Yes, that is right. But this type of future scenario obviously raises some very big concerns, especially in the area of personal privacy and security. I just recently reread George Orwell’s 1984. Although the opportunities we are discussing do sound incredibly exciting, I think there will always be people looking to exploit these technologies to the detriment of others. In listening to our discussion now, I cannot help but feel we are really talking about enabling this type of Big Brother

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oversight of personal lives through these new services. I am sure people who are not studying these technologies or services on a regular basis will simply feel scared by all of this. So if we do end up going down this path, where do you see the greatest threats emerging relative to an individual’s control over the information they share through such technologies? Will you explain how FeliCa is working to protect consumer and business data related to such threats? This, of course, is a very big issue for us to consider. Overcoming these types of security and privacy anxieties are fundamental to the diffusion and use of FeliCa and competing technologies. If we are unable to address these properly, we will never be able to develop the types of lifestyles I was explaining earlier. As a ﬁrst step, I think we ﬁrst have to pay attention to the unrealistic anxieties consumers have. For example, a lot of people have told me they love the idea of mobile FeliCa, but are too worried to use it because they might lose their mobile phone. My ﬁrst question to these people is Don’t you also have a similar risk of losing your wallet? And they say, Yes, but I tend to lose my cellphone more than I do my wallet. But this is actually not true. Many of my friends have lost their wallets, or had their wallets stolen on a crowded train. When you lose your wallet, it typically does not come back. But I will give you a surprising statistic. In Japan, 60% of lost mobile phones are returned. In addition, the FeliCa chip embedded in mobile phones has a locking system. We have already combined this with the GPS capabilities of the mobile phone, so it is extremely easy for the network operator to lock or unlock the FeliCa chip remotely when the customer gives them the permission to do so. We can even make the FeliCa chip completely inactive if the consumer makes this request. This all happens using the existing mobile network’s over-the-air (OTA) system. There is no need for extra technologies to be deployed or invented. We can do all of this today. So the fear of losing a mobile phone and somehow having money removed from the phone is an unrealistic anxiety. It is a myth we need to help consumers to overcome. Once they do this, the use of mobile FeliCa technology will enable them to enjoy a much easier daily lifestyle. That sounds like a very similar challenge to what American Express faced when they ﬁrst introduced the concept of the traveler’s check. They basically had to reposition the concept of money as unsafe, and traveler’s checks as a guaranteed way to keep control of your money even when traveling. While I do not have the exact numbers, I believe they were quite successful in this campaign to change consumer perceptions.

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That is it exactly. FeliCa is safer than your wallet. This technology offers you a safer option, and if in the odd chance you do lose your mobile phone and the information associated with your FeliCa chip, you can get that information back. The customer must be educated to understand this point, which is one of our main responsibilities right now. Once we are successful in conveying this message, it is up to the customer to make the choice to use this technology to help make their lives easier. I am sure there are many people who will say, Alright, I have heard your story, but I just hate new-fangled technologies. I am going to stay with my coins and paper money. These types of customers will always exist, and there is nothing we can do to convince them otherwise. But, again, we at least need to let them understand the facts so they can reach this conclusion outside the realm of unfounded myths. But in order to make this case, the underlying FeliCa technology must be secure in the ﬁrst place. Recently, students in Europe have published two papers that basically teach hackers how to crack the MiFare code. As far as I know, we have not seen similar news regarding FeliCa appearing in the media. Is it only a matter of time? No, I do not think so. FeliCa Technology uses a much higher level of security. Since the announcements about the cracked code, they have announced MiFare Plus as a more secure platform going forward. With FeliCa, however, we really do not need to worry about these kinds of security threats. FeliCa has been built using EAL4 Plus7, which is currently the highest recommended commercial security standard in ISO 15408. We know how great this technology is, but from the consumer’s perspective, they have no idea what EAL4 Plus means, or ISO 15408, for that matter. What all this technical jargon means is that if you really wanted to break the EAL4 Plus code we are using, you would need billions and billions of dollars. Would you like to spend this type of money and time to break this code? Of course, nothing is perfect, and this is why we continue to conduct research into new technologies that will further strengthen the security of our system and make the overall suite of services more appealing to all of our stakeholders. When you mention your stakeholders, it seems to be very clear that the entire industry is caught in a conundrum regarding which model to follow, a handset-based model or SIM based model for this type of technology. FeliCa is obviously working to convince the industry that the handset-based model is correct, while MiFare appears to be championing a SIM based approach. Are there any

Evaluation Assurance Level (EAL).

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differences for the consumer between these two approaches? Which one will ultimately win? Whenever a new technology is introduced that is truly epochmaking, customers will always get scared, or react negatively. When Impressionism was ﬁrst introduced, the entire art industry denounced it. When Galileo Galilei talked about the Earth revolving around the Sun rather than the other way around, he was put in jail. So there will obviously be fundamental disputes about new ideas and technologies as they are ﬁrst introduced. But from what I can tell, within 50 years after an important new idea or technology is introduced, these disputes disappear and people are comfortable using these new things or working with these new ideas. The issue is that nobody knows what the trigger will be to enable this leap to the new technology. And that is where we are today. In Japan, these new wallet technologies have just been introduced, and we have only had 5 years to work with them. On the other hand, the wallet as we know it has more than twenty seven hundred years of history behind it. Of course, it is going to take some time to overcome this long history. Obviously, there will be competing ideas for how to do this. So, it is important for all of us to have this kind of debate, and I think we are all searching for the application or set of applications that will trigger the leap from our current way of thinking about wallets, money, and personal identiﬁcation to these new technologies. Which stakeholder do you believe holds the keys to making this leap successfully? It is the content provider, of course. The reason why it has to be the content provider is that these are the people and companies who are most focused on enabling the customer to win. If the content providers can create applications or services that can convince the customer to both carry and use their FeliCa phone, then everything else is easy. In Japan, we have already made it so that people have the capability to use FeliCa technology on their mobile phones, as almost every newly launched mobile phone has FeliCa embedded. However, we continue to struggle to ﬁnd the real killer application for mobile FeliCa technology versus card-based FeliCa. A lot of customers know about the Osaifu Keitai, which means “wallet phone” in Japanese, but to be frank, I cannot say all of those customers are using this technology yet. So maybe it is JR East’s Mobile Suica application for train tickets and payments that will convince customers to switch to mobile FeliCa. Or maybe it will be other things like ANAs ticketless check-in, or the digital key example we discussed earlier. But it will be from

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one of these applications that we will see the leap from cardbased to mobile FeliCa happen. That is what is most important in Japan right now. Among these ideas, do you see any opportunities or innovations you consider to hold the greatest potential going forward? First, I want to be very clear in saying that I do not really care if the winning technology is NFC or FeliCa, Type A, Type B or Type C, or even Type D or E, for that matter. From the customer’s point of view, they really do not care about the technical details underneath the applications they are using. Most important are the things they are ultimately able to accomplish because of these technologies. So, for us to think the consumer is thinking “I would like to buy this phone because it uses Type B RFID” would be ridiculous, right? Instead, they would be thinking I would like to buy this phone because I can do this cool new thing. That way of thinking is much more important for the industry anyway, is it not? So our company’s biggest asset at this point in time is actually not the FeliCa chip technology itself, but our knowledge as a technology platform and our ability to develop and manage services on top of this technology using current over-the-air technologies. This is what separates our business from all of our competitors. At least on a commercial basis, we are the only company in the world with this set of capabilities. From our point of view, a chip is a chip, so which one would you like to use? NFC or Type A or Type B or Type C? We can do that, no problem. And our team of specialists can work with you to implement the most appealing service offering for end users. In the last chapter of our book, we introduce the Law of Simplexity, which mandates a simple front-end combined with a complex and comprehensive back-end. Within this framework, we believe, only those companies who effectively manage to accomplish both will succeed in the mobile industry of the future. Yes, you have hit exactly the right point. At this moment, once they have started using FeliCa technology either for train tickets, payments, or identiﬁcation, the customer really appreciates the added simplicity in their lives, as we take care of the complexity of these interactions and transactions in the background. However, the process of getting set up to use these services is still a very big challenge for the average end user to accomplish. People really do not want to do anything tedious, but the way the system is currently organized, it still takes some time and energy to get your phone set up to use mobile FeliCa technology. This idea of Simplexity remains one of the biggest challenges we have to overcome. For example, if you go to the homepage of

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JR East’s Suica service, ﬁrst you have to download the Suica application. And to do so, you have to register similar information as when you ﬁrst signed up for mobile phone services. From the customer’s perspective, this is a frustrating and redundant experience. So in thinking about a solution within the framework of your idea Simplexity, we are searching for ways to preregister users or to have the store clerks at the mobile phone shops quickly set this up for customers when they ﬁrst buy their phones. There could simply be a check-list that says, Do you want mobile ticketing services set up using Suica? Would you like electronic payment services using Edy? The phone shops could offer a discount or other beneﬁts to the consumer for signing up for services in this way. With these types of simple solutions in place, the entire sign-up experience would be painless for the consumer. This type of idea would most likely work in the short-term, but in the long-term we need to ﬁgure out an easier way for the customer to sign up for these types of services and to address more effectively the privacy concerns they may have in going through this process. Do you have any parting thoughts for what will bring FeliCa to the forefront of mobile business internationally? It will not be a system like Visa or Mastercard, but where FeliCa has enormous potential is in closed environments. Anywhere that a customer is in a hurry and needs a quicker interaction, FeliCa technology can be effectively applied. And anywhere they need to increase their mobility, or need the ability to access content, information or even other people from a mobile location, then FeliCa can be applied. Anywhere in the world? Anywhere.

CHAPTER 4

IMMUTABLE LAW NO. 4: THE VALUE OF TIME ZONES

Let us begin this chapter with a pop quiz. You will recall that we measured mobile content use across four distinct locations a couple of chapters ago. Please take a moment to rank how you think other people access mobile Internet content from the four locations listed below, from most often to least often: Locations A. B. C. D.

Work or school. While commuting between home and work (or school). Home. Leisure (out and about) time.

Your Ranking 1. 2. 3. 4.

(Most often) (Next most often) (Third most often) (Least often)

THE MYTH OF “OUT AND ABOUT” Usually when we conduct this exercise, our respondents’ rankings strongly reﬂect the notion of mobile content being used while on the move, in line with the following: The Six Immutable Laws of Mobile Business, by Philip Sugai, Marco Koeder, and Ludovico Ciferri Copyright © 2010 John Wiley & Sons, Inc.

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London, UK, 2005 Orange UK has developed what they call “boredom busters”— short snippets of video content designed to kill time while waiting for a bus. Kuala Lumpur, Malaysia, 2008 The global association of media publishers, IFRA, organized an industry conference with the title “Mobile Media for Content Consumers on the Move”. Standard thinking about mobile use has focused on these types of “on the go” or “boredom buster” content, for those times in between the more important things in life we have scheduled. However, research has shown a much different picture of where and when mobile Internet content and services are used most. Japanese consumers, for example, responded as follows: Women 1. 2. 3. 4.

Home. Leisure (out and about). Work–school. Commute.

Men 1. 2. 3. 4.

Work–school. Home. Leisure. Commute.

These results actually sync up very well with consumer research on the topic. Here are two examples: Bordeaux, France, 2002 In partnership with Orange, France, Game maker IN-FUSIO conducted a survey of mobile game players. The company found that 75% of them prefer to play at home from Friday to Sunday between 5 and 10 P.M. Up until now, the popular view was that mobile games were played for much shorter periods of time and while on the move. Tokyo, Japan, 2004 Fashion retailer Xavel discovered that many of its young female subscribers take their mobile phones to bed with them. After taking a bath, they read mail magazines and surf the Net to relax before going to sleep. Because more than one-half of Xavel’s product sales occurred between 10 and 4 A.M., the company called this period “golden time”. Our comparison revealed strong correlations between mobile use and location. That mobile Internet use adheres to the pattern of where people spend their waking (and even sleeping) hours makes perfect sense, since the advantage of the

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mobile phone over other communications platforms is the relatively constant connection it provides. While life in Japan undoubtedly has unusual elements, logic and common sense suggest that these percentages could apply to many other developed nations. Separating men from women shows more pronounced differences in overall usage location. Gender aside, however, 70% of mobile use occurred at “ﬁxed” locations, and the other 30% or so happened while users were roaming around. While the balance of use at ﬁxed locations varies widely between men and women, use while out and about was much the same. It seems that many people tacitly accept the myth that mobile usage occurs while we are roaming, and that we switch to another access platform when we are in a ﬁxed location. The results show a different picture.

MOBILE CONTENT USE IS NOT LOCATION- OR TIME-SPECIFIC To build a segmentation model for mobile Internet content use based on user location, we matched the use of speciﬁc content (e.g., email or weather news) with each location. Different content appears to inspire different use characteristics. The question driving our research was since usage varies throughout the day according to where users are, does location inﬂuence what type of content consumers are accessing? To answer that, we investigated what kind of content users focused on in speciﬁc locations as shown in Figure 4.1. Those locations included our four “macro” locations (home, work–school, leisure time, and commute), as well as sublocations (e.g., the kitchen, bathroom, bedroom, and living–dining area). The content types we looked at included email writing, e-mail reading, general news, business news, ringtone browsing and downloads, wallpaper browsing and downloads, and games. We also factored in the time of day (morning, afternoon, evening, and night) the content was used. We went in ﬁguring that if different content proved appealing in certain locations or at speciﬁc times of day, we could build a model showing that mobile content and services must be tailored to ﬁt each. Our results, however, did not support that idea. No deﬁnable usage patterns emerged for content, either by location or time of day. It appears that time and the surrounding environment did not automatically need to be factored into the design of mobile content and services. However, our results did conﬁrm what we already knew: The mobile phone is an empowering device, minimizing the inﬂuence of our environment on our actions and maximizing our ability to act anytime and anyplace. Just as we embrace or escape our environment with the content and services our mobile phones serve up, we take two approaches to content irrespective of location and time: In short, dramatic bursts of varying duration or with longer, dedicated attention. Because these interactions with mobile content can be more readily understood from the perspective of access time, we will call them “time zones”. These time zones

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Figure 4.1 Where male and female Japanese mobile phone subscribers use their phones (March 2007).

are not directly related to environment, but to how users interact with mobile Internet content based on their time constraints and information needs in such environments. Let us explore these time zones to understand their differences in more detail.

TIME ZONE NO. 1: IN-BETWEEN TIME Our lives today have become fast-paced and largely calendar-driven. We hustle between appointments and meetings, home and work, work and play. Even with an appointment book chock-full of important things to do, though, there is always “inbetween” time as we move from one thing to the next. By deﬁnition, the content and services we use during these bursts must be concise, easy to access and understand, and easy to drop and pick up again later. Enter the mobile phone. When you have got a few minutes of free time, the appropriate “in-between” content is at your ﬁngertips. As mentioned before, commuting in Japan usually requires riding on public transportation. Because Japan’s transportation systems nearly always run on time, one of ﬁrst and most successful mobile data services was to tell travelers the fastest, cheapest ways to get from point A to point B. These services provide accurate route information in seconds, typically including several options, travel distance, travel time (including the approximate time needed to transfer between trains or other modes of transport), and fares. A service called Navitime (see Fig. 4.2), for example, allows users to input their start point and destination and get back a list of the cheapest, most efﬁcient routes.

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Figure 4.2 You can get there from here, and Navitime shows exactly how to do it (Copyright © Navitime Japan Co., Ltd. 2009).

If an accident or service change occurs, they can ﬁnd an alternate route with the lowest level of impact on their commute. Navitime’s navigation services could be applied in other cities around the world. Whether they would succeed in other markets is open to question, but getting valuable information delivered in a quick, easily accessible, and easy-to-digest format would surely appeal to consumers during “in-between” times. Finding out the weather is an equally straightforward process. Wondering whether those clouds in the distance signal an afternoon rainstorm, or if the heat will rise? You can quickly and easily access today’s forecast, receiving enough information to answer your umbrella–no umbrella and jacket–no jacket questions. The content and services available through your mobile phone can also provide short mental “escapes” as you pass the time between appointments. For example, let us say you step into a taxi and during the 5 or 10 min to your destination you scan the latest world news headlines and see if your team won the big game yesterday. Texting is one of the mobile phone’s killer services and a universally used in-between time escape. Maybe you need to update your spouse on your weekend plans, or check in with friends. Because your mobile phone is within reach virtually any time, these exchanges can happen at any place and any time. “GOLDEN TIME” On the opposite end of the spectrum is “golden time”, a term we have co-opted from Xavel and the survey mentioned at the beginning of this chapter. Golden time is characterized by longer term, dedicated usage. When we have larger blocks of time available to focus on content and services, we explore and engage more, and for longer periods. In this time zone, content and services can have more depth and breadth.

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Many people, however, do not immediately associate this time zone with the mobile platform. The mobile platform is somehow assumed to be of lower quality than other platforms, so people use it only out of necessity. Popular logic says that the minute a more robust platform becomes available they will immediately make the switch. But the mobile phone has proven its ability to hold the attention of its users for longer term, dedicated sessions. Xavel’s survey of its site GirlsShopping.com found that most product purchases occurred between 10 P.M. and 2 A.M. IN-FUSIO Games and Orange, France discovered that users mainly downloaded and played games on their mobiles at home at night. Internal research conducted by mobile TV service provider Nanomedia in Japan revealed the most popular timeframe and venue for watching TV on a mobile phone was during the night at home. These results are surprising because people’s homes are usually littered with other entertainment options, including Internet-enabled PCs, large-screen televisions, and dedicated game machines. How can we explain the existence of golden time when these other platforms are obviously more robust than a mobile phone, and just as accessible? Let us investigate each example to see what is driving this behavior. Xavel’s GirlsShopping site, dedicated to tracking the fashion trends of Japan’s younger teen girls, began as a mobile-only site. The companion PC website appeared years afterward. GirlsShopping gave girls across Japan the lowdown on major fashion trends popping up in big-city fashion hubs, such as Shibuya or Harajuku, and with it the opportunity to be part of the “in” crowd. GirlsShopping also created different theme-based e-mail magazines to update subscribers on the latest looks in clothing, make-up, accessories, and other fashion elements. On top of that, Xavel created a forum where subscribers could voice their opinions and ideas about the usability of these products. Xavel built an m-commerce engine as well, allowing quick and easy purchase and delivery of everything discussed in the e-magazines. Why such a close match with golden time? Well, this is fashion. While the e-magazines may be read all at once or in sections throughout the day, reviewing purchasing options, blogging about them and making online purchases require more concentration than in-between times allow. So for Xavel, golden time developed as a distinctly different time zone for the purchase of fashion-related goods. The mobile platform also proved superior to the PC for such interactions because the new trends and conversations ﬂowing from them occur 24/7, 365 days a year. If pink nail polish is out of fashion at noon, no fashion-savvy teen need face the embarrassment of having lunch 1 h later with pink nails. Knowing the latest shift in the style paradigm right away allows these “in” consumers to avoid a fashion faux pas. The power of instant, ubiquitous communications raises the viability of the mobile platform above all others for such content. Golden time is naturally not limited to fashion. Any other content or service offering that requires intense consumer involvement will generate it. Similarly for gaming and TV content, while in-between time may allow for a round or two of game playing or quick glimpses of a TV program, dedicated use is typically required to get the full experience of rich content.

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We have developed three basic but essential steps for integrating this concept of time zones into valuable and effective mobile Internet content and service offerings.

STEP 1: CHARTING TIME ZONE NEEDS As with any marketing effort, we must begin by analyzing mobile content through the eyes of our customers, determining their basic needs and desires for our content or service offerings. We can then parse this further to understand their needs within each of the two time zones. To start, we need to list up those time zone speciﬁc needs. Using Xavel’s GirlsShopping.com as an example, we can extrapolate that customer interest would revolve around issues, such as self-expression, self-esteem, fashion knowledge, being part of a group, and shopping satisfaction. Looking speciﬁcally at in-between time, we can assume that consumers would need relevant and timely information to keep them connected to the fashion scene. Switching focus to golden time, it is reasonable to assume that these consumers would want to explore the many different products and services available for discussion or sale through GirlsShopping. Whether we have identiﬁed the exact needs of Xavel’s consumers is up to the company’s marketing research initiatives. For your own efforts, at least conduct some basic market research to determine the needs of your customers when interacting with your site, as well as more detailed requirements during in-between and golden times. This brief example shows that Xavel’s value proposition is clear and applicable across both time zones, so we can proceed to step 2. STEP 2: CHARTING TIME Do you have a new mobile content or service in mind, or are your current solutions failing to spark consumers? Our suggestion is to create one chart listing the content and services you offer that ﬁt in-between use scenarios, and another for golden-time situations. This will help you integrate our time zone theory into your development or revamp efforts. Separating your site’s content in this way reveals the relative weight you have been giving each time zone, and which elements of your mobile offerings appeal to consumers in speciﬁc time zones. If you only have “in-between” content, what elements can you add to encourage golden-time use? You can also identify whether your mobile site is built to handle content appropriate to both time zones. Brainstorming about Golden-Time Content As we mentioned earlier, 3 of the 10 most popular novels published in Japan in 2007 were written using a mobile phone and submitted to a mobile content site.

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Figure 4.3 Getting content to do double duty.

User-generated content is clearly not limited to short text messages or blog posts. Can you leverage similar user creativity for your content or service offering? If, on the other hand, your site features only golden-time content, what in-between offerings can you add to capture user attention while they are roaming? Additionally, check your results from step 1 to see if your content and service offerings truly match the wants and needs of your customers within the two different time zones. Do you need to develop other types or extend your existing offerings? Xavel’s GirlsShopping, for example, has mail magazines, a multilevel mobile site, and a variety of other services that make the site viable and valuable during in-between sessions. More robust product reviews, blogging, and mobile commerce elements provide this site with both the depth and breadth of content and services for lengthy golden-time interactions. With these insights in hand, let us move on to step 3.

STEP 3: STRETCHING TIME AND BLENDING CONTENT From the consumer’s perspective, the time zones we have created are not distinct. In fact, depending on time constraints and user needs, in-between or golden time can occur at exactly the same place and time of day. This ﬁnal step, in fact, involves developing blended content that can stretch across both time zones as depicted in Figure 4.3. Mobile content must be ﬂexible, based not just on the access device, but time zone requirements of the end user as well. For example as we show in Figure 4.4, an information-rich site, such as a news service would use a multitiered presentation. The top tier would display only headlines—quick snapshots of all top content the site currently features. The middle tier would show the ﬁrst one or two paragraphs of the stories, while the third tier offers the entire story. Many mobile news providers have already adopted this approach. Such an approach to information architecture perfectly matches the use scenario of both in-between and golden time, letting the user decide how deep to go.

ANALYZING A MOBILE TIME ZONE FAILURE

Figure 4.4

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Access levels for a news site story.

So, if your content and service offerings are more focused on in-between time, what can you add or expand on to make your site stickier? For golden-time content, how can you simplify elements to appeal to a shorter attention span during in-between time use? Following the three steps above, you can develop mobile content and services that match more closely with the actual needs and use scenarios of mobile consumers, providing them with both the robustness of available content and services to use, as well as the ﬂexibility to interact with such content based on their individual time constraints and needs. To see the impact of this three-step time zone analysis on a mobile content or service offering, let us analyze the ﬂop of one of the most highly anticipated killer apps for the mobile platform: mobile TV.

ANALYZING A MOBILE TIME ZONE FAILURE For many years, a great deal of hype and excitement surrounded the convergence of broadcast television with mobile devices. Operators and broadcasters around the world have invested billions of dollars to launch mobile TV services, with relatively minor success and not much of a return on their investments. Setting aside fundamental issues affecting the development of a proﬁtable and replicable business model for mobile TV, such as the structure of the underlying ecosystem and the physical limitations of mobile phone screens, let us begin our analysis by gaining a basic understanding of what TV content mobile consumers want. As we discussed earlier, mobile content and services can be separated into four basic categories: express, entertain, inform, and transact. According to broadcast industry logic, the needs for entertainment and information would appear to be the two main drivers for mobile TV content. More speciﬁcally, during in-between time such entertainment and information has to be short, but can be longer during golden

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time. Unfortunately, the needs for mobile TV content and services have not been deﬁned clearly enough. Because of this, the services developed to date have not adequately captured the attention of mobile consumers. Our recommendation would be to conduct some thorough analysis of ways in which mobile TV content and services could spark new consumer needs or desires. Additionally, we would suggest brainstorming sessions on how to integrate two elements (“express” and “transact”) into the value proposition of mobile TV. This may provide exactly the information needed to develop compelling mobile TV content and services. But at this point, let us adopt the current needs of “entertain” and inform” as the two main drivers of mobile TV consumers and proceed to step 2. If we were to plot most mobile TV service offerings into our simple chart from step 2 as we’ve shown in Figure 4.5, we would ﬁnd the following: Broadcast TV programs ﬁt safely within golden time because there is obviously more time for extended viewing. Additionally, consumers have the ability during golden time to click and interact with the data content streamed together with the TV broadcast content. Viewers can also browse electronic programming guides at leisure during golden time to locate other related programs, set prerecording priorities, or simply explore the upcoming list of TV shows. Finally, as broadcast TV content is mostly advertising supported, the ability to put more targeted ads in front of viewers is also clearly matched with golden time. In-between time, however, presents a problem. Traditional TV programming has a set schedule; in-between time is unscheduled. If you tune in to watch the news and ﬁnd a cooking segment on, for example, your mobile TV viewing experience will be unsatisfactory. One interesting tweak of mobile TV services in Japan is to record TV content onto a micro or mini SD card at night and watch during various between-time occasions the next day. In this scenario, the TV data stream is still accessible, so there is an opportunity to capture some in-between time “clicks” to more detailed information related to the mobile TV content. Electronic program guide (EPG) content can be viewed in shorter bursts as well, which is actually why the EPG concept was originally developed.

In-Between Time

Current content that fits this time zone 1. Recorded broadcast TV programs 2. Broadcast-related data content 3. EPG content

Figure 4.5

Golden Time

Current content that fits this time zone 1. Broadcast TV programs 2. Broadcast-related data content 3. EPG content 4. Targeted ads

Mobile TV time zones.

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So we can see from this example that mobile TV services have not yet evolved to match directly with in-between time, although end users have begun to devise ways to make this match more effective. The industry has no valid solution to this issue. Streamed, on-demand television broadcasts that convey snippets of information as opposed to the entire broadcast are an important ﬁrst step, but they do not go far enough. To address this issue in the spirit of the time zone analysis, step 2 requires deﬁning the needs of in-between TV programming viewers. Are there additional communications capabilities that we could bundle with TV programming, such as mail magazines, or “behind the scenes” updates? Can we simplify or modify mobile TV content to make it more appealing in in-between usage scenarios? Perhaps we could consider recording and segmenting programs by length, the need for accompanying audio or relative importance to the viewer’s current time or location rather than by their ratings. Additionally, we can explore ways of making current mobile TV programming more appealing to golden-time users. What incremental services or capabilities could be added to the current mobile TV service suite? One recent breakout success in Japan is Nico Nico Douga, which lets users make text comments on top of online video content. Imagine YouTube videos with textbased grafﬁti. Broadcast television remains outside of the Nico Nico Douga realm. But with tens of millions of mobile phone subscribers given the capability to directly interact with broadcast television content through their mobile phones, the opportunities for increasing mobile TV’s golden-time appeal seem legitimate. Moving to step 3, we ﬁnd that pure broadcasts of mobile TV content are not ﬂexible. The same content is broadcast or recorded and provided for later playback in only one length and format. In light of our previous discussion, the logic of this approach is suspect. Yes, such an approach to broadcast television content works when you are beaming content to people’s living rooms. But even though we are living in a global village, we cannot treat the world like our own living room just yet. Just as the mobile phone is clearly different from a plasma TV, should the formatting and approach to the content delivered to mobile phones not be different? How can we segment golden-time content to appeal more openly to in-between viewers? The easiest conclusion would be to build tiers of TV content (the news in 10 s vs. 10 min). How about a blending of media, such as giving each program a clickable, text-based storyline? Instead of watching TV while in-between, we can “read” it, and then click on the short links to view a small segment of that episode. How else can mobile TV content be stretched to appeal across both time zones? To answer that, let us return to the basic consumer needs we outlined in step 1. As we integrate the ideas of self-expression and communications into the suite of mobile TV offerings, previously undeﬁned consumer needs emerge. Our process should be iterative, cycling back and forth through all three steps until a clear value proposition is deﬁned, and content and services developed that clearly match with the use situations of mobile consumers. While we have applied

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this approach to the very broad topic of mobile TV, we have done so to suggest that this type of analysis can be applied to any type of mobile content and service. Done correctly, and in the spirit of our time zone discussions, the results of these efforts are sure to provide you with the insights and knowledge necessary to make your mobile content and service offerings valuable to consumers and proﬁtable for you, as well as appealing across the full spectrum of time zone use scenarios. While more complicated models for analysis of mobile content exist, we believe this simple three-step analysis of content and services provides a valuable background against which to judge the viability of current offerings. In addition they identify the areas for enhancement that will appeal most to mobile consumers.

THE TAKEAWAY In this chapter, we presented a simple but powerful toolset for analyzing your mobile content based on end-user requirements. Most people view mobile phones as devices to use while roaming; we hope we have changed your mind about that. Since people typically spend far more time in ﬁxed locations than roaming, they mostly use their mobiles there. While mobile consumers appreciate “in-between” content and services, what is geared for “golden time” should take priority. We are conﬁdent that having a ﬁrm grasp of the nature of both user time zones will allow you to develop and offer more valuable and effective content and services in mobile markets worldwide. Expert Insight Chiaki Fujino President NANO Media NANO Media Inc. was formed in January 2003 and was a merger between two companies, Re-com and Irate. Re-com was one of the ﬁrst companies to create fan-sites for entertainment artists on the mobile platform in partnership with Fuji Television, Irate was the ﬁrst company to provide EPG (Electronic Programming Guide) contents to mobile phones. The newly formed NANO Media was created to provide seamless integration between EPG and related artist information through one-seg mobile phone TV services. Chiaki Fujino served as the President and CEO of Irate from January 2002 and was named President and CEO of NANO Media from January 2003, which is a role that he

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continues to hold today. NANO Media completed its Initial Public Offering in the Tokyo Stock Exchange’s Mothers Market in November 2005. Prior to NANO Media, from 1999 to 2001, Chiaki Fujino served as a senior executive of the Aucnet, a company that provides the largest Satellite TV-based used car auction in Japan. In 1975, Chiaki Fujino joined ITOCHU, and from 1984, became the initial starting member of JSAT Corporation, currently the largest Satellite operator in Asia. During the start-up phase of JSAT, he was closely involved in projects related to the integration of broadcasting and communications services for SKY PerfecTV and other CS Broadcasting Channels. Mr. Fujino graduated from KEIO University. Six Laws

Mr. Fujino

Six Laws

Fujino

Before we start, for executives outside of Japan who may not be familiar with your company, can you provide us with a brief overview of NANO Media, and your efforts related to the mobile platform? The NANO Media business can be grouped into two categories. The ﬁrst is our unit, which develops fan-club sites for entertainers, and the second is our unit, which develops television program listings. We are the ﬁrst company in Japan to have developed the capability to display the Electronic Programming Guide (EPG), which is the ofﬁcial name for this type of television program listing, on mobile phones. After we developed this capability, we created a new technology that allows consumers to program their phone or similar mobile television device to record a television program using Japan’s One-Seg technology. We have also created a number of other innovations, including the ability for consumers to download ring tones of the music they are listening to on their mobile phone’s FM radio tuner or even to purchase the full CD immediately from their phones. In this way, we are the ﬁrst company to provide these types of coordinated services on the mobile phone platform by integrating the capabilities of both communications and data transmissions. In managing these different types of mobile services, have you been surprised by the various ways consumers interact with media content on their mobile phones? When we look at consumer behavior on our fan club sites, which have a very large number of members, we have the ability to watch how these subscribers move between different content areas, and how many of them are doing so. One of the things we have found most surprising is the powerful impact that television commercials on the mobile phone actually have. For example, when a television commercial starts, the number of people accessing the fan site afﬁliated with the talent in that commercial tends to increase in real time, and when the commercial is ﬁnished, usage tends to decrease. We originally thought that the impact of television had declined,

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Six Laws

Fujino

Six Laws

Fujino

especially for younger consumers, but when we look at the actual facts and analyze the usage data that we collect, we can see the very strong impact of advertising on consumer behavior. In this chapter, we have spoken about the concept of two different “Time Zones”. The ﬁrst is when users have short bursts of “in-between-time” usage, and the second is when they are spending more dedicated time watching and viewing mobile content and services. Can you give examples from speciﬁc Nano Media mobile services where you have seen such usage variations? When I look at the usage statistics for one of the most popular types of television content that people watch on their mobile phones, it would be the WBC, World Baseball Classic. Because most all of these important games are broadcast during the daytime, people actually tend to leave these programs displayed during meetings, or while they are working. Baseball games were primarily what you would classify as “in-between” content in that users would check the progress of the game periodically while they were at work. But because this baseball series has become a national event, society became permissive about watching these games during working hours. Because of this, we can now consider this to be golden-time content, even though it is being watched during the day as opposed to the 10:00 P.M.–2:00 A.M. period, which you introduced in this chapter. For in-between time content, I have personally experienced how vital the mobile phone and its services can be in certain situations. When I was in the train station in Tokyo, a big earthquake struck. The train I was going to take suddenly stopped, and I wanted to get information to understand what was happening and when train services would resume. But I could not get this information because all mobile sites were overloaded from too many other users trying to access content in the same way at the very same time. But because One-Seg mobile television services were available on my phone, I could still access the broadcast television content and get the information that I needed to understand what was happening. I think this is one example of how mobile television content can be used during in-between times. Now that Mobile TV (OneSeg) has been available in Japan for a while, have you noticed any differences in usage or consumption patterns of Mobile TV content? Are consumers shifting their usage or are businesses creating new complimentary services that are adding further levels of value to the Mobile TV usage experience? I do not think so many new ways of using the mobile phone and Mobile TV have appeared yet. This is because the same programming available via terrestrial television broadcasts is also available through the mobile phone. So we are seeing similar

THE TAKEAWAY

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Fujino

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audience-behavior tendencies across these two access channels, because there is no unique or differentiated content at this time. Maybe one possible difference is the fact that waterproof OneSeg tuners are now being sold, so we can guess that some people are watching television while taking a bath. We also conducted some research recently to better understand how consumers were using Mobile TV. For this study, we actually gave free handsets to a panel of volunteers. We received very interesting results from the research. Perhaps more in line with your Golden Time idea (from 10:00 P.M.) than my previous WBC example, we also found that people were using mobile TV earlier in the night than we expected, with the average viewing time being 10:00 P.M. We had expected usage to be later in the night, mostly at midnight when people were lying in their beds. We also found that the types of content people were watching were mostly variety shows rather than news or sporting events. Based on these research ﬁndings, in the future when television program commercials are created that are unique to the mobile platform, I would expect to see even more interesting changes in the time of day and types of content that people would be interested in watching via their mobile handsets. Based on your experiences in the Japanese market and your knowledge of the global mobile industry, what do you feel are the most important trends in the mobile industry today, and how must international business executives be thinking about integrating these into their overall plans and strategies going forward? The most important trend that I see is related not only to One-Seg mobile television broadcasts, but also to high-speed access through LTE(3.9), ISDB-Tmm, or Media-FLO, which will be used to deliver video and other types of media in the future. When these technologies diffuse, we will have increasing opportunities to create focused, niche offerings tailored to speciﬁc subscribers. So we will surely see a time when advertisements are targeted not by demographic segment, but speciﬁcally to each individual.

CHAPTER 5

IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

As mobile sites evolve in Japan, they are combining to create powerful new models of content and services that capture the hearts, minds, and money of Japan’s mobile consumers. This blending had been promoted as Web 2.0 elsewhere, but in Japan, for the mobile platform at least, this was simply the most effective and proﬁtable direction for mobile content and service providers to take after consumer adoption of standalone content and service offerings had matured. While the West proudly proclaimed the advent of Web 2.0, mobile consumers in Japan have been using blended content and service offerings since 1999. The Web 2.0 concept gave birth to new content and ways of using the Internet: mashups of existing information (e.g., combining pictures, maps, and GPS information), collaborative content creation and distribution, making friends and creating new interest groups, posting homemade videos, and inhabiting and even conducting business in virtual worlds. Looking back at the Web 2.0 movement, one paradigm shift this produced was to change the consumption of online content from a passive activity to an active one. Patrick Barwise, professor emeritus of management and marketing at the London Business School, calls this “leaning forward” versus “leaning back”. “Lean forward” content has transformed the Internet into a space where users create their own content and make it into a social hub that empowers individuals. This movement has spawned services related to social networking, photo sharing, video sharing, and social bookmarking that have attracted millions of users and captured the attention of the global media as the poster children for the next-generation Internet. The Six Immutable Laws of Mobile Business, by Philip Sugai, Marco Koeder, and Ludovico Ciferri Copyright © 2010 John Wiley & Sons, Inc.

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WEB 2.0: NOTHING NEW FOR JAPAN Web 2.0 development was well under way and proﬁtable in Japan 6 years before O’Reilly crafted his famous deﬁnition of the phenomenon. But as we indicated in Chapter 2, Japan has always been considered a special case, so developments in the mobile platform here were largely ignored. When the Web 2.0 boom started in the United States and Europe, Japan already had an advanced broadband and mobile net infrastructure and a sophisticated “ecosystem” of carriers and service providers based on shared revenues. Japan created its own next-generation ﬂavors rather than copying existing Web 2.0 services from the West. Japan had already developed effective and lucrative Web 2.0 business models, and has evolved beyond these to what the West may eventually call Web 3.0. Our key message for this chapter is that proﬁtable business models for Web 2.0 exist beyond advertising. In Japan, these models have developed through a strong synergistic relationship between the PC Internet and mobile Internet. It is interesting to note that the mobile platform was the main driver for Web 2.0 in Japan, not the PC—the opposite of the environment in the United States and Europe. This does not mean that every successful service launched in Japan appeared on the mobile platform ﬁrst and then migrated to the PC. Instead, operators of these services understood the power of the mobile channel to power the rapid growth and popularity of their services. In this chapter, we will present several case studies from 2008 that show various approaches Japan’s hottest and most signiﬁcant Web 2.0 (or better, Web 3.0) services used to attain strong revenue and subscriber growth. We want to highlight how the mobile channel empowers consumers, which we believe was vital to the success of Web 2.0 services, and those that will evolve from them in markets outside Japan. We use these as examples of success within the context of their time. As with any case study, changes will no doubt have occurred. Irrespective of the differences in market share, subscriber numbers or even the fate of these companies, however, we include them to better illustrate our key points rather than celebrate them as “ultimate success” stories. As we explore the proﬁtable, mobile-speciﬁc business models that have emerged in Japan over the past decade of robust mobile Net use, please note that many of these services do not depend on advertising revenue as their sole source of income, which has helped them to develop more valuable services for their customers and stakeholders. BLURRING THE LINES Social Networking Services from Web to Mobile (mixi, Gree) Social networking services (SNSs) in Japan started appearing around 2002 or 2003, and over 300 appeared during the next few years. These platforms ranged from general

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services like GREE and mixi to special-interest networks like Pachiring, dedicated to pachinko lovers, poshme.jp, for Japanese pop idol lovers, and others catering to an adult audience. Mobile was a vital outlet for SNS platforms right from the start, and constitutes their biggest growth factor. In less than 3 years, the user base for social networking services grew to an estimated 20 million users, meaning around 15% of Japan’s inhabitants are SNS users. Mixi (Convergence SNS) The shining star and poster child of the Japanese digital economy is mixi, which launched in February 2004 (Figure 5.1). According to the Impress R&D survey Keitai Whitebook 2008, mixi boasted a whopping 81.8% share of the market, making it Japan’s most successful SNS service at that time.8 Mixi reached ~15 million users in mid-2008, and these users were active, with the average user spending around 2.5 h on the service a month according to an August 2008 mixi IR report. Anyone wishing to join mixi, by the way, must be at least 18 years old and be invited by an existing member. 8

(Keitai Whitebook 2008, p. 134, Chart 1-11-13, Impress R&D 2007).

Figure 5.1

Mixi’s PC site (copyright © mixi, Inc., 2008).

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Mixi has also turned into a powerful nexus for Japanese men and women in their twenties looking for romance. So many lonely hearts have found each other through mixi, in fact, that a new word, mixicon, is used to describe a couple who met through the service and got married. It may not be a coincidence that when the company went public in September 2006, the stock price doubled within 12 h. Mixi’s main functionality is similar to other social networking services like MySpace. Users can post personal proﬁle pages, write diaries, connect with other users, upload pictures, create communities, and so on. They can also postreviews of books, music, and movies that are linked to Amazon Japan; the reviewed items are available for instant purchase. Mixi Station, a feature application launched in early 2007, tracks user listening habits in Windows Media Player or iTunes and uploads the data to the mixi music section. Other users can browse the tracks their friends and communities are listening to, and buy them through iTunes. Music is a major part of mixi’s content offerings, and includes mixi Radio, a personalized radio service based on the user’s listening preferences. Mixi also introduced video upload functions, linking up with YouTube Japan to better integrate video and diary functions and help YouTube increase its local content. Mixi Mobile Mixi launched its ﬁrst mobile site shortly after the PC version (Figure 5.2). In the beginning the functions of the mobile site were limited, such as checking the activities of mixi friends and blog entries. By late 2008, it offered nearly all the features the PC site did, including video content.

Figure 5.2

Mixi PC and mobile personal proﬁle page (copyright © mixi, Inc., 2008).

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Figure 5.3

Mobile SNS leaders (data from Keitai Whitebook 2008, Impress R&D 2007).

At ﬁrst, users saw mixi Mobile as a supplemental service. That changed quickly, however: statistics that mixi issued in August 2008 said its PC site averaged ~ 4.81 billion page views per month, but the mobile site received > 8.85 billion.9 The most inﬂuential mobile user group is 20–24 years old (40%). According to R&D Japan, mixi Mobile is the second most bookmarked mobile site in Japan, and the second most accessed mobile site among female mobile users, just after Yahoo!10 (Figure 5.3). GREE (SNS with Added Services) GREE, another Japanese SNS launched in February 2004, had approximately 7 million users in October 2008.11 Like mixi, GREE has blogs/diaries, photo and video albums, communities, and reviews. Unlike mixi, GREE offered advanced functions like video sharing from the start. In November 2007, the service added a special section for fans and artists that combines music, music videos, and artist, and fan blogs. GREE Mobile also started to offer location-based services that use the GPS chips many Japanese handsets contain. In 2008, GREE started to offer casual games, a move that helped the service more than double its registered members within a year.12 GREE Mobile In 2008, GREE Mobile (Figure 5.4) became the number three mobile social network with ~11% of the market.13 There were only minor differences between mixi and 9

(Mixi, Inc. IR Report, August 2008, FY2008 First Quarter). Keitai Whitebook 2008, Impress R&D 2007. 11 GREE press release, October 20, 2008. 12 GREE press release, October 20, 2008. 13 Keitai Whitebook 2008. 10

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Figure 5.4

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Au one GREE screenshots (copyright © KDDI Corporation, 2008).

GREEs mobile services and basic functions when it came to social network functions. There was one big strategic difference, however, and that is how GREE worked together with the mobile carriers. Mixi had long tried to remain independent from the carriers, while GREE was very open to team up with them. Let us look at how this has played out. Au One GREE (SNS Meets Carrier; Total Ecosystem Integration) In November 2006, Japan’s number two carrier, au one (KDDI), integrated GREE in its overall mobile services, making it the ofﬁcial SNS engine of au networks. They rebranded the platform as “EZ GREE”, following the “EZ” branding of other au services. When au changed its name to au one in September 2007, the name changed to au one GREE. After a rather slow start, au one GREE grew dramatically. In 2008, the service had around 2 million registered members; according to a January 2008 GREE press release, that number had doubled in less than 6 months.14 Au one GREE was always free, open to all au one users, and no invitation was necessary. From the start, au one GREE offered extra features that GREE Mobile did not, such as games, user-generated content (questions and answers, Wikipedia) and fortunetelling. The GREE platform is tightly integrated into au one’s mobile service ecosystem (Figure 5.5). It seamlessly interacts with other au one offerings, such as LISMO (music service), MyAlbum (picture service), MyBlog (personal mobile blog), Avatar (an avatar service), and MySchedule (social calendar). Users can easily add their MySchedule calendar to their au one GREE entry, insert pictures from MyAlbum, or click on music reviews and directly download the songs through LISMO. They can also use their au one avatar on their proﬁle page. Au one GREE also offers location-based services, such as location-speciﬁc communities and an 14

GREE press release, January 28, 2008.

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Figure 5.5

Au one GREE is an integral part of au one’s ecosystem.

integration into au one’s GPS navigation service, au one Naviwalk. Unlike mixi or GREE Mobile, all revenues stay within the carrier’s ecosystem, strengthening the user-carrier bond. KDDI obviously views social services, such as SNS platforms as essential to succeeding as a mobile carrier. Mobile Drives GREEs Growth Mobile has been GREEs main driver. After au one, GREE Mobile became part of the ofﬁcial menu of DoCoMo and Softbank Mobile in 2007. Since then its overall user base has increased more than sevenfold from under 1 million to over 7 million.15 The GREE received over 2 billion page views monthly on the mobile platform alone (GREE media data, January 2008), and according to a December 2007 corporate announcement was the fastest-growing SNS service in Japan at that time, averaging 10,000 new users per day. Nico Nico Douga (Advanced Video Sharing Meets Convergence and Afﬁliate Marketing) Established in December 2006 (Figure 5.6) by a company called Niwango, Nico Nico Douga (Smile Videos) is a service with a Flash-based interface that allows users to 15

GREE press release, October 20, 2008.

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Figure 5.6 Nico Nico Douga’s website (copyright © 2008, Dwango Planning and Development Co., Ltd.).

embed comments directly onto videos in real time. Other users can see the comments and add their own. The service has become especially popular among Japanese otaku (geeks) because of its originality. Niwango’s main targets are people who regularly visit 2-channel, a bulletin board community in Japan with millions of users. Only 2 months after launch, Nico Nico Douga was getting 100 million page views per month, making it one of the fastest growing websites in Japan. An August 2008 Niwango investor relations paper said the service had over 8 million registered members.16 In the beginning, Nico Nico Douga used YouTube as a video platform. At the end of February 2007, however, YouTube shut Nico Nico Douga out. Two weeks later, Nico Nico Douga announced the launch of its own video-sharing site. Users are required to register at Nico Nico before they can view any videos. There are two membership types—free and premium, with the latter costing ¥500/month. Premium members can watch high-quality movies and get more sophisticated comment management tools. Nico Nico Mobile In August 2007, Nico Nico Douga launched a mobile version for Japan’s three biggest carriers (Figure 5.7). In less than 6 months, the company claimed a user base of over 16

Divango result brieﬁng for the 9-month period ended June 2008; August 7, 2008.

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Figure 5.7 The Nico Nico Douga video player on the PC (left) and the mobile phone (right) (copyright © 2008, Dwango Planning and Development Co., Ltd.).

900,000, including 170,000 premium users, reaching over 2 million by mid-2008. Users can watch and add videos via their mobile phones, share them with other Nico Nico Douga PC and mobile users, and edit their list of favorite videos. A mobile-only search keyword ranking is also available. Nico Nico Market is an interesting afﬁliate tool for the mobile that allows uploaders to attach related products to a video from a product list. Other users see these products when they watch the video and can click on the links provided to buy them. When a user buys a product, the uploader receives a share of the revenue. It is interesting to note that YouTube began pursuing a very similar revenue concept worldwide in October 2008, teaming up with Amazon and iTunes. Mahou No Island (SNS and User-Created Mobile Content Brought to “Life”) Mahou no Island, which translates as “Magic Island”, started as a free homepage service for mobiles and PCs in 1999. With the rise of DoCoMos i-mode, new users ﬂocked to this easy-to-use service. Mahou no Island made it possible to develop a personal homepage for mobile phones without the need of a PC, and at no cost. The company soon expanded into the booming MIDI ringtone market, and later into the voice ringtone market. Mahou no Island acquired around 6 million registered users and generated roughly 3.5 billion page views per month by October 2008.17 17

Mohou no Island press release, October 15, 2008.

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User-Created Content The key strategic move Mahou no Island made was to let users create content in addition to the usual homepages, proﬁles, bulletin boards, and other communications. This was essentially an SNS platform long before companies like MySpace hit the scene. Mahou no Island’s next move was to offer users a way to write and upload novels using their mobile phones. Other members could read these books, write comments, and rate them. The response was so positive that the company introduced its “Mahou no Toshokan” (Magic Library) service in 2006. The Magic Library platform not only gave avid amateur writers a literary launch pad, it allowed them to circumvent the standard writer–agent–publisher model entirely. Now anyone could write and publish a digital novel using a mobile phone— and they did, in droves. By October 2008, the library contained > 1 million novels, most of them written on mobiles. From Virtual to Real The most astonishing development was yet to come. Working with two Japanese publishers, the company decided to print the novels that ranked highest. Since the local market for ﬁction had been sinking since 2004, this looked like a foolish move. Wrong. Mahou no Island started a new book boom in Japan. The company has published > 35 titles and sold > 7 million books. Koizora, one of Mahou no Island’s most successful titles, sold > 1.2 million copies. From Novels to Music Following the tremendous success of Magic Library, the company introduced a new service in 2007 called Island Music Factory. Amateur and independent professional artists can upload, promote and publish their work on the site and share it with other users. Japan’s biggest music label, Avex, released a CD in January 2008 by one of the artists they discovered there. From Mobile Novels to Mobile TV Dramas In April 2008, the platform expanded into mobile video, adding a service called “Mahou no Island TV”, which features video dramas based on user-generated novels. To date, seven novels had been made into special mobile TV dramas. The ﬁrst, teddybear, was also published on DVD in December 2008.18 Mahou no Island is a perfect example of how the mobile platform can serve as a content creation and distribution tool, creating trends and even revitalizing “old media”.

18

Mohou no Island press release, October 15, 2008.

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Figure 5.8 The main screen of Mobage-town, avatars, and games (copyright © DeNA Co., Ltd., 2009).

Mobage-Town (SNS Meets Casual Gaming, Local Services and an Intelligent Business Model) Mobage-town (short for Mobile Game Town) is a platform site offering free single and multiplayer games, SNS functionality, location-based services and avatars (Figure 5.8). The mobile-only service started in November 2006 and grew to > 11 million registered users by mid-2008, doing so in less than 2 years. It took mixi > 3 years to reach this stage (PC and mobile combined). One reason is that mixi is invitation-only, but Mobage-town’s growth rate is still impressive.19 DeNa Co. Ltd. is the company behind Mobage-town, one of the most interesting mobile Web 2.0 services in Japan. All major carriers have offered Mobage-town as an unofﬁcial service. In 2008, Mobage-town was the second most popular mobile SNS after mixi, with a market share of ~ 13%, and was the most accessed mobile site in Japan among teenage male users.20 Casual games are the lure at Mobage-town. The platform offers over 100 different games and adds several new ones each month. Most are simple one-button games, and can be played on most Japanese handsets. Mobage-town’s basic SNS functions are similar to those of mixi and GREE. Registered users can create their own proﬁle page displaying their interests, hobbies, and a personal avatar, as well as a room for the avatar to inhabit. This room is placed on a virtual map of Japan that deﬁnes the “virtual neighborhoods” of the users. Each user also has a diary in which he/she can post text entries, pictures, and videos. Other users can comment on the entries and add the poster to their friend networks. The community functions allow users to create and join online communities and seek out other users with similar interests, similar gaming proﬁles, or those who live close to them.

19 20

DeNa IR Report 2008, ﬁscal Q2 results. Keitai Whitebook 2008, Impress R&D 2007.

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A Clever Business Model The off-the-shelf avatars in Mobage-town are very basic. Therein lies one of the business model’s key elements: To personalize their avatars, users need to purchase clothes or accessories using a virtual currency called Moba-Gold. They receive a limited amount of virtual cash when they join that can be spent on dressing up their avatars or to get access to in-game items like golf clubs for a golf game or armor for a role-playing game. To boost the word-of-mouth effect, Mobage also gives credits to users who introduce their friends to the platform. One way to earn Moba-Gold is by shopping at sponsor sites, which are heavily advertised throughout the platform. Sponsor offers range from ringtones, mobile games, and fortunetelling all the way up to private loan offers. Users can also receive points by answering surveys on sponsor sites or by participating in online campaigns. DeNa’s subsidiary Pocket Afﬁliate handles advertising and afﬁliate site management for Mobage-town. Mobage-town recently introduced location-based advertising services that further focus its revenue activities. User-Generated Content Like Mahou no Island, Mobage-town offers a service that permits users to write and upload novels or read novels submitted by other users. Within less than 6 months, >280,000 novels had been published. Mobage-town also has a service called “Music Creators Corner” where subscribers can submit original music and a jacket photo. Users can search for artists, browse through the jacket photo art, comment on and rank the music, and even ﬁnd an artist who lives close to them. Supporting young local artists is one of the main ideas behind the concept. The artists can earn points based on how many registered fans they have and how often users listen to their songs. Within 6 months after the launch, ~ 2500 songs had been uploaded to the platform. Mobage-town became one of most successful mobile Web 2.0 platforms in Japan in 2008. It also became the most active mobile site in terms of page views, outperforming mixi Mobile and Japan’s number one mobile portal, Yahoo! Mobile (Figure 5.9). The secret of its success: simplicity. Lismo (Music Meets Convergence and SNS, Fully Integrated into a Carrier Ecosystem) Almost any conversation about online music and music downloads touches on Apple and its market-dominating iPod and iTunes. While iTunes has an impressive market share of 70–80%in most countries, Japan remained different through 2008. Over 80% of all music downloads were done through the mobile phone—what are called “over the air” downloads. Connecting a music player to a PC and then downloading

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Figure 5.9 Comparing access levels between Mobage, mixi Mobile and Yahoo! Mobile (data sources: DAC Group Mobile Media Guide 2008.10; mixi FY2008 First-Quarter Presentation, June 2008).

songs to the device—known as “side-loading”—does not seem convenient or simple to Japanese consumers. Consequently, iTunes has a local market share of only ~10–15% for music downloads. Digital music on mobile phones has come a long way since the simple MIDI ringtones of 1999. Japan’s second-biggest carrier, KDDI, was one of the ﬁrst movers in this new market. It was also the ﬁrst to introduce full-track downloads via mobile phones in 2004. KDDI took its music service to a new level and introduced the LISMO! Listen mobile service in March 2006 (Figure 5.10). After less than 18 months, the service announced its 50-millionth song download, and over 200 million by May 2008.21 LISMO was the ﬁrst service to offer a seamlessly integrated PC–mobile platform for digital music in Japan that included advanced community functions. Like iTunes, LISMO has three main components: music management software, called au Music Port software; an online music store, au Music au; and a mobile music player (in this case preinstalled on “au one” mobile handsets). Subscribers use their mobile phone or PC to manage their music library and back up songs and videos downloaded on their mobiles to the PC. They can also convert CDs on the PC and transfer them to their mobile phone and transfer tracks and music videos purchased at the PC music store to the mobile phone. The music can even be streamed from the phone or PC to LISMO-compatible AV equipment. LISMO is not just a music software solution. Users can back up, synchronize, and transfer personal data between their mobile phone and PC, as well as import it into their personal blog (au one MyBlog) or other au one services like MySchedule, and share it with other au one users. 21

KIDDI press release, May 7, 2008.

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Figure 5.10 The main screen of LISMOs PC client (copyright © KDDI Corporation, 2008).

Figure 5.11

Utatomo mobile screenshots (copyright © KDDI Corporation, 2008).

This means, for example, that a user can back up and manage all images taken on the mobile phone with the PC version of the LISMO music manager. The pictures can also be stored online, added to the user’s LISMO personal proﬁle or published on the person’s blog. The same can be done on the mobile phone. LISMO also offers a simple but powerful music component called Utatomo (Figure 5.11), which lets users create personal proﬁles and share their current playlists. They can also search for others with similar music tastes and contact them

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directly through LISMO. In addition, they can write reviews of music they have purchased or listened to, join fan communities, and even book concert tickets. EZ Digital Radio is another intelligent example of the tight integration between LISMO and au one. Mobile users can listen to FM radio on their phones and see the names of the track and the artist being played. They can then buy the song through LISMO. LISMO is an integral and clever part of the au one ecosystem. It is closely interlinked with other au one services and Web 2.0 applications, and provides true added value to au one users (Figure 5.12). KDDI presents LISMO as an example of its move toward ﬁxed-mobile convergence, turning the mobile phone into a personal gateway device. As KDDI Associate Senior Vice President Makoto Takahashi puts it: “ … in our mobile phone operations we offer “LISMO,” enabling users to save music downloaded by mobile phone onto their home PC. The service also enables users to do the opposite: they can transfer music downloaded from the Internet using their PC and listen to it on their mobile phone. If we extrapolate this idea a little further, it could become possible in future to connect a mobile phone to a television to watch video ﬁlmed using the phone while out, or to connect a phone to a car dashboard display for navigation. With this type of potential, I envisage FMC bringing changes that used to be in the realms of science ﬁction. In short, the mobile phone becomes your passport—your personal gateway—to a diverse variety of services.” (Source: KDDI 2007 annual report)

Figure 5.12 LISMO, a convergence PC–mobile service integrated into the au one ecosystem.

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In September, au one introduced “au box”, an entertainment set-top box designed speciﬁcally for mobile users. They can bring mobile phone LISMO content to the TV, watch videos, or just listen to downloaded tracks on the system’s built-in speakers. It is also possible to rip CDs, watch DVDs, and connect the box to the Internet for web surﬁng, as well as directly download LISMO video and music. Downloaded content can easily be exchanged between the box and the mobile phone. Part of KDDIs of ﬁxed-mobile convergence concept, it eliminates the complexity of using a PC.

S!Town (SNS Takes Virtual Mobile and Adds Multiuser Gaming) Softbank Mobile offers an interesting mobile platform called S!Town. S!Town blends the typical SNS elements with casual and multiuser gaming, instant messaging, avatars, and a small element of Tamagotchi in a three-dimensional (3D) virtual environment (Figure 5.13). The service launched in October 2006 as a cooperative effort between Softbank, Gemini Mobile, and Bandai. Because of its rather demanding hardware specs, S!Town was only available on a limited number of handsets at ﬁrst, but most of Softbank’s new models now support the service. S!Town inhabitants can select from a range of 3D avatars, all created by Bandai and based on different tastes and preferences of the target group (females in their late teens and early twenties). They can move through a full 3D environment on their mobile devices and get to know new friends on the go through multiplayer games. The Town’s instant messaging service lets them communicate with others publicly or create private chat rooms. Citizens can create their own proﬁle page, look for users with similar interests, join communities and enjoy all the features of an SNS.

Figure 5.13 S!Town Mobile screenshots (copyright © 2008, SOFTBANK MOBILE Corp.)

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S!Town also has different neighborhoods based on lifestyle preferences. There is “Digital Town” for technology fans, “Culture Town” for those into music, movies and going out, the design and fashion quarter “Oshare Town”, and “Active Town” for sporting types. Each user can create a virtual room for her or his alter ego and decorate it. Town residents also receive a small virtual pet, obviously based on another famous Bandai brainchild, the Tamagotchi. They have to care for their virtual pets, which grow and assume different shapes over time. This small critter works for its keep. For example, it can explain how to use the site’s features, fetch attractive goodies for its owner’s virtual room, and act as the user’s personal agent on the S!Town platform, introducing him or her to other users with similar interests. Like Mobage-town, S!Town has its own currency, called the “coron”, which inhabitants use to purchase new items for their rooms. Trade items, such as a spaceship that comes disassembled, encourage interaction: Users may have several duplicates of the same part, and trade for pieces they are missing. Events based on different seasons and holidays also play an important role in S!Town, and are held in the town square or elsewhere within its virtual environs. Participants can get to know new people and receive special limited-edition items for their virtual homes. Virtual 3D billboards and posters appear throughout the town, which users can click on to take part in special campaigns. The big advantage S!Town has over PC based services like Second Life is that it is fast, easy to use, and available anytime and anywhere. Robert Osborn, global product manager of the platform behind S!Town, explains the idea behind putting a 3D SNS on a mobile device: “PC-based social networking activity has exploded in the past year. These services are now moving to mobile phones. Success on the mobile phone depends on how well the experience and user interface are carried over. The reason 3-D is so compelling on the mobile phone is the phone screen is so small that the traditional WAP browser approach is hard to read and slow. 3-D opens up the limited space on the phone and lets you create virtual real estate that didn’t exist before. This real estate can be used to build stores, sell ads, and create new worlds to explore. “There are more mobile phones in the world than there are PCs or game consoles. At the same time, there are sub-communities of users all around the world. Mobile devices afford the most ﬂexibility in that they are becoming both a mini-PC and a mini-gaming device.” —Robert Osborn, Director, eXplo Global Product Management, Gemini Mobile Technologies, from an interview with the authors

S!Town’s user numbers are still low (~200,000 as of January 2008) because the one carrier platform it runs on is also the smallest in Japan. Whether S!Town becomes a mass phenomenon or not, it is a great example of the potential of the mobile platform and 3D virtual worlds.

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Widgets (Information Simplicity Going Mobile) In the wake of the Web 2.0 buzz, the idea of “widgets” had also generated incredible hype as the next big thing for both the PC and mobile Internet. Widgets are small applications built for a speciﬁc purpose. They can be embedded inside a website, blog, proﬁle page, or other online application, reside on a PC or mobile phone, and accessed easily. Examples include a weather report application that provides local weather updates, a stock ticker, an incoming mail alarm, and a tool that announces when a comment is added to the user’s blog page or SNS proﬁle. Widgets are designed to simplify tasks and actions. Instead of accessing your stock portfolio on a broker’s website, for example, you can check everything through a widget application. Apple and Microsoft support widgets in their operating systems, and online services like Yahoo! and Google also offer their own widget application environments called Google Gadgets and Yahoo!Widgets, respectively. Widgets have also become popular inside SNS sites like Facebook and MySpace. Users can add speciﬁc widgets to their personal pages and share them with other users. While widgets are big in the United States and Europe, they have never taken off in Japan. Yahoo! Japan offers around 100; Yahoo.com had over 5000 as of October 2008. The situation for Google Japan Gadgets is similar. Web widgets, which can be embedded into blogs and SNS services, were nearly nonexistent in Japan at the time as well. The PC widgets have not received serious attention in Japan, but that does not mean the market is nonexistent. Widgets make potentially even more sense for the mobile phone. i-Channel The NTT DoCoMo launched its ﬁrst widgetlike application, i-channel, in 2005. A Flash Lite-driven news ticker preinstalled on most handsets, i-channel lets users subscribe to different channels like news, sports, and weather information. The latest update is pushed to the mobile phone and displayed on its standby screen. The user can click on these items and go directly to speciﬁc pages within the i-mode menu. Although there is a monthly charge for the service, within 28 months of its launch i-channel had attracted over 15 million users. Softbank and au one launched similar services soon after DoCoMos i-channel debut.

Mocoa Since autumn 2006, Softbank Mobile ships most of its handsets with a widgetlike Java application called Mocoa. The Mocoa application allows Yahoo! Japan users to instantly access Yahoo! Messenger (Yahoo’s instant messaging client) and Yahoo! Mail, and manage their Yahoo friends. First-time users can also sign up for a Yahoo! account using Mocoa.

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These are the ﬁrst successful attempts to bring basic widget services to mobile devices. KDDIs Au One Gadgets The KDDI introduced the ﬁrst real mobile widgets in late 2007 with help from Scandinavia. Opera Software, a Swedish company known for producing a Web browser that runs on a broad range of devices (including PCs, mobiles, smartphones, set-top boxes, and Nintendo Wii/DS machines) teamed up with KDDI to bring Opera browser widget technology to au one handsets. Branded as “au one Gadgets”, these widgets let users access preset services like trafﬁc information, weather and sports results, or download new widgets from the KDDI server. Au one Gadgets also allow users a new way to easily access and handle pictures, mail, schedules and other data stored on their mobile phones. Unlike the other services mentioned so far, Opera’s browser widget technology allows third parties to develop and publish widgets themselves. (They cannot share them with others, however.) The service is easy to use (a critical characteristic for a mobile service) and offered free. Like DoCoMos i-channel, these widgets run on the standby screen and are updated automatically. The KDDI was the ﬁrst carrier to launch such a service back in 2007. That widgets are not just toys but a strategic step in a new way of accessing the Web became evident in late 2008, when DoCoMo and Softbank both launched widget platforms for their mobile phone networks, including special widget application shops. All this shows what the mobile device could become in a post-Web 2.0 world: a simple, social, personalized, and intelligent access device for a new user-created universe.

Figure 5.14

Mobile phone versus PC: a different development path.

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The Mobile Phone as Social Widget Beyond the advanced technical functions of Japanese handsets and the low-cost broadband mobile networks available, the mobile phone has become the preferred device for Web 2.0 and the post-Web 2.0 services mentioned above because it provides a simpler way of accessing the Web. Users access services through a front end that requires much less training to master than a conventional PC. In a way, a mobile is also a widget. Unlike the PC, the mobile phone is a purpose-built communications device. Social functions are woven into the mobile’s essential DNA: connecting with other people to share information and experiences. Web 2.0 functions on a mobile phone are a logical and organic step. A mobile phone is a perfect Web 2.0 social tool: Users can post personal experiences and upload and sharing pictures and videos the moment they happen. The GPS and other location-based services can enhance this further. Compared to a PC, a mobile phone is always “on” (on location, on time, and on hand). In a Web 2.0 environment, it is the perfect access tool for spreading the use of such services. Erasing the Hard Lines We separated the “value” that mobile content and services offer into four distinct categories while discussing our ﬁrst immutable law. Judging from the short case studies in this chapter, however, such clear demarcations no longer exist. As expressed in Figure 5.15, Web 2.0 mobile business models integrate entertainment, expression,

Figure 5.15 Blurring the categories.

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information and transactions, and consumers are demanding these combinations from mobile content and service providers.

Organizing What We Have Found While the mantra of most Web 2.0 companies has been “ad-supported”, the examples in this chapter suggest other options are possible and proﬁtable. Looking back at the Web 2.0 boom, these models can be more sustainable for future approaches. In developing the business model for your mobile site or solutions, consider the following points to spark your thinking: 1. 2. 3. 4. 5. 6. 7. 8.

Social networking as the hub (mixi, GREE, Mobage-town). Two-tier memberships (Nico Nico Douga). Afﬁliate marketing opportunities (Nico Nico Douga). User-generated media models (Mahou No Island, Mobage-town). Value virtual currency (Mobage-town, S!Town). Fixed mobile value (LISMO). Stickiness (S!Town, Mobage-town). Value-added tools (Widgets).

THE TAKEAWAY These examples clearly indicate that Japan has moved far beyond the Web 2.0 boom the West is experiencing. While the ultimate importance of the sites and services we have discussed is debatable—especially since there are no guarantees any of them will still be in business by the time you read this—the lessons they offer must not be missed. Each has developed an unusual and compelling business model blending different elements of Internet content to create valuable and proﬁtable service offerings for their subscribers, and gotten solid proﬁts in return. Moreover, they have done so with a clear understanding of both the power of the mobile channel and the importance of the mobile phone relative to the PC. This key lesson one we will return to frequently. Another critical point we will delve into is how most of these services are moving away from the complexity of PCs toward the intelligent simplicity of mobile devices. From a big, nonconnected application on a big machine to smart, connected applications on small machines. From the need to search for speciﬁc information through an ocean of content to simply ﬁnding the information based on the user’s current needs. Most of all, shifting from technology people struggle with to technology that broadens, eases, and enriches our everyday lives.

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Executive Interview Dr. Keisuke Onishi President and CEO (Co-founder) NAVITIME JAPAN Co., Ltd. Dr. Onishi graduated in 1992 from Sophia University (Tokyo) with a Ph.D. in path-ﬁnding technology. His thesis was about Path-Finding Algorithm for Road Navigation Systems. He then joined Ohnishi Heat Engineering Co., Ltd. and continued research on navigation systems while serving as Managing Director. In 1996, he started a navigation technology licensing business, and then in 1998 developed a path-ﬁnding engine and data format for mobile devices and created the world’s ﬁrst multimodal navigation. He established NAVITIME JAPAN CO., LTD. in 2000 and in 2007 he also assumed a post at The University of Tokyo as a Visiting Professor. Six Laws

Dr. Onishi

Six Laws

First of all, thank you very much for your time. As you know we are writing a book right now about the future of the mobile industry and the future of mobile business. In this book, we also talk about time zones and the importance of the location–situation of the user. NAVITIME is one of the leading providers here in Japan for location– based services, so I hope you can share some of your experiences with us. First of all please tell us about NAVITIME and your activities in the mobile platform. Our overall company’s vision is to help people across the globe to be able to travel with peace of mind or a feeling of safety. At its core, that is what we believe NAVITIME provides. Regarding the mobile platform, it plays an important role for us, especially when you look at the users themselves. A lot of people now carry their mobile devices with them most of the time, and if they can search for trains, cars, buses, airplanes, or walking routes with that device, it is very convenient for them. So that is why we are targeting mobile devices. Looking at the users of your mobile service, what have you learned about the times when people are navigating with NAVITIME? Did this match with your expectations, or was there a surprising ﬁnding?

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Dr. Onishi

Six Laws

Dr. Onishi

Six Laws

Dr. Onishi

Six Laws

We initially expected people in their twenties and thirties to be the main users. We also expected the service to be used mainly in a business environment or for business purposes. This expectation was correct with regard to male users. But for females, it turns out they use it more for their private life rather than for work, for example, for meeting up with friends or going to restaurants. This came as a surprise. When do people use NAVITIME? In our chapter about time zones, we differentiate between what we call “in-between” time, where users have limited time to access mobile content, and “golden time”, where users devote their time to mobile content consumption. In which category would NAVITIME belong? Our basic service is looking or searching for directions to get somewhere, and people have limited time to do these search activities. Most of the usage is in-between times. For example, we can see that people would use their GPS to do a local-area search of their current location. They search for coffee shops, restaurants, or look at movie information. We also have a service called Navilog. It shows you what other people are searching for, and it also shows the top-ranking searches for local areas. Users can check what everybody around is doing, what other people are searching for within their local area. This activity would ﬁt into the golden-time category, where users dedicate their time to look and to explore. Japan can already look back at a history of >10 years of mobile Internet usage. Have you noticed any differences in mobile usage or consumption in the last few years, especially when it comes to location-based services. In the past, NAVITIME was used mostly to look for the place a person wanted to go, so they searched for ways to reach it. In a way, they looked for “directions” using our service. NAVITIME was more like a navigation tool to them. But recently this has changed, because of mobile data ﬂat rates and the increased speed of mobile networks. People have started using their mobile phone to look for more location-based information in general, such as restaurants, cafes, and the like. They probably would not have done this before, or perhaps they would have used their PCs at home if they had the time. I think people are looking for a one-stop solution to information retrieval by using their mobile for all these activities instead of switching between the PC and the mobile phone. From a user’s point of view this makes sense, as the mobile device is always with the person, always “online”, and because of GPS it is also always “on location”. Talking about recent mobile trends and developments in general, what important trend do you see in the mobile industry today?

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Previously, the so-called ofﬁcial carrier menu had been the main mobile access channel for content in Japan. But in the future, I believe the channels providing these services, including billing and payment collection, will begin to change. Would this situation or trend also apply to other countries? I believe there is a gap between Japan and the overseas markets. Japan is already moving forward with the fourth-generation networks. In overseas markets, we are still looking at a better 3G network development and the development of working ﬂat-rate plans. They have not come yet, so you are looking at the gap between these two situations. So it looks like the rest of the world still has some catching up to do. What advice can you give companies overseas, based on the experiences you had here in Japan? I would give the advice to overseas telecom operators. My understanding is that in Europe or the United States, the operator’s revenue for the content is very high, and this hinders the growth of the content provider. I think carriers need a fairer revenue sharingmodel with the content providers. In addition, I understand that monthly subscriptions for mobile content are quite rare abroad, and one-time download and payment is the mainstream. In Japan, one of the reasons that mobile content or mobile providers are succeeding is that they have a steady income from monthly subscribers. I suggest that the operators implement such a system and at the same time allow the content providers to grow. These are important points you mentioned. I would also like to know your thoughts on the importance of “Simplexity” for mobile business in general. In our book we discuss moving into an era of Simplexity. We think the new frontier is the frontier of Simplexity. Do you agree with this? If yes, is NAVITIME already moving in that direction? I believe NAVITIME is one typical service headed toward Simplexity, as databases and real-time information are becoming very, very complex. We try to provide a simple answer to the users out of that complex database, using a very complex algorithm. For the users, we not only try to provide a simple answer, but the input methods must also be simple. Right now, there are 10 buttons on the mobile phone, but we have started working with voice recognition. When voice recognition technology becomes more advanced in the future, it is my hope that when someone starts NAVITIME, it will be acting as a personal concierge for that person. I agree that everybody will be turning toward Simplexity. Technology and information will become more and more complex,

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but the users need much more simple interfaces to interact with the technology. Yes. In our book we even envision the mobile phone becoming a tool for an enhanced “simplex” reality. The mobile device will be able to enrich our reality by providing an extra layer of information and meaning to our surroundings by combining locations, objects, people, time and their connection to each other, including personal preferences, relations, individual needs and recommendations based on these. Do you think the mobile phone has the potential to become like this in the future? Yes, I think so …

Expert Insight Kenji Kasahara Founder & CEO mixi Kenji Kasahara, born in 1975, grew up in Osaka Prefecture. He graduated from the Department of Economics at University of Tokyo. Inspired by the case studies of IT business he studied in a university seminar on management strategy and by the rapid rise of Internet business in Silicon Valley, USA, he started up “Find Job !”, an online job information site, in 1997. In 1999, Kasahara established eMercury, Inc. (mixi, Inc.) and assumed the post of representative director. In February 2004, he launched “mixi”, the ﬁrst social networking service in Japan. It was listed on the Tokyo Stock Exchange Mothers market in September 2006. mixi currently has >16.8 million users (as of March 31, 2009). Six Laws

Kasahara-san, you are the founder of mixi, one of the most successful social network services in Japan today. You already started your company > 10 years ago. Mixi was recently the ﬁrst big Japanese social platform that opened up their ecosystem for third parties, also allowing users to create new services and applications.

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Can you provide us with a brief overview of mixi, and your efforts related to the mobile platform? SNS “mixi” is a communication service based on relationships among people. Through mixi, users can connect with their friends or acquaintances and always communicates with them through diaries, communities, messages, and so on. Now 70% of users access “mixi” from their mobiles, and they can use it anytime they want. Now most functions and services of mixi are developed within my company; however, since 2008 we have opened up, offering an API allowing other individuals and corporations to create new services within our platform. One of our applications called “mixi Apps” enables any user to develop and provide services within “mixi”. Because of this, the communication tools on the platform became much more diversiﬁed than before. More than 17 million users are now able to use the functions and services based on their individual needs. Even more than before, “mixi” is now becoming a communication infrastructure going beyond the classic SNS concept. At present, on PCs as well as on mobile phones, we already have these application programs that enable any corporation or individual to develop services. With your millions of users you have a good base for analyzing user behavior. What have been the most surprising or interesting things you have learned about the times when people are using mixi? Have their usage patterns differed from what you initially imagined? If so, how? If not, what patterns were you expecting to see and why? We learned that usage patterns really vary from person to person. Honestly, they are far more varied than I expected. For example, some people are using “mixi” to tell friends how they are doing, others use it to share photos among family members, and some are using it to get the information provided by friends. In addition, “mixi” is used to exchange information among people who have the same interests and hobbies and also to ask questions and receive answers when they are in trouble. In this way, we can see really varied usage patterns. Most of mixi’s user activities happen on the mobile platform. Although you started out as a PC service, mobile has been your strongest driver in past years. Why are social network services in Japan such a boom on the mobile device? What are the immutable reasons behind this? It is because mobile devices were developed as communication devices in the ﬁrst place. They match with our communication

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service, “mixi”. As you know, in Japan many people take trains to work or school, and they also often use their mobiles “on the way”. Therefore, the beneﬁt of mobile phones, which can be used easily anywhere, is very high. But there is a more important reason— because we, as human beings, originally have a desire and a need for communications with others. So we have greater afﬁnity for mobile devices that allow us to communicate and connect with others anywhere and anytime. Yes, I think this need for communication is very important. In the case of mobile social networks and the need for communication, this is something that applies to human beings in general, not just to Japanese mobile users. So we can see the mobile device as the true “social device?” We talk in our chapter about the mobile phone having a social deoxyribonucleic acid (DNA) while the PC was created for completely different usage scenarios. As I previously mentioned, mobile phones were devices developed for communication, however, PCs were originally developed to work on them, to edit or save data. In this point, I can say mobiles are far more social than PCs and more proper for communication. Now, with this “perfect” social device in the users hand we see a lot of users not only consuming content, but also creating content on it. Complete books have been written on the mobile phone and turned into printed book bestsellers and hit movies. Is the mobile phone an accelerator of user-generated content? Not just in Japan but in general. Well, generally speaking, UGC has a lot of deﬁnitions and the mobile device is one of many for generating content; however, mobile phones are devices that are always with us in our daily lives. So mobiles might be the better device for it. And I think I can say this is true for any country with a mobile phone (mobile Internet) culture. Japan is one of the most advanced and established countries in the world when it comes to mobile business and mobile Internet usage. In other countries, mobile business and mobile Internet usage is still in a nascent stage. But we also see a lot of growth potential there. Looking back at what made mixi a (mobile) success, what would your advice be to other companies? I think the most important thing to be successful in the mobile space would be to provide a service that embraces and is built-upon the main characteristics of mobile; namely, afﬁnity, simplicity, convenience, and communication. It is important to create services and strategies based on the circumstances and situations of mobile phone usage.

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Globally, we have seen a second PC Internet boom in the last few years. Social networking had been a new driver for services and applications in many countries. We now seem to be in a postboom phase, but the mobile Internet is still growing rapidly. This can be attributed to the social elements of mobile. So from your perspective what will come next? It is difﬁcult for me to imagine what will come next. Actually, everybody said the growth of the Internet came to a halt a few years ago. Then the so-called “web2.0” boom started and after that the Internet grew dramatically beyond our expectations. In the same way, I believe there will be strong possibilities for the next growth of the Internet, as well as for new business opportunities. Currently, the most common and known communication tools in Japan are mobile phones. I would like to develop “mixi” into a common communication service that goes even beyond mobile or PC. The mobile phone is also a metaphor of a new approach: A move away from complicated and complex systems like a PC toward a system that is simpler to use, which is based on the usage scenario, and the needs and skill set of the users. We use the term Simplexity for this approach. In our book we give several examples and scenarios for Simplexity and how it might shape a new age of technology. What is your take on mobile “Simplexity”? Because mobiles are compact, it is very important that they are simple and easy to use. One of the reasons why most mobile Internet users are young is because PCs are just too complicated for them to use. Therefore, it is very important that people can use their mobiles intuitively.

CHAPTER 6

IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

Mobile phones continue to grow even more complex and versatile. Research shows, however, that mobile owners use less than 20% of the applications and capabilities their phones possess. That means all the money spent on developing, testing, deploying, and servicing these neglected solutions has been wasted. Our next law focuses on a critical shift in thinking required to develop successful and proﬁtable technology products and services. We believe it is time to rethink how people interact with devices and digital services. Consumers should not serve technology; technology should support us and serve our needs. A study by the consulting ﬁrm Accenture in June 2008 gives some insight into why. According to the study, 95% of consumer electronic products returned by their owners because they were broken or malfunctioning were actually functioning perfectly. Users just could not understand how to operate them. The fruits of technology surround us day and night. Not only is escaping technology practically impossible, we are often required to scramble up a steep learning curve before we can even use a product, such as a mobile phone, VCR, or computer operating system. We have to devote time and effort just to recoup what we invested in a certain service or product. Of course, one group of people (geeks) takes pride in learning the arcane functions and features of speciﬁc devices. The average user, however, just sees this as a nuisance. The funny part is that we all put up with this, ﬁguring it is inevitable. We buy how-to books and start our own private war with the technologies that surround us.

The Six Immutable Laws of Mobile Business, by Philip Sugai, Marco Koeder, and Ludovico Ciferri Copyright © 2010 John Wiley & Sons, Inc.

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Most engineers would agree that technology inherently implies complexity. The fundamental question is whose shoulders should be bearing the brunt of this complexity? In a perfect world, not ours. For the companies that create tech products, success lies not in making users smarter so they can handle the products but in making the products smarter so they can support the user. This could be called the second age of technology, or the age of intelligent technology. We prefer to call it the age of simplexity: tapping into the average consumer’s learning curve and current behavior to create useful and empowering tools and utilities that offer real value to users. Simplexity involves becoming part of the users’ existing learned environment and seamlessly interacting with their world. Nintendo’s DS and Wii are good examples of this because they provide the user with familiar input systems, such as a pen and a remote control that doubles as a movement sensor. Haptic interfaces that respond to the user’s touch, such as the iPhone’s graphical user interface, present another way of ﬂattening the user’s learning curve. The next generation of these products should be adaptive, able to learn from the user’s preferences, behavior patterns, and current environment, and circumstances. There is often a gap between the average consumer’s knowledge and what he or she would need to understand to consider a technology or digital service usable. That knowledge gap can be wide, and manufacturers tend to place the responsibility on the consumer, providing basic “bridging kits” like a 300-page user manual. Creating devices and services that tap into existing behavioral patterns and lift consumers up to the point where they believe the service or device is usable and empowering is a more intelligent approach. This concept can be applied to a lot more than consumer electronic devices, of course. A nice example is the rise of the mobile credit card in Japan, once the only industrialized nation where credit cards had never gained any real traction. The reasons usually given for this were that the Japanese are avid savers, possessing the highest personal savings rate in the world, and that getting into debt was seen as close to immoral here. When asked about the bias against credit cards, Japanese often mention their concern about overspending. In 2001, Japan Railways (JR) introduced an RFID-based prepaid card called Suica as an alternative to paper-based commuter passes and train tickets (Figure 6.1). Within the next 3 years > 10 million people had switched from paper tickets to these digital passes, simply tapping their Suica cards over a read–write device built into the ticket wickets. Suica cards meant no more fumbling with change or tickets–passes getting stuck in the ticket machine. They are also easy to recharge at upgraded versions of the ticket machines, and because Suica is RFID based there was no need to remove it from wallet or purse. Best of all, there was virtually no learning curve. In 2004, JR gave Suica even more functionality, allowing users to purchase cigarettes, coffee, snacks, and other items at train stations, further reducing the need to carry around small change. Consumers loved it. In 2005, JR and DoCoMo announced mobile Suica, which utilized the RFID capabilities of the latest mobile phone models. The other mobile providers soon followed suit. Users could recharge the RFID commuter–payment card online using their bank

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Figure 6.1

Figure 6.2

A Suica RFID prepaid card.

A Suica card and a mobile Suica application on an RFID-enabled phone.

account or credit card, and keep constant track of their spending using built-in software (Figure 6.2). Again, this added only a very slight incline to the user’s learning curve. A year later, DoCoMo launched its own mobile credit card, giving registered users a spending limit of up to ¥200,000. Through the mobile application, users had full control over their budgets and spending history, similar to the prepaid Suica card. This eliminated one of the main concerns about credit cards.

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Simplexification point intelligence of a system

Complexity of usage

PHASE I

PHASE II

PHASE III

time

Figure 6.3

The phases technology passes through to reach simplexity.

By 2008, around 8 million Japanese were using mobile credit cards, and their numbers continue to grow steadily. Japanese consumers had discovered an interest in credit cards, largely because service providers used a simple, step-by-step method to tap into existing user behaviors and introduce products based on the consumer’s current learning level. Pushing a mobile credit card right from the start probably would have been too much for users to handle, both in terms of spending concerns and technology. The solution is not providing thicker manuals or better training. It is about making products more intuitive and easier to use. Our sixth immutable law, simplexity, focuses on empowering devices to empower consumers. Here is how simplexity came about, and where it is taking technology and related services.

THE THEORY OF SIMPLEXITY Simplexity combines technology, integrated services, intelligent analysis (preference/ behavior based), and an easy-to-use interface based on and driven by user needs and capabilities. We see digital technologies, devices and services following an evolutionary three-phase process, going from simplicity to complexity to simplexity (Figure 6.3). This trend will beneﬁt users as well as marketers. Users get a more enriching experience; marketers can turn a niche technical product or service into one for the mass market. Let us start by describing the phases that lead to simplexity.

PHASE I: SIMPLICITY This phase covers the early stages of a technology or service, when the technology involved is relatively uncomplicated, only limited functions are available, and users

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do not need very detailed knowledge. Examples include the ﬁrst digital cameras and VCRs, which had just a few buttons and very basic functions. The ﬁrst mobile phones also had limited functions and a rather low-tech system compared to modern devices.

PHASE II: COMPLEXITY During this phase the technology becomes more sophisticated, functions proliferate, and the manual that comes with the device gets much thicker. Programmable VCRs and digital cameras with MP3 capability, video modes and special effect ﬁlters fall into this category, as do modern mobile phones. The user has to invest much more time and effort to master these devices.

PHASE III: SIMPLEXITY Instead of making the device and its functions more complex, the device is made simpler for the user by increasing its “intelligence”. We call this “back-end complexity”, because it occurs in the background and is not instigated or directed by the user. Good examples are digital video recorders like the TiVo, which recommends programs of potential interest based on the user’s preferences and past viewing behavior. Digital cameras can automatically analyze the surrounding light conditions and adapt to them, and even recognize the faces of the people we take pictures of. The camera itself assumes control of these functions, freeing users from dealing with a complicated menu. The iPhone is another prime example. The iPhone’s simple touch-based interface, motion sensors and integrated applications make it very easy and intuitive for users to access and process information. The device also tries to adapt to the user’s behavior patterns. Example: if the user ﬂips the device to the side, the screen rotates. Navigation is done with the ﬁngers in a very natural way. Other examples on the following pages help to illustrate the concept further.

OVERVIEW OF THE THREE PHASES The ﬂowchart in Figure 6.4 details the three phases mobile phone technology took to reach simplexity. When did this concept start, who is championing it, and what are the technological and human implications? Service has always played a vital in Japanese market competition. Whether they were running an Edo-era Japan inn a century and a half ago or a consumer electronics shop today, Japan’s business owners are committed to providing a high level of service to customers. As the venerable saying goes, “Okyakusama wa kamisama desu”:

OVERVIEW OF THE THREE PHASES

Figure 6.4

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A ﬂowchart of the genesis of the mobile phone.

The customer is god, not a mere king. This concept of service incorporates listening to consumers and learning about their needs to enable the business to anticipate possible actions. Many Japanese consumer electronics makers spend a great deal of time on enhancing ease of use. Even their manuals display an intuitive and user-friendly approach, typically including cute characters that introduce the user interface and functions. We might call this “intelligent anticipation”. At ﬁrst glance, that may look like a Japan-only phenomenon, but it is really a global one. A level of hospitality that rises to meet a client’s needs before they are even expressed is what determines success in many service industries. Take the hotel business, where knowing how to treat a particular guest and an acute awareness of the individual’s likes and dislikes wins customers and retains their loyalty. A hair salon offers another valid example. When a customer visits her local hairdresser, the relevant shop personnel are aware of past treatments the customer has received, her preferences, and perhaps even about an upcoming occasion. Based on this knowledge, the hairdresser advises the customer, strengthening the bond of loyalty. These customers are beneﬁting from a preference- and behavioral-based service approach very close in its basic principles to the concept of simplexity.

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EXAMPLES OF SIMPLEXITY IN ACTION The basic concepts of simplexity are not new. As mentioned earlier, Japan has spent hundreds of years pursuing service excellence. Japanese manufacturers have been attempting to automate “intelligent anticipation” services for decades. The result: support robots, intelligent car systems, intelligent vending machines, and advanced mobile services. It would be foolish for us not to take advantage of this experience and learn from it. A look at modern Japan reveals a broad range of products and services that reﬂect the simplexity concept. The car industry, for example, regularly follows the progression from simplicity to complexity toward simplexity. In the early days, ﬁxing a car required basic mechanical skills and a strong arm. As automotive technology evolved, however, cars became more like mobile computers than simple transport vehicles. If your car broke down, its display might ﬂash a cryptic message only a well-trained service engineer could understand. Figuratively and sometimes literally, this left the average driver stranded on the side of the road, albeit with a thick owners manual in hand. The complexity was just too much for users to handle. On top of that, drivers were installing or bringing along more gadgets. CD players, DVD players, iPods and mobile phones were turning drivers into multitasking monsters and adding an extra threat to trafﬁc. Over the last few years, however, automotive technology has shifted from complex, hard-to-use car control systems toward “intelligent assistants” that aid drivers rather than bafﬂe and annoy them. Car navigation systems, parking assistants, and cruise control systems give drivers more freedom and safety. These systems also learn from the person’s driving and traveling habits. This line has the simplexity paradigm of increasing back-end complexity and reducing front-end complexity to empower users. Toyota, for example, now offers an intelligent parking assistant system on its Lexus and Prius brands. When the driver ﬁnds a parking space, pressing a single button prompts the car to automatically park itself. The carmaker’s Advanced Pre-Collision System automatically detects the presence and position of vehicles, pedestrians, and even animals to avoid collisions. Toyota’s system uses three cameras mounted on the car. One camera even monitors the driver’s face; if the driver is not looking ahead, the system either warns him or her or takes control of the brakes, safety belts, steering, and other functions.

CAR NAVIGATION SYSTEMS Car navigation systems, available in Japan for nearly a decade, have developed into high-tech communication and information centers that empower drivers. These systems can analyze their current road situation, anticipate driver needs, and make recommendations on what to do next. They can put drivers in contact with other drivers, for example, and even stop them from driving drunk. Nissan’s Carwings intelligent navigation system illustrates how much these systems can do. Introduced in 2005, Carwings has evolved into a full-blown digital

CAR NAVIGATION SYSTEMS

Figure 6.5

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The Carwings navigation system (copyright © Nissan Motors).

communication hub featuring a 3D navigation system, Internet-capable information system, and a real-time trafﬁc monitor (Figure 6.5). It utilizes mobile phone connections to retrieve the latest trafﬁc information from other Carwing-equipped vehicles, enabling it to create a more accurate trafﬁc situation model than the classic vehicle information system found in other cars. The system can also detect the nearest ﬁlling station and use its network service to analyze which one would be cheapest. The system includes an RSS reader for websites that displays content from sites, such as Yahoo! Japan, So-net and Nissan Drive, and can even have the built-in textto-voice system read it aloud. The system also has its own e-mail service: Users can submit their vehicle location by e-mail and have incoming e-mail read to them. Carwings has a local weather guide and can offer recommendations and directions to restaurants (Figure 6.6). The system also features an eco-drive service that allows users to compare their own fuel efﬁciency with that of other Nissan drivers of the same car type. Drivers can call an operator 24/7 for help in case of an accident or other emergency, if they are having problems with the navigation system, or if they get lost. These car device services illustrate the excellence of the service concept mentioned earlier, reducing the complexity of the technology and the environment (or information), and intelligently working to anticipate the consumer’s needs and behavior. Another prominent example of tapping into the learning curve and simplexity is Nintendo. This company has a long history of gaming founded in 1889 in Kyoto, the cultural heart of Japan. A few years ago video games were marketed only to a limited audience of hardcore gamers: A group that initially ranged in age from 14 to 18. The launch of newer consoles extended that market demographic up to 24, but gamers were still seen as a niche market within the overall electronic consumer goods industry. The mantra of the hardcore gamer community is “faster is better”. Companies like Sony and Microsoft tried for years to push the technical envelope by releasing consoles boasting faster processors and smoother, more realistic graphics. Whenever

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Figure 6.6 Motors).

The Carwings system showing the Yahoo! gourmet service (copyright © Nissan

Figure 6.7

The Nintendo DS console and pen-based input.

a new console came out, gamers upgraded automatically. The video game industry and the console makers warred over this dedicated but ﬁnite audience. Meanwhile, nongamers saw these consoles as overly complex machines with complicated controls and even more complex games and interaction. For example, the average game controller of the time had 10–14 buttons, and some games used a double-button system. Nongamers ﬁgured that operating a Boeing jetliner was easier than handling a game controller, and left the latter to geeks. Although Japan has always had a greater afﬁnity for video games, even here the games virtually never made it beyond their core audience into the mass market. After more than two decades in the video game business, Nintendo decided to take a close look at this market situation. The company interviewed a wide range of gamers and nongamers. In 2004, based on that research, they released a portable gaming console called the Nintendo DS. Unlike previous consoles, this device had a touch-sensitive display that allowed users to interact with it using a pen or their ﬁngers (Figure 6.7).

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Figure 6.8

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The Nintendo Wii console and its innovative controller.

Nintendo also launched a new series of games targeted at casual gamers with easy-to-understand game concepts and simple pen-based input control. The company put great effort into reducing the complexity of the controls, tapping into the learning curve of many people on this planet. The message was If you know how to use a pen, you can use this device and have fun. Nintendo even started producing educational titles to help users increase their skills in many different ﬁelds with the tap of a pen. This empowerment drive translated into billions of dollars for Nintendo. Drawn in by a clever marketing campaign, a lot of nongamers suddenly became gamers. Most people who bought a Nintendo DS had never purchased a video game before; females in their late twenties and thirties and early forties were some of the most avid converts. Instead of ﬁghting over the ﬁnite market of hardcore gamers, Nintendo used simplexity to open up a totally new market. Nintendo used this experience to create another hit product, the Wii game console, in 2006. A simple home video game system, the Wii uses a motion sensor input device that resembles a remote control (Figure 6.8). The controller is intuitive and simple for the user, but ﬁlled with high-tech components that translate movement into game mechanics. By swinging the controller, for example, users can hit a virtual ball in a baseball game, or use it like a ﬁshing rod or a sword. The games were also simple, easy to understand, and offered many options for playing together with family and friends—a concept that appealed greatly to the nongamer, and a prime example of simplexity at work. By March 2008, Nintendo had sold > 70 million DS consoles worldwide (all within 4 years of its launch) and > 24 million Wii units worldwide just 2 years after the system debuted. The DS and the Wii were new concepts of simplexity: A simple approach to gaming and personal entertainment. Pen-based input and motion sensor controllers are complex technical systems (complex back-end technology) that provided a very simple and straightforward user experience. Nor was their popularity limited to Japan. Both systems won fans all over the world, and captivated a new audience: nontechies. Clearly, there were deeper human needs being met here.

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ELECTRONIC PROGRAM GUIDE (EPG)/TV GUIDES Video recorders have gone from being devices requiring a Ph.D. to program-tointelligent media agents that record content based on our preferences and viewing behavior. This required a drastic increase in intelligent back-end processing power and a corresponding simpliﬁcation in operation. Let us take a look at some examples of intelligent EPG/DVR systems. Toshiba video recorders, for example, have a function called Magical Chapter that automatically creates index points in video clips, detecting transitions according to differences in images within the sequences and separating the TV recording into chapters. Users can then skip a particular chapter by clicking a button. They can also display thumbnails, which are automatically generated, and use them to start viewing at a particular point. This technology takes editing a step further. In Japanese variety shows, for example, the same scene is always shown before and after commercials. By comparing the chapters, the recorder sniffs out such redundant content and creates an optimized version of the clip. The recording, including the chapter notations, can be burned onto a DVD. A side note here on another similar technology called “digest preview”, an audio analyzer that Japanese DVR makers have widely adopted over the last few years. Digest preview automatically creates a rough key index based on the audio information the video contains. The recorder ﬁrst analyzes the audio spectrum in the video clip and determines which parts have louder sound, operating under the assumption that increased volume signiﬁes an exciting scene. The recorder creates an indexed version of the clip based on this analysis. That theory certainly jibes with the action in a sports broadcast, such as when a team scores, the audience cheers, or the commentators get excited. In TV dramas, the music usually gets louder or more dramatic during critical scenes. The idea behind this intelligent information ﬁltering and processing function is to give viewers the option to skip the dull parts.

G-GUIDE EPG G-Guide is the biggest electronic program guide in Japan. The company behind it, IPG Co., Ltd., launched its basic service in 1998. Most Japanese consumer electronics manufacturers support the G-Guide standard in their TV and DVR devices. G-Guide handles analog terrestrial broadcast, satellite, and digital terrestrial broadcast channels. On TVs and DVR devices, users can access G-Guide by pressing a dedicated button on the remote. Updates are handled either through the datastream in the TV channel or via the Internet using the Ethernet plug many TVs and DVRs have. G-Guide also offers a search function based on broadcast genre, title, channel, and other ﬁlters. Viewers can bookmark and program broadcasts using the G-Guide menu.

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Figure 6.9 G-Guide screenshots (left: mobile EPG screen; right: mobile phone remote control interface) (copyright ©1999–2009 Interactive Program Guide Inc.).

G-Guide is also available for mobile phones, many of which come with it installed and offered free of charge (Figure 6.9). G-Guide Mobile was developed by IPG and D2 Communications Inc. This mobile service, which is updated through the wireless network, has > 30 million registered users. On phones with digital terrestrial television receivers, the EPG can switch directly to mobile TV channels and set recording tags for mobile TV broadcasts. An infrared-enabled phone can also serve as a mobile remote control for a standard TV or DVR. Different programs can also be marked in the EPG; the mobile phone then automatically turns the TV on and selects the right channel when the program starts. Some digital video recorders can be programmed through a mobile phone even when the user is not at home. The user’s preferences, EPG browsing, recording and remote control use are tracked and used to recommend services. The service is ad-sponsored, with ad content targeting users based on their viewing interests and habits. If a user browses through the EPG looking for a travel documentary about Hawaii or programs his DVR to record the program, for example, the banner might display a travel agency promo about Hawaiian vacations. The ads can be displayed on mobile phones, as well as on the DVRs EPG. THE MOBILE PLATFORM MANDATES SIMPLEXITY As we have said, no other digital device is as close to us in proximity and personal relevance as the mobile phone. At last count, the International Telecommunications

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Union found there were more than twice as many mobile phones in use around the world as PCs.22 Since many people on this planet will never be able to afford a PC, the mobile phone will be their only access point to the digital information age. Additionally, many older people ﬁnd using a PC overly complicated. That knowledge gap will undoubtedly close within the next decades because the people who entered the workforce in the last decade have never known a world without mobile phones and the Internet. Yet this generation is constantly confronted by an overload of information, functions, and options. What they need is not technical help, but a ﬁlter for relevance. The classical development of a modern society proceeds from agrarian to industrial to service. In the context of the Internet and digital communication technology, this could translate into a shift toward a digital service society, where technology plays the role of a service provider that assesses relevance based on user needs and preferences. The Web 2.0 buzzterm “software as a service” can be seen as a pillar of the new digital service society. The mobile phone’s simplexity will serve as the ﬁlter between a complex world and us. The mobile phone is not a mini-PC. It is much more personal than a PC can ever be. We should look at the mobile phone as a personal, intelligent agent. The wealthy have household servants and senior executives have personal assistants; credit card companies pride themselves on providing concierge services for premium cardholders, offering live agents as personal assistants. Next-generation mobile phones will make such concierge services available to the masses. In Japan, that future is now. The NTT DoCoMos i-Concier service, launched in late 2008, was included on all the new winter handsets launched in early 2009. Designed by Japan’s Takram Design Engineering, i-Concier provides relevant information to mobile users based on their current location, previously programmed preferences, and anticipated needs (Figure 6.10). Putting this discussion into the framework of our previous examples, as Web 2.0 had blurred the lines between content categories, mobile agents built on the simplexity concept will increase each user’s power over their contextual environment (Figure 6.11). Mobile screens have become bigger and screen resolution has improved, but their limitations still provoke heated discussions. Instead of a big screen, perhaps what we really need is the right information at the right time, with the unnecessary and redundant ﬁltered out. Viewed from this angle, screen size is not really the issue. Remember hearing that if you cannot summarize what you mean in a sentence or two, something must be wrong with the explanation? Maybe we should apply this communications approach to the way we deal with digital information retrieval. Mimicking PC functions on a mobile device, something we see often today in smartphones, is what the industry sees as a brilliant solution. But instead of a solution, the industry gave users a mediocre tool for their mobile (business) lifestyle. If you hate what you do on your PC, you will hate it on your smartphone, too—and maybe even more. 22

Available at http://www.itu.int/ITU-D/ict/statistics/at_glance/KeyTelecom99.html.

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Figure 6.10

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i-Concier (copyright © 2008, Takram Design Engineering).

Figure 6.11 The simplexity-empowered mobile user.

The iPhone, therefore, was a true innovation. Rather than mimic a PC (or even a Mac), the iPhone brought new ways of interaction, information retrieval and digital communication. The iPhone was built to enhance the overall user experience and provide a new and easier style of communication. It offers simpliﬁed browsing and information management, and a touch-screen with a gesture-based interface— much closer to a solution than a typical smartphone could ever be.

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SIMPLEXITY AND THE SEMANTIC WEB All in all, the mobile phone provides the best way to understand the concept of simplexity and its recent and future developments. From ﬁltering calls and mails to ensure that only the people who should reach us do to acting as our personal shopping advisor based on our budget, location, and events we have planned, the mobile phone can be our Swiss Army knife for managing a world that increases in complexity seemingly by the hour. This brings us to a big trend in information technology, the so-called semantic web. During the Internet’s early stages, the main drawback was a lack of content. Now the amount of information available online is staggering. The next big online revolution will be about how to retrieve the right and relevant data based on individual user preferences and needs. The semantic web offers one approach. It allows us to index and search information based on semantic values—the differences between the meanings of words and symbols—and how relevant the information is to the context of our search. Here is an example. A user is looking for a house. The semantic approach retrieves results that contain not only the word house, but also the ones related to the semantic concept of a house. Instead of search terms, users can input a sentence in conversational language and get a direct answer to it rather than a list with a million hits. In our example, the user could enter What is the tallest house in the world? and the system would understand that a skyscraper is also potentially a house. It then analyzes the meaning of the sentence and looks for the answer online using semantic indexing. The answer: The tallest building in the world is the Taipei 101 in Taiwan at 509 m. All this is based on a highly complex (semantic) back end combined with a simple and user-friendly front end. A search result can also be based on the relevancy of the personal context of your search, meaning your personal ecosystem. In a greater sense, this development would result in a “ﬁnd” metaphor rather than a “search” metaphor for the Internet. Here information is ﬁltered, analyzed, processed, and retrieved based on personal preferences, needs, location, and personal context.

THE MOBILE INTERNET AND THE WEST Why have the mobile Internet and mobile services not achieved a breakthrough in the West? Perhaps because the necessary foundation (infrastructure, ecosystem, and value-added services) is not in place (Figure 6.12). Nor is the real beneﬁt of the platform—simplexity. Japan’s mobile Internet and handsets embody a new way of handling information and communications. There will be a special mobile Internet tailored to the needs of a general audience, leaving behind the complicated PC experience and opening up the Web in a simple, easy-to-use way based on personal needs. In this

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Figure 6.12

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The four levels of the simplexity pyramid.

sense, the Japanese mobile can be regarded as the DS–Wii of digital communications devices. The iPhone is the ﬁrst mobile device offering this level of access, integrated into a vital ecosystem and loaded with value-added services, including GPS location and triangulation services. Combined with attractive ﬂat-rate data plans, the iPhone has the potential to create a new mobile Web society for the world, similar to what Japan has enjoyed in the last 5 years. iPhone sales show there is a demand for “simplex” devices: According to a September 2009 Apple press release, the company sold more than 50 million iPhones and iPod touch worldwide. Here are some other examples of mobile simplexity in action.

Intelligent Mobile Search (Niwango Mail) Niwango, the company that introduced Nico Nico Douga, also launched an interesting mobile search service called Niwango Mail in 2006 that can be used on every Japanese carrier. Unlike similar services in other countries, Niwango Mail is free of charge. Here is how it works: Users submit information requests in plain language via e-mail. The service indexes and analyzes thousands of mobile and PC based websites, and responds with speciﬁc recommendations. For example, let us say a couple want to eat some nice Italian food in Tokyo’s Ebisu district. They may have several questions related to that desire. What is the weather like in that part of town? How can they get from where they are now to Ebisu? Which Italian restaurants in the area are considered best? Their queries might be “Osaki to Ebisu”, “current weather in Ebisu”, or “best Italian restaurants in Ebisu”? The nature of the reply is what sets this service apart. Instead of sending along a bunch of links for the user to follow up on, it provides train connections,

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information on authentic Italian restaurants, or the local weather. This is a ﬁrst step from a “search” to a “ﬁnd” service. Search services include game-related content (game info, “brain training” games, dating spots, DecoMail, weather, news, a restaurant guide, and local information guide, e.g., ATMs, postofﬁces), local map information, train guides, books, horoscopes, ringtones, dictionaries, picture frames, and “Nichannel search”, which scans Japan’s biggest bulletin board.

Intelligent Location-Based Services (Mapii) Mapii is a location-based service for PCs and mobiles that was launched in early 2008. Mapii features a location-based SNS, shop and restaurant guide, blog, mail service, and friend locator. For example, subscribers can ask their friends where they are or ﬁnd them on the map, and suggest an activity. Users can also arrange to receive an automated e-mail whenever they are close to a friend or a place that might interest them. If they decide to go to a shop or restaurant, Mapii can recommend a location based on their preferences and feedback from other users. Subscribers can also download discount coupons. User comments about places, shops, and restaurants are displayed on the map, and members can also solicit feedback on a speciﬁc topic related to a place (location-based Q&A). A user who sees a Spanish restaurant, for example, can broadcast a request asking if the food is good there. This mail goes to people near the place or who have been there already. In the future, Mapii plans to include job information and information on local events and promotions. Most impressive is Mapii’s user interface, which allows even novice computer users to easily understand and use the service. The mobile site uses Adobe’s Flash Lite software, which is installed on over 90% of Japanese handsets, to provide a rich and effortless user experience.

The Takeaway Let us revisit the four main points we have raised so far: 1. Tap into the learning curve (create “no-brainer” solutions that anyone can use). 2. Offer anticipatory services–information hospitality. 3. Be user-ecosystem relevant (based on the user’s current situation, location, needs, etc.). 4. Add incremental value (boost the value of the service over time).

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Simplexity combines technology, integrated services, intelligent analysis (preference–behavior based) and an easy-to-use interface based on and driven by user needs and capabilities. This convergence will beneﬁt users, as well as marketers. The former get easy-to-use, useful, entertaining devices and services; marketers can turn a niche technical product or service into a mass-market product. The chart in Figure 6.13 summarizes the different traction points of future mobile services based on simplexity. Technology should both enable and excite. Service providers, marketers, and solution providers must create solutions–technology that make users feel they are in control, not the other way around. Users are no longer willing to invest a lot of time in learning a system or service. In fact, ours can be called a “postmanual” society, in which people ignore user manuals or set everything manually to achieve the results they want. That means systems and services must align with the user’s natural learning curve, like the Nintendo DS uses a pen, which virtually everyone can ﬁgure out how to use. A good service is like a good advisor or a good hairdresser, serving as an intelligent hospitality manager attending to the user’s needs: they know what you want and like. This takes pressure off the consumer, but puts a lot of pressure on technology and service providers. They must provide information and services that help reduce the complexity of a consumer’s environment. They also need to offer smart choices based on the consumer’s ecosystem (his or her current environment, needs, social surroundings, past and current communication, occasion, and other factors relevant to the situation).

Figure 6.13

Where simplexity is taking the mobile space.

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An intelligent simplexity system will be able to detect and recommend, ﬁlter, and funnel what is important or interesting for the user. Based on what our earlier chapter on different zones of comfort said, the system would provide services to help the user escape or embrace the current situation on a very sophisticated level. Simplexity also implies that a service should be what we call a “perpetual better”. Derived from the Web 2.0 dogma of the “perpetual beta”, this means the services and their merits increase the longer a service is used. We are not talking about software or service updates, but an organic process in which the system continuously learns more about the user’s preferences and helps the user make increasingly better choices. As we have seen with Nintendo’s Wii and DS systems, one of the powers of simplexity lies in moving products and services from niche–expert systems into the mass market. The need for expert knowledge or a steep learning curve to use a product or a service disappears (Figure 6.14 and 6.15). This “expert” requirement is moved into the back end, allowing even inexperienced users to master the device or service. This ranges from game consoles, mobile devices, and GPS systems to overall platforms like the Internet. In the bigger picture, simplexity also signiﬁes the shift from a mass market to a market of individuals, in which services and products are based on or customized to ﬁt the needs and tastes of speciﬁc consumers. This movement includes the Web 2.0 social and personal space, as well as personalized ads, location-based services, personal TV (IPTV), and intuitive new user interfaces and intelligent databases. Our sixth immutable law postulates that simplexity will generate many proﬁtable innovations in the mobile industry. While other players struggle to make larger screens and wider keypads, or pump their content and services, simplexity will be what truly empowers individual users through their mobile devices.

Figure 6.14

The path to simplexity.

Figure 6.15 Flowing from expert to amateur and mass market to personal.

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Mobile devices will work on our behalf as personal assistants and agents. But as we can also clearly see, such an evolutionary path comes with signiﬁcant negative implications. How we deal with these may deﬁne our era for future generations. Our parting question for you is How will your mobile Net offerings move from the complex to the simplex? Formulating a coherent answer will be vital to positioning your company’s offerings. You can count on seeing your greatest competitive threat emerge with the solution to this question clearly in place.

Expert Insight Tomoko Namba Founder & CEO DeNA, Inc. Tomoko Namba founded DeNA in 1999. In her previous employment at McKinsey and Co., she had become only the third Japanese woman in the company’s history to be made a partner. Namba’s wealth of experience is reﬂected in every aspect of DeNA, from dayto-day operations to charting future directions for this young, dynamic IT company with its unique corporate culture. Under Namba’s leadership, DeNA is committed to the delivery of outstanding service while also striving to instill environmental awareness in its rapidly expanding consumer base. Namba has also been involved in a number of national government efforts, such as the Prime Ministers’ Council for the Promotion of Regulatory Reform. She has also worked with the IT Strategy Headquarters. Namba holds an MBA from Harvard. Six Laws

Ms. Namba

Mobile Game Town is today one of the most successful social network, game, and avatar platforms in Japan. The most interesting part is that you started to offer your service on the mobile platform only. What was the intention to go mobile only? What was different from just launching this service on a PC? Before starting Mobage-town, we already had a mobile auction service. DeNA started as an auction provider on the web like eBay, but we shifted our focus from the web to mobile. We had our web auction service, but we started the standalone mobile auction that

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was not connected at all with our previous service and that went very well. We became the number one player in mobile auction, and we found that most of our users were not web users. They did not use the web and they even do not pay attention to what is going on in the web. They are mobile users. So we did not pay much attention to convergence, and we did not feel like we had to do both. We knew that the mobile platform was growing faster than the PC platform and the PC based web. So we focused on mobile. This did not mean that we excluded the PC web from our strategy. We also included it in our activities. There is now also a Mobage version on the web, but we knew it was not essential. Users between the two platforms really do not overlap. Many users are using both mobile and the PC, but when they are using services like e-mail, auction, or shopping on a cell phone, it is a different personality. They may do shopping on the web, but it is a separate activity. It is not really connected. So we did not have to worry about serving two different platforms. We decided to focus on the growing platform, which is mobile, and to worry about convergence or covering the web later. There was no real intention to foster a mobile-only culture or industry. It is really more like a natural outcome for us. Looking at the two platforms, I assume that mobile requires a different approach when it comes to user interaction and a more simple front-end for mobile users. Following is what we describe as “simplexity”. We wanted to optimize the user interface. We wanted to offer the service on the auction service on the web, as well as a similar service on the mobile phone. The factor that brought us huge success was when we optimized the user interface for mobile users, which Yahoo, for example, was not able to do. The user interface is crucial, particularly when it comes to mobile services. That is why we focused on providing a good mobile user experience. Interesting. When we take a look at the social element of your service, then this social component seems to be one of the main drivers of Mobage. Social network services on the mobile platform show amazing growth rates. Why are social network services in Japan such a boom? If you look at the page views of mixi, Mobage, and GREE, (Japans biggest SNS platforms), the percentage of mobile page views is huge. I would say 80% of the total page views on social networking services are mobile page views. Why is it such a big boom? Because it is easier to use, and, of course, it can be used anytime.

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Communication is something really inherent, and it is a universal need. You feel that you are really communicating with people if you can only do this at any given time and at any given place, not just when you are sitting at your desk. People have this need to communicate with their friends or to make new friends. So I think it is natural. Being always with you really matters as a communication device, as a “networking” device. You want to be connected; you want to network all the time. This is very much in line with what we outlined in our chapter. We think this is not only true for Japan, but also for other countries and cultures. Oh, sure, sure. Yes. It is quite universal. I think these mobile developments will also happen in other countries like the United States, for example. So we are looking at a global development toward the mobile phone becoming the preferred social network tool or device. The functionality in terms of what you can do is almost the same as a PC, and it is portable. It is always with you and it is manageable. So it is an ideal device, although there are some differences between the markets, of course. Obviously, Japanese cell phones used to be a lot better than those in the States, but this may be changing when I look at the iPhone. I think the mobile is a pretty perfect tool, and I am very positive about mobile devices. Naturally, there will be some evolution, wider and larger screens, and higher speed, and of course, touch based interfaces, for example. So there will be advances, and a sort of progress here and there, but the concept of mobile cannot be replaced by anything else. Which brings us to another topic we talk about in our book. Very often I hear from decision makers abroad that Japan and Japanese mobile content is quite unique. Meaning, it might work in Japan and for Japanese users, but not for Western users. Some of the most popular elements of Mobage’s services are games and avatars. This concept seems to be very successful in Japan, but how about the rest of the world? Do you think Japan is a kind of Galapagos Island when it comes to mobile content and services, or is this just a kind of modern myth? Games are obviously not only popular in Japan. Game companies like Square Enix and all the major Japanese game publishers are doing really well in the States too. Demand for these games is equally high in the United States as in Japan. At the same time there is a strong (a really strong) demand for Avatars. I was really surprised.

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This also falls in line with user-generated content. We introduced MobaMingle in the States. It is quite similar to Mobage, and I was really surprised to see—although the user base of MobaMingle is still very small—that the percentage of users who use Avatars, who change the clothing of their Avatars, is equally high as in Japan. It is exactly the same as in Mobage in Japan. And also, the percentage of people who write novels and stories on the mobile phone goes in that direction. Writing a novel or writing a story only with your thumb on a mobile phone used to be something that was considered to be very Japanese and unique to the Japanese culture. I was really surprised to see that an equal percentage of U.S. users started writing novels with their thumb on our MobaMingle platform. I learned that the desire to create, to express, and to share your work with your friends or other people is universal. No matter if this is done with a pen or with your thumb. Of course, there was a concern at ﬁrst that the United States is not like Japan and that Americans would never start writing novels, but we learned that they do. We did not learn this from books or articles; we learned it from our own experience. I agree with you. Looking back at what you have achieved here in Japan, what would your advice be for other companies in the mobile ﬁeld? What is important? What is important in the mobile ﬁeld? When it comes to mobile, I think the overall user experience is crucial. How easy to use a service is. Also people tend to be more impatient when they are using a mobile phone. Timeliness is an issue. It is not like sitting at the desk and relaxing and doing something while having a cup of coffee. It is very different. Maybe you are waiting for a friend to arrive or a train to catch. Perhaps you have only 2 min and you want to check something, your messages box, for example, so see if you have a message from your friend. You do not want to wait for 30 s, so you tend to be very time sensitive when you are using cell phones. The focus has to be on the user experience. How easy is it to use the service? How easy is it to understand the service? Yes, I agree. We talk about so-called time zones in our book, which deﬁne the user’s situation and what kind of service he/she would expect based on this. Timeliness can be a big issue in one of these time zones. Speaking of time, now let us take a step into another time zone: the future. In a few years from now, what role do you think the mobile phone will play? What will the future of the “web” look like?

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Maybe in 3 years (at least in Japan) mobile devices will replace the PC completely, I think, because of LTE. We can get rid of the hassles of having to handle wires or cables. I am really interested in LTE and how it will change the overall web–mobile space. Users are now the key focus of so-called mobile social media. What role will the user play in the future? Will there be a stronger movement toward users becoming content creators? How will this tie into the overall future mobile ecosystem? I think the editor’s role is going to be more and more important. In general, the user movement will lead to a more democratic way of information creation and exchange, too. Take Yelp or Tabelog, for example. Tabelog is popular here in Japan, and Yelp is popular in the States, which is a fairly democratic way of handling information. There is no “editor in charge”. Everybody is evaluating and contributing to it. Those evaluations and feedback are better than one or two editors’ evaluations. Another thing that interests me, of course, is—and everybody is talking about it—the Apple Store Ecosystem. If managed right, there will be a new era for user-generated content. Maybe there will be user-generated novel stories and maybe paintings or illustrations or music. But the ﬁrst ones to show up are applications. It is a major part of the Apple Store ecosystem. This new approach to content could change the way we companies operate, how we produce our services, and how we offer our services, to the mass market. This way is already changing when you look at platforms like Facebook and Android, iPhone and MySpace. This is not limited to only Apple or Facebook, but mixi also started, and maybe many other companies will start something similar. They can introduce similar concepts and change the way they do business. It can even change the way we think of work in general. The Apple Store ecosystem suggests a new way of organization. You can work for yourself, and it is just a matter of choosing which platform to get on to. I think it is really interesting. Yes, this is a fascinating outlook. Looks like the future will bring many changes. Of course, one big change we see coming is this era of Simplexity. In our book we talk in detail about the concept of Simplexity. We also talk about intelligent systems able to make suggestions based on a user’s location, preferences, and needs. How important do you think this concept of Simplexity will be in the future? It is extremely important. I think it is one of the reasons why mobile phones in Japan did so well compared to PCs, because they are based on Simplexity. A PC can never be as simple as a

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mobile phone. It is very complicated, as is the concept of personal computers, whereas a mobile phone is actually a computer but you do not feel like you are handling a computer. So one of the big success factors for cell phones is their simplexity. At the same time, there is a huge effect on the manuals. You may have a manual for your cell phone but you do not use it. You do not read it, nor do you need it. Because the phone—in the best-case scenario—is self-explanatory. In any dimension of the user interface, you have to pursue this concept of Simplexity. I believe it is very important, and when the cell phone develops further, including LTE, a cell phone could perhaps look like a pen. Let us forget about punching in numbers. It is a simple penlike device. Maybe this device will be used for telephone calls, and there will be another device the size of an iPhone for other ways of communication. But all of it will be very simple to use. That is one possibility. Simplexity is always the key, so that is why I keep saying user experience is key. It is universal on each level—the device level, on the service level, on the OS level and beyond.

Expert Insight Brent Mori President and Representative Director Opera Japan Brent Mori has worked as the Japan Country Manager for Opera Software International since 2005. Opera Software has ofﬁces in > 10 countries and develops the Opera Browser, the world’s leading standards compliant multiplatform web browser. Opera Japan has built a solid reputation for providing cutting edge technology and high levels of customer support to leading companies, such as KDDI, Nintendo, Sony, Toshiba, and Sharp. Brent also worked with cutting-edge digital and network technology at Sony Corporation and Openwave Systems prior to joining Opera. He also worked as a Field Representative and Legislative Aide to California State Assemblywoman Barbara Lee, who now serves in the US Congress. Brent grew up in the San Francisco Bay Area, and did his undergraduate work at the University of California at Berkeley, and attended graduate school at Stanford University and the International University of Japan.

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Brent currently resides in Tokyo, Japan, where he spends most of his free time with his 5-year old son Dylan. Six Laws

Brent Mori

In this chapter, we have just discussed the concept of “Simplexity”, which hinges on the idea of a simple front-end partnered with a complex back-end. Can you explain how the Opera Browser could be considered a “Simplex” solution for mobile Internet browsing? The concept you have called Simplexity is at the heart of what Opera has done with our browser, and really points toward the goals that Opera has in even further increasing our appeal for end users, mobile device makers, mobile operators, and content providers. Let me explain a bit. Opera has always believed in “One Web”, in which device manufacturers, mobile operators, and content providers can all provide websites and applications that run on a standards-based browser. So with some web technology and servers, end users can easily enjoy some pretty complex applications. Instead of using their PCs to do word processing, spreadsheets, and e-mail, now anyone with a PC and an Internet connection can easily use applications that were not available a few years ago. With an advanced web browser, we can communicate with friends all over the world with Facebook. We can manage a global sales team with Salesforce. We can see what photos our friends have added to Flickr. We can log into our company’s intranet via a secure SSL and/or VPN connection. We can create and share documents with Google Docs. We do not even need to download and install software to do so. So we have complex and useful applications available to anyone with an advanced web browser. Web applications on PCs are great examples of Simplexity, but Opera has taken this a step further. We have spent literally millions of hours of development and testing and product improvements to create a mobile web browser with great performance and the ability to support web applications on mobile devices. You no longer need to download software to access great services—you do not even need a PC. This is a great step up from what was available to most mobile users, even recently. When the mobile Internet was ﬁrst started, Japan really led the way. KDDI became the world’s ﬁrst carrier to implement standardsbased WAP 2.0, and DoCoMo developed i-mode, and J-Phone began their JSky service. While this was a great step forward, in order to provide a service, content providers needed to create three mobile websites or else decide which version of Java or BREW to

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use to develop a downloadable application. The user was limited to websites and applications that could be viewed or downloaded onto their device. Despite all of this work, most services were limited to mainly text and simple image-based services. What Opera did was to create a complex, state-of-the-art web browser that is relatively simple to port to devices and to customize, but still makes cutting-edge websites and web applications available to the end user. KDDI recently announced the Toshiba biblio, which includes a mobile version of Opera 9 that makes it possible for users to view YouTube on their phones. No porting of YouTube applications. You just go to www.youtube.com like you do on your PC. Is there a more simple way to enjoy video on a device? So is the concept of Simplexity embedded in your overall strategy? Well, I think there are two elements to how we look at Simplexity. The ﬁrst is ease of use for the end user, which you have covered extensively already in this chapter. But I think a second and equally important point for us is to always be thinking about the ease of implementation for the manufacturer. When we talk about implementing this idea of Simplexity, we are actually talking about creating the ease of implementation. We feel that the only way to do this is to deliver content or applications based on Web standards. So the ideal approach is really based on Sun’s old vision of Java; write once and run anywhere. In our case, you create your content once for the Web and then it becomes easily available to anyone with a browser. But do consumers not actually behave or interact with Internet content differently when they access it from different devices? Yes, you are absolutely right in that there are quite a few differences we can see between different devices or platforms. Although we are focused on “One Web”, or familiar functionality, the ways that people actually interact with content on different devices varies. I would say this is because of the different user interfaces and the way they have evolved. If you look at the Nintendo DSI you can deﬁnitely see very different behaviors compared to other devices. It is obviously a two-screen, touch-screen device. Working with them on this project has taught us a lot about the power and value of the user interface and its impact on consumer behavior. There are a lot of features and elements optimized for a particular device that must be clearly understood. Is this an area you believe needs further investment and attention in markets around the world? Yes, especially as we continue to work with many different devices produced by a number of manufacturers around the world. We have

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learned a lot about the value of the user interface in inﬂuencing behavior. We are currently making investments to improve this user interface and to introduce tools that will make it easier to improve and customize user interfaces for our customers. Can you give some examples of how you are doing this? If you look at the latest Windows mobile release we introduced, it has a graphical user interface that has easy-to-use icons. We have also improved the touch screen capabilities and zooming features within the last year or two. With regard to the speciﬁc UI technologies, we focused on making it very responsive and very attractive, but we felt that the current technologies in the market did not enable us to do what we wanted to do. So we built what might be best understood as a user interface engine that sits on top of the browser. This now enables either us or our customers to further optimize and customize the browser beyond what was previously possible. With this new technology there is now a new layer on top of Opera speciﬁcally aimed at enabling easier, better, and more effective development of the user experience. This seems to me to speak directly to your concept of Simplexity. We have spent a lot of time and money to develop these tools so that it becomes easier for a device manufacturer to create a really cool UI, and because of this, it now becomes even easier for the end user to interact with the device. As further support to what you have described as a complex back-end, we actually had to invent an entirely new technology and a new technical environment to enable the simplicity and ease of use on the front-end. Because of this effort, it is now much easier for the end user to use the newest version of Opera, but it took us a lot of work. But if I look at what you have done versus the efforts I see content developers making on their own, it seems like you may be on two parallel paths. For example, if I have an iPhone and want to use Facebook on it, instead of launching the Safari browser and going to the Facebook site that way, I can simply download the Facebook widget or app, and magically the Facebook site has been optimized for my device. What you have described seems like a different path, where the Facebook site would be optimized for any device. From your perspective, do you see those approaches as fundamentally different? Yes, there have been two different approaches, but I think that widgets for individual devices are adding more complexity than is necessary. Opera also supports the use of widgets. In fact, we were the ﬁrst proponent of the widget standard within the W3C.

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At Opera, we think small applications are often easier to use than a browser, so we also provide the technology for widgets. But to be clear, what is different about our approach is that our widgets can be portable across multiple platforms. We think this type of open and portable approach is really what end users want and what service providers need. They are each looking for a simple way to use the net, services, and local applications on any device. Opera has developed widgets now for a couple of years, which are, again, based on web technologies, not proprietary standards. Basically, what this means is that if you can write a webpage, it will be very easy for you to create an Opera widget. We think that web technologies also provide a very good platform for stand-alone applications. There are many good reasons to run these smaller applications on top of web technologies, the most obvious of which is that you do not have to worry about an operating system. If you support a standards-based widget, you should be able to run a widget on your phone, the set top box on your television, or on your PC. And it can run on Linux, Windows Mobile, Symbian, BREW—it really should not matter. I am thinking about widgets as the second tier of user interfaces. At Tier 1 you have the traditional web browser. But there are many times when you do not want to open an entire webpage to check something like what time it is in your parents’ hometown. So this type of web technology-based widget that we are promoting should be very easy to use and should be able to run on any device. Do you see that as a decision a content provider or service provider would need to make? Do we invest in widgets for Opera or do we invest in something for iPhone? Yes, I think the unfortunate situation we ﬁnd ourselves in today is that we have fragmentation within widget development right now. If you develop a widget for the iPhone, you have a large market there with the iPhone itself. But that iPhone widget will not work on other non-Apple devices, so you will have to develop another widget for other devices that will eventually run W3C standards-based widgets. We are hoping that widgets will not have dependencies on any proprietary technologies going forward. One good example of this is T-Mobile’s “Web and Walk” offering, which uses an Opera-based standard. They already have created Windows Mobile devices that are shipping with Web and Walk widgets, and their plan is to make the same widgets available to their phones based on other platforms. Because they are working with a standards-based solution, they can easily do this. So being

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cross-platform and cross-device is, we hope, going to be a larger beneﬁt that will attract enough people to make that a viable alternative to their dependence on the iPhone standard. But as we go down this path of discussion, I am reminded of the words of Takeshi Natsuno from our interview with him at the end of Chapter 2. He said that pursuing industry standards takes away the opportunity for innovation, and that instead of pushing for standards we should be focused on creating content and services that make sense and that ultimately add value to consumers. Well, there is actually a lot of validity to those comments. Standards organizations move very slowly. I am not suggesting we wait for standards in order to push forward with innovation. The fact that the W3C has not approved or ﬁnalized a widget speciﬁcation does not mean we are waiting for the W3C in order to push forward with our new solutions. I do not have time to wait for standards, and I believe some of the standards that are ultimately agreed upon are going to become totally irrelevant in the marketplace shortly afterward. But then again, there are some obvious advantages for working within the context of a standards body, especially for a smaller player such as us. If we ignore standards and go down a proprietary path, there are some tremendous disadvantages to that approach as well. And if you look at the complexity of delivering applications to certain operators, where you have the combination of proprietary handset operating systems coupled with proprietary operator requirements, you are limiting the available market for your innovation. But Natsuno does make very important and valid points. Based on what you have experienced in Japan, do you believe there may be a “formula” for other businesses looking to succeed in the Mobile Industry? Or maybe some keys to success that operating the Opera business in Japan can provide to international executives? I do not think there is a particular formula that can be easily distilled, but there deﬁnitely are keys to success, as well as clear traps that will lead toward failure. Can you elaborate on this? The mobile market continues to evolve very quickly, and ﬂexibility and speed within this rapidly changing environment are keys to success. We have seen some of the world’s biggest companies lose market share by not anticipating and reacting quickly or deﬁnitively to the changing demands of the market. Market share and proﬁtability have changed with advances driven by increasing network

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speeds, web browsing capabilities, color screens, photo e-mail, and increases in overall data trafﬁc. While it is difﬁcult to put into practice, the key is to anticipate and react to these changes. For example, I believe that providers of WAP-based solutions did not fully anticipate the impact that higher handset CPUs and higher network speeds would have on their businesses. With ARM9 3G handsets, WAP became too simple and old-fashioned for users who could use Opera or other full browsers. When the demand for the full Internet on mobile devices became apparent, they could not react quickly enough to compensate for this demand. Of course, this was good for Opera because we always had a vision that users wanted “One Web” with full features. With the rapid evolution of the mobile platform, we were ready for that market when CPU and network speed really enhanced the demand for full features on mobile devices. On the ﬂip side of this, a simple formula for failure is to have a global company not give its people in local markets enough ﬂexibility to react in real time to their customer’s needs. Opera management has agreed with me that we need a degree of ﬂexibility here and decision-making power locally. We do not have to go through a lot of debate in order to respond quickly to an important customer. So, when I say that ﬂexibility and speed are vital, there are also a clear set of operational or policy guidelines that can either enable that or disable these from happening. And at the foundation of these solutions, do you see an important role for the Law of Simplexity? Whether or not they call the concept Simplexity, our customers and Opera are actively engaged in working toward simplifying the delivery of complex services to the end users. The KDDI and other mobile operators are moving toward more standards-based solutions and more open OS based solutions, so Linux is gaining momentum. Opera has grown our business recently because customers have recognized that web technologies are now advanced enough and fast enough to enable more simple delivery of applications and services to their customers. Rather than port applications onto handsets and devices, device manufacturers can simply install the Opera browser and make services and applications available to their customers via the web. Do you have any examples of how consumers are using full browsers on their mobile devices that would show how Simplexity demands a different approach from the PC? For many executives reading this book, this may be the ﬁrst time they have seriously considered the mobile platform as a legitimate channel for their business.

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One very important factor to consider at the basic level is the fact that when consumers are using mobile devices they have far less patience than when they are using their PCs. This is actually one of the major traps I have seen companies fall into when they think that the mobile platform is just a simpliﬁed version of their existing PC experience. When thinking about the mobile platform and the unique customer behaviors that take place when people use their mobile devices, it is a huge mistake to fail to look at your own technology through the lenses of both the end user’s experience and the device makers’ particular needs for the mobile environment. One of the things that I have seen technology providers consistently underrate is the importance of performance in offering functionality. What I mean is that you can create a really great product, but if it takes 20 s to launch the product on a mobile device, you can be sure that no one is going to use it. There are serious differences in consumer electronics devices and the resources available. A mobile phone is not a PC, so you must not think of them in the same way. The mobile device typically does not have a broadband connection or a reliable broadband connection, and you do not have the luxury of a large screen or a lot of memory. That makes a huge difference on what can be done with your technology and how it is experienced. So the technology that you develop has to be adaptable to the device environment. Do these differences mandate that people think much harder about the mobile platform? For people who are serious about succeeding on mobile devices, yes. Typically, executives are not thinking about implementation issues, the limitations in the mobile platform, and ultimately how people interact with mobile devices. There are two fundamental dimensions to consider; that the device capabilities are limited and the way people interact with the content and services available on them is therefore limited. Mobility adds another dimension, but it also adds different expectations and limitations. I think people often get so excited about the potential of their technology, they do not think things all the way through from the device manufacturer’s perspective through to the end-user experience. The device manufacturer has to focus on costs and resource requirements. They cannot just think, Hey, you’ve got this great streaming solution, I will use it immediately! Instead, they have to think about how much it is going to cost them to implement, the range of devices that it will work on, and ultimately how the end user will be able to use it.

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Is there anything that your experiences in Japan may be able to teach the world about this way of thinking? Although I do not believe this way of thinking is unique to the Japanese market, the device manufacturers here consistently take a very holistic approach to their business efforts. They are thinking from the fundamental component costs all the way through to the end-user experience. Many technology providers approach these manufacturers thinking only about the technologies they have created, not about this overall model. So from a vendor standpoint, or a technology vendor standpoint, to have your products succeed on the mobile platform you must understand this holistic approach to technology. Not only is this something that Nintendo has done very well here in Japan, but it is also something that Apple and Samsung have excelled at as well. Beyond consumer electronics, this is the same approach that Toyota has taken with its cars. It is also something that DoCoMo and KDDI also know very well. When they introduce a technology, they make sure to introduce not just the simple technology, but the entire ecosystem surrounding it. They make sure content providers are lined up, that there are enough resources to educate consumers about new features, and all of these related facts. From the beginning they are thinking very holistically. And again, I do not think this is unique to Japan, or that it was even ﬁrst established here. But many Japanese companies take this approach and have been successful in doing so. As more companies take this holistic approach and consumers adopt mobile Internet services and solutions that arise from this way of thinking, where do you believe the greatest or most important “Simplex” innovations will arise going forward? My view of the future of Simplexity is pretty Internet-centric, so I will stay within that scope. Mobility adds an extra dimension to the web. We have already seen that mobile web offerings are usually enhancements of technology available on the web. Mobility makes e-mail more interesting because we can send photos to our friends immediately. The GPS makes web mapping and area directory technology more useful by giving us immediate information about where we are now. With Simplexity solutions, mobile providers will be able to offer new services without worrying about the underlying complexity of the devices. They will simply need to update their current web-based offerings, and their content or services can be available on any device anywhere. Currently, popular services, such as SNS, blogging, intranet, and management tools, will all add new dimensions as they become fully available to mobile

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users. End users will not need to decide whether or not they will buy a Windows or Mac computer, or an iPhone, Windows Mobile, Symbian, KDDI, or DoCoMo device. They can access their content through their web browser irrespective of the device they prefer and use. But as you have outlined in your Law of Simplexity, many interesting ideas will ultimately fail because they are going to be either too rudimentary or they are going to be too hard to use. I think this is a very effective yardstick against which to judge the success or failure of future mobile solutions.

Expert Insight Keisuke Toji President and CEO Interactive Program Guide Inc. Keisuke Toji graduated from Osaka University in 1991 and then entered Dentsu Inc., Japans biggest advertising agency. At Dentsu he focused on sales promotion and on new business development. In 1999 he founded Interactive Program Guide, Inc. (IPG), a joint venture between Gemstar and Dentsu and was appointed as a director. In 2005 he was named President and CEO of IPG.

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Toji-san, your company operates G-GUIDE, one of the most used mobile applications and services in Japan. G-GUIDE is an electronic program guide service for TV viewers. I just found out that it already has > 30 million mobile users. What do you think is the secret behind the success of this mobile electronic program guide? And what are the more fundamental success factors behind it? First of all, one important prerequisite for G-GUIDE was that here in Japan we have an established TV culture. People enjoy watching TV. Alongside this we also have a strong newspaper culture. So many people were already used to getting their TV information from the newspaper or through other sorts of printed TV guides.

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Having this information on your cellphone offers extra beneﬁts to the user, because this content was only available in newspapers before. It also gave people something to do on the mobile phone in their free time (checking upcoming TV programs). Those were two of the needs that G-GUIDE catered to initially, and then there is also the factor that it is preinstalled on the phone when you buy it. Preinstalled on the mobile phone as a stand-alone application you mean? Can you explain a bit more about this speciﬁc factor? I guess it was 2000 when they started i-mode, and when they ﬁrst had the idea of so-called ofﬁcial sites. But for most of these sites you needed to pay a particular monthly fee of ¥100. This monthly charge approach might be the appropriate approach for many other mobile services, but not for an electronic program guide. Because TV itself in Japan is basically free, so we thought TV information should also be free, and we started to work on an ad model for the service. In the beginning, we had a unique challenge getting our mobile service site off the ground. The reason was a more technical one not a content one. At that time the typical way to access information on a mobile phone was through the mobile Internet, through mobile sites. What brought the change to us was the general move toward 3G and 3G handsets. Those handsets were able to run very complex Java or BREW applications. These applications allowed users to download or access just the information they needed and have this as a default setup on the phone. This situation changed the game. At that time, because of that new application-based environment, Natsuno-san from DoCoMo was looking for a killer application to go with it. They were aware of several kinds of popular content they could bring to the mobile platform, such as games like Final Fantasy. But they knew that TV information is going to be key. It had the potential to offer a simple and powerful solution to an already existing demand. So we both started to work together on creating a speciﬁc mobile application for this. So this was a user and needs-based approach. In our book, we also emphasize the importance of the user and usage scenarios. Tapping into already existing needs and usage patterns also helps to attract a larger user group. Have you seen something similar with G-GUIDE? We shared a big vision for G-GUIDE with D2C (a joint-venture mobile agency of Dentsu and DoCoMo) and Natsuno-san: There are those millions of TV users out there and this group also includes regular cellphone users. But until that time, not many of

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these mobile phone users were using the mobile Internet or mobile applications. Only heavy users utilized these kinds of services. So what we wanted to achieve through G-GUIDE is to get also to be normal mobile phone users interested in the mobile Internet and mobile applications. So thinking about all these people, we knew that the universe of TV users is basically everyone. Through them and through our service we wanted to expand the usage of the mobile phone as much as possible. That idea is part of our success because it brought mobile Internet and mobile applications usage from a “geek niche” into the “TV room”, which is something that everyone has an interest in. This is very much in line with our Simplexity approach in the book. When I look at the Nintendo DS or the Wii, for example, they were able to increase their sales by opening up gaming to a new (nongamer) target group. They utilized interaction tools (pen, remote control-like device) that were familiar to everybody and turned gaming into a mainstream phenomenon. This bigger picture we shared with DoCoMo was the key to our success. It was not just about increasing the number of G-GUIDE users from X to Y by offering an application preinstalled, but this vision in our minds: turning normal mobile phone mail and voicecall users into application users and mobile web users by offering services that are meaningful and relate to their actual needs and behavior patterns. An interesting and very “simplex” feature of mobile G-GUIDE is the ability to use the infrared port of the mobile phone as a remote control for the TV/VCR. How is this feature part of your vision? Another part of our success was that we did not only just bring the EPG over to the mobile phone, but there was a crossover between the actual cellphone usage–functions and the TV viewing experience. If we had just brought what was in the newspaper or in the TV magazines to the cellphone, that would not be a big change. But by having the mobile EPG application use the infrared port of the mobile phone as a remote control for TV users is probably one of the things that changed the viewing experience. That was probably also a big part of the success as well. Having an EPG on TV that is one thing, but when you combine it with a DVD recorder (and the possibility to program the recorder even through the mobile EPG application) that opens up a whole new realm of experiences that people did not have before. So crossing over those boundaries was probably also one of the reasons why we have such a high number of users today.

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Yes, I think this was a very clever and strategic move. And it leads to a reduction of complexity on the user side. Looking at G-GUIDE as a service, do you think this would also work outside of Japan? Probably not. One prerequisite is a strong carrier. In Japan the carriers are very strong entities. They have a lot of power in the market. This ranges from the actual handset specs and features up to a broad range of control over other activities in the mobile market in general. So in that sense we were fortunate to have a very good partner like DOCOMO to start with. There probably are not many other countries where the carriers are as strong as they are here in Japan. I guess you need that level of control to make this model work. Without that it is very difﬁcult to make it work. The other prerequisite is that you need a country where people pay a lot of attention to TV, and that is true for Japan. And Japan is also fortunate to be a highly developed country with advanced mobile technology. But in general what you need is strong attention or dedication to TV. That does not seem to exist much in other places. We experienced this with our partner, Gemstar. They have a worldwide business, and they have been experimenting with mobile EPG services in other places. But so far we have only seen the success here in Japan, even though people may have copied it, and others try to copy it in other places. Your EPG service is a real convergence service offering access via PC, mobile, and digital video recorders. What role do you think the mobile phone plays in the general trend of convergence? We looked at mobile as a good way to expand our service and “to get it out there” in terms of a mass audience. At the time we started to offer our service on the PC, we realized it probably would not be our main media. Many consumers want to use whatever device they have in front of them and just be happy with that. Maybe if they have a mobile next to them, they will just use a mobile. If they have a PC, they will use a PC. But on the other hand, things are not that simple. Each device has its speciﬁc beneﬁts, usage scenarios, or usage patterns. This needs to be taken into consideration. Important is the interlinking of these devices based on their speciﬁc usage. So what would this mean for different devices like the PC, mobile, and the TV? I think each device—at least in a short term—will probably have a preferred use. For a TV-like device, it would be about recording and watching video content, mobile would be for quick look-up of information and communication, and then the PC is used for

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accessing and retrieving bigger chunks of information because of the large screen. When we think more about TV and TV recording, it is very easy to understand what kind of user experience and content is necessary to make it work. But when we started to think about the PC, we thought about what experience–content users would be looking for in the ﬁrst place and at least for the short-term this would be consumer-generated media. What will the situation be like in the near future? How will this interlinking happen? And what role will the mobile phone play? Can you give us an example? At this stage, when we look at media in general, it is still divided. Take video content as an example. Before the main media was TV, then it expanded into PC and mobile Right now people use these different media, but we think it is all going to come back to the big screen. People are going to want to watch this on a big screen, leaning back, enjoying the high quality and the easy of use through a simple interaction device. So it is going to come back to the TV, and in the future the TV is going to be the most important interface for this. While the TV provides a great viewing experience, it does have difﬁculties when it comes to interaction. You can use your remote for switching channels, but data entry is very difﬁcult, and we think that is where mobile is going to come in. People have their mobile with them 24 h a day, 7 days a week. They are used to relying on their mobile phone when they want to enter or look for data or content. The mobile phone is the best interaction device for this. Also, please keep in mind that the living room is still going to be the main place where users spend their time. So having the mobile phone for switching as well as data entry is a good way. So the PC as an online entertainment device will start to become less and less important. The TV and mobile or, better, a combination of both will be our future tools of interactive entertainment? As we keep on going forward the PC probably will not be the main entertainment device. Things will be moving back to the TV. One of the things people are going to want when using their TV is a way to enter information or to retrieve information, without using a complicated remote control or having the TV screen cluttered with information. Here mobile is a perfect tool, and the good thing is most consumers are already familiar with how to use a mobile phone, how to enter data, and how to retrieve information. We can build on an existing and learned behavior pattern. So this convergence concept uses the mobile device as a kind of advanced TV interaction device. The mobile phone will act as

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a “simplex” interface between the user and the interactive TV services? The PC might be a real good way to input content or to interact. Yet the best device you can use in conjunction with the TV is probably the mobile phone. You have it with you all the time, you know how to operate it, and so it is the best way. Because it is with you all the time, it is a very valuable tool and also something very personal. Your personal communication, your friends, your private activities, your personal pictures, and memories all rest within your mobile phone. Entertainment is also very personal. So the fact that both are so personal is another factor contributing to TV and mobile working together pretty well. Also, we think another important thing will be the record of what you have done or what you have consumed or enjoyed in the past. Up until now, TV basically is something that happens once and is gone, So being able to store entertainment information or store your experiences is something we think is going to be needed, which the mobile can deliver with the push of a button. As we go forward, when you think about TV and mobile, it is not only a way to enter information, but it will also be a tool to manage, analyze your personal history, preferences and past experiences, and making recommendations based on this. That is another very important value that exists in the mobile. Very much a “Simplexity” enabler I would say. In general I can see many of the points we outlined in this concept in your service already. Also your future vision is very much in line with that, too. Can you show us other examples of G-GUIDE where this concept would apply and why it would apply? One of the most important parts of G-GUIDE, and for EPGs in general, is the user interface. In Japan, you have this two-dimensional TV program lay-out in newspapers and magazines. Everyone is already used to it. It needs no explanation, and it is something that if you asked a hundred people, a hundred will be able to tell you what it is and can use it without any explanation. So we already have a learned user pattern of what a classic TV program guide looks like. What we did is to reproduce this learned pattern in our online version. The other part is looking at how people utilize program guides. In general, they want organized access to information. For TV content, that access is best organized through a timeline. This is also a learned behavior. Timelines allowed people to synchronize the TV schedules with their life and personal schedules, to set themselves into perspective and have a “rhythm schedule” of content. We selected the same approach for our EPG.

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How do you manage the increasing complexity of channel and video offers? There are free over-the-air TV channels, cable pay TV channels, special satellite broadcast channels, digital terrestrial mobile channels, and so on. The TV landscape is getting more and more complicated for users. The TV gets more complicated. In Japan, when we started with G-GUIDE there were 7 main channels, and it was very simple to reﬂect this in an EPG. These days things are getting much more complex than they have been in the past. And this will even increase in the future. We might grow from those 7 channels to > 300. But our job is not just to list all 300 channels. We need to keep the same experience and simplicity you have gotten used to with that seven-channel interface, because that is the amount of information people are used to. But we have got to make sure that the right information out of those 300 channels gets displayed there. That is going to be a very important value that we are going to be able to provide. It is all about taking a much more complex scenario of channels and delivering that same simple experience people are used to. Traditional TV breaks down and dilutes more and more. Because of this, our service will even grow in value. The true beneﬁt is in keeping the same simple user interface and interaction regardless of the content complexity around it.

CHAPTER 7

PARTING THOUGHTS

As children, we were often reminded to “think before you decide”. Unfortunately, we sometimes forget this principle. Business decisions are frequently inﬂuenced by emotional elements or short-term goals. Occasionally they are done with minimal consideration and market awareness. Knowledge of the future of the mobile industry is power. This includes an awareness of the marketplace, technology, key players and services, users, and the immutable laws behind them all. We want to provide you with some food for thought in the form of several short “Think” memos. While based on our six immutable laws, they also go beyond them. Each looks at a different angle of the mobile industry’s future, and should help you to understand the fundamental changes happening today and to come.

THINK BEYOND THE MOBILE PHONE The ubiquity of mobile networks and convergence of devices will bring new ways of mobile communication and mobile business models. We have to broaden our long-term thinking about mobile devices. A good example is Amazon’s Kindle e-book reader, which has a built-in mobile phone network chipset that allows users free access to Amazon’s online bookshop as well as wireless downloads of e-books. Users do not need a mobile phone or carrier contract, and pay no fees; Amazon handles everything, and they mainly use the mobile network connection

The Six Immutable Laws of Mobile Business, by Philip Sugai, Marco Koeder, and Ludovico Ciferri Copyright © 2010 John Wiley & Sons, Inc.

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to allow users access to their service anytime, anyplace. We will see more devices using the mobile Net in ways not imagined before.

THINK OF ECOSYSTEMS The advent of the iPhone highlights how vital ecosystems are for turning technologies into successful services. From day one of the mobile Internet, Japanese carriers provided content creators with an attractive revenue-sharing model and the tools to easily create and deploy new services and content. All this was neatly organized in a “semiwalled garden”. Google Android and Microsoft’s Windows Mobile are moving in the same direction. Even Facebook, with its Widget functions and platform market-place, has had an ecosystem for quite a while. Expect to see more ecosystems, even across different devices. In a sense, this approach is a post-Web 2.0 business model. Content development and application development is “crowd-sourced” to small companies and even individuals, who try to make their fortune by offering products within the designated “hothouse” of carriers or providers.

THINK OF A USER-DRIVEN ECONOMY To succeed, companies need to build their products and services from the user’s point of view and offer a true consumer beneﬁt. A mobile device is a personal tool, and users expect mobile products to be personalized as well. One facet of this is customization. The other is providing solutions based on user preferences, location, current needs, and overall situation. In this new world, the device does not rule the user; the user controls the device. The device must be seamlessly integrated into the user’s daily life, empowering and broadening his or her personal ecosystem. This is a radical step past a technologydriven economy where users are forced to adapt to the complexity of products and services. We call this the “real embedded device”.

THINK BEYOND THE WEB Using an online browser to seek out information or to connect to friends is an in-between step, not a real solution. The Web’s role and aspect will change. Rather than a collection of millions of websites, it will become a collection of millions of connected databases and users—a new space of information intelligence, and semantic and social knowledge. The Web will be much more of a user-driven, preference- and behavior-based personal net that can run on many different devices. The mobile phone will act as a freestanding “thin client” or mobile widget, and information will be stored, rendered, and displayed in an accessible, easy-to-understand way.

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THINK OF A GEAR, NOT A GADGET You probably looked at the latest mobile handset and thought “Just another overhyped gadget”. Considering the many functions these phones possess (most of them unused) that is understandable. However, we should be thinking of the mobile phone not as a gadget but as a gear: A mechanism that helps us reach a goal or achieve a task. The phone is a gateway device, a multidimensional navigation tool and hub you can use to connect, interact, inform, entertain, carry out transactions, and express yourself.

THINK OUTSIDE THAT BOX, AND THEN BACK INSIDE IT Companies intent on fomenting a product revolution usually end up creating just a minor insurrection. Why? Because their vision is too narrow. When you try to create new markets and business, do not view the mobile phone as just a phone. Imagine instead what this device can do for the user and how that person would want to use it. What user-based services would empower users without demanding too much time and knowledge? Look outside the current market as well for solutions already there, what is missing, and which could be brought to the mobile platform.

THINK OF MOVING FROM VIRTUAL BACK TO REAL The next big online revolution is already arriving, integrating the Internet’s virtual realms into the real world. Mobile devices will be the bearer of this revolution, connecting real people, real places, real objects, information, and time through an intelligent network of databases (Figure 7.1). Time here takes on several dimensions, including the time something actually happens and time in a timeline or historical dimension. This can be the history of an object, a user, an interaction history, usage history or a purchase history. Mobile phones let us retrieve additional data about where we are using GPS and online databases. For example, NEC developed a system several years ago that allowed users to learn about a speciﬁc place or structure by pointing the phone in its direction. Mobile SNS services connect us to friends, family, and colleagues, and even helps us ﬁnd new friends on the go. Spontaneous meetings can be scheduled by using mobile maps and quickly assessing the relative whereabouts of the other parties. Places and objects can also be tagged on virtual maps so other users can retrieve extra data about them and add their own insights. Mobile devices can also remind us about locations and people we know, objects already purchased, people we have already interacted with, and provide us with meaningful information from intelligent online databases. They are the connectors

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The mobile phone adds a new level to the real world.

between the normal world and this new enriched, hyperlinked world. Google’s Android approach, for example, revolves around this concept. THINK OF THIRD WORLD USERS The “one laptop per child” (OLPC) concept has been promoted in Third World countries for some time now to boost development. While putting a laptop in front of every child may help, we doubt it would be the optimal solution. The problem is that we often naïvely assume developing countries are basically like the developed world, minus the wealth and the advanced know-how. Giving a laptop to a child in a poor country is an act of charity and makes the giver feel good, but what about the “ecosystem” the child lives in? Many things could be done for the price of a laptop that would beneﬁt local people more, such as building infrastructure, securing and purifying their water supply, and protecting against disease. You could throw in a mobile phone for free, as part of an aid package. The mobile phone is a simpler, more suitable information exchange and access device than a laptop. Robust, cheap, and easy to use, it can also serve as a grassroots transaction device to develop the economy. Best of all, it is already out there, whereas the OLPC is not yet part of everyday life in the Third World and was developed outside of the ecosystem it will be used in. The best people to devise solutions are the ones who will use them. Simplexity is a key concept for developing countries, where users cannot afford sophisticated and expensive tools. Those qualities should be built into the back end of the system, while consumers use simple, robust devices, perhaps even solar powered, that utilize mesh networks to access content and services. Developing countries will be the main sources of growth for the global mobile industry. The ﬁrst wave of mobile adoption has already brought connectivity to half the world’s population; the next wave is focused on securing the rest.

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What we have discussed throughout this book applies equally to these new subscribers and markets. One of i-mode’s ﬁrst breakout content successes was a simple, up-to-the-minute surf report from Cybird, delivered via basic SMS-style text updates. It is not surprising that similar weather and market price reports have become popular with rural farmers and ﬁsherman in Bangladesh. The mobile platform is bringing new knowledge to migrant workers, farmers, craftspeople, and many, many others, opening opportunities for entrepreneurship (e.g., Bangladesh’s famous “telephone ladies”), and serving as the medium for social and political change. The demands of mobile consumers in developing economies require simplexity-based solutions built on the foundations of our other ﬁve immutable laws. We see only one major obstacle to the success of any market or ﬁrm that adopts these laws in their business efforts—the disempowerment corollary to our third law. As the world becomes increasingly “mobile”, we anticipate a concentrated effort by some organizations to exert control over mobile users through the mobile channel. Intrusive advertising, user tracking, security and location-based data theft, contactless RFID fraud and theft, for example, show that the disempowering dangers are real, current, and signiﬁcant. If mobile phone consumers feel more disempowered than empowered as organizations take advantage of the rich data available through wireless interactions, the mobile platform may never live up to the potential we have outlined. We believe, however, that consumers will ultimately win, and our collective future will be a robust, simplex, and mobile one. We offer our six immutable laws as evidence that such a future is possible in all markets, and as a guide for how other markets can surpass developments in Japan. We hope they help you and your organization achieve great heights and avoid the mishaps and failures plaguing the companies that have ignored them. We also hope to hear how you have applied these principles to your mobile initiatives. You can send your feedback, including questions, comments, and insights, to the following address: [email protected] Expert Insight Tetsuzo “Ted” Matsumoto Senior Executive Vice President Softbank Mobile Corp.

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On June 22, 2007, Tetsuzo (Ted) Matsumoto took the position of Senior Executive Vice President of Softbank Mobile Corp. On September 1, 2006, Tetsuzo (Ted) Matsumoto took the position of Executive Vice President, Technology, and Chief Strategy Ofﬁcer of Softbank Mobile Corp. (previously Vodafone K.K.). Before joining Softbank Mobile Corp., Matsumoto worked for Qualcomm for >10 years. After serving as a consultant for 2 years, he founded Qualcomm Japan Inc. in April, 1998 and became the President of the company. In September, 2004, he was promoted to Senior VP of Qualcomm Corporate, responsible for Japan, South East Asia, and Paciﬁc. In March, 2005, he became Chairman of Qualcomm Japan and stayed in the position until May, 2006. After that, until the time he resigned on August 31, 2006, he mainly served for the developing markets in the world, based in San Diego. Before becoming President of Qualcomm Japan in April, 1998, Matsumoto was President of Japan Link Corporation, a consulting ﬁrm he founded in April, 1996. Prior to Japan Link, he worked for a Japanese Conglomerate, Itochu Corporation, for 34 years in a variety of positions: Senior Vice President and General Manager of Electronics (U.S. Corporation); General Manager of communication and multimedia businesses; and Division Vice President of aerospace and information (Tokyo HQ). During the same period, Matsumoto served on the boards of 15 Japanese multimedia related companies. Matsumoto received a bachelor of law degree from Kyoto University in 1962. Six Laws

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Since initial conversations with you is what sparked our ideas for this book, we wanted to use this interview to summarize the main themes of the book and to explore current opportunities and challenges that exist in Japan and internationally for the mobile industry. We are especially interested in how you think those outside Japan can learn from both the successes and failures the country has experienced over the last decade of advanced mobile data usage. So to start our conversation, How do you think Japan arrived at its current level of mobile Internet usage? The key factor behind Japan’s highly developed mobile industry has been young consumers who have driven and shaped the market. Young Japanese users created a new culture, within which mobile handsets became an indispensable tool. Our ﬁrst law of mobile business focuses on the value of mobile services rather than the cultural environment within which they are developed. After all, we have young consumers everywhere in the world. One of the points we make in the book is that young consumers in Japan are no different from those in other countries. Well, ﬁrst let us say that kids are kids wherever you go; they adapt quickly to new environments, absorbing the inner roots of innovative things. I lived for a long time in the United States, and the differences between Japanese and American kids are not

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that signiﬁcant. Japanese products are successful throughout the world—animation, manga, games, etc., (Pokemon is a typical example)—because kids are kids everywhere. When it comes to high school or college students, however, some differences start to appear. Are these differences related to some uniqueness of Japanese culture? I see at least three main differences, which I believe are related more to Japanese society than to its culture. Anywhere in the world, regardless of longitude or latitude, high school and college students tend to hang out with their friends in the streets. If you compare Japanese with Americans, the ﬁrst noted difference is that Japanese live in a pedestrian environment, while Americans live in a driving culture. (Europeans may be in the middle.) The second difference is that in the United States, and to a lesser extent in Europe, people tend to be very focused and devoted to their independent interests and choices. Japan, however, is the nation of the “me-too syndrome:” what other people are doing, we will do. In other words, while people may be slow in making independent decisions, they are quick to follow the trends of others. Thus, one trend expands to the masses very quickly. In other words, Japan is a large mass market that could be educated more easily than, say, that of the United States. On top of that, and this is my third point, Japanese young consumers tend to be rich compared to their overseas peers. This is because their parents, who are caught up in the typical hectic Japanese lifestyle, tend to spoil them. Anyway, for these three reasons—the pedestrian nature of Japanese society, the “me-too syndrome” of Japanese people, and the ﬁnancial strength of Japanese young consumers—things become widely adopted very quickly. Then it becomes a spiral. If the potential market is there, products will follow. If good products are developed one after another, the market will be further stimulated. It sounds like the differences between the natures of Japanese on the one hand and American and European young consumers on the other is what made it difﬁcult for American and European markets to easily enter into such a spiral? Yes, I think so. Let me tell you about the question I have been asked so many times by foreign mobile carriers and service provider executives who visit Japan to learn about the robust development of our 3G industry. The question was always, Who is driving this process? Is it the business market or the consumer market? My answer, of course, has always been that the driver is the consumer market. In fact, business people in Japan are rather slow. It is almost impossible to get the whole corporate system to move quickly toward

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innovative services. In meeting after meeting, a consensus may eventually be built, but not too much risk will be taken to adopt anything very innovative. On the other hand, young people just jump right in when they feel something is interesting or “trendy”, and through word of mouth the idea gets to the masses very quickly. The Japanese mobile market is consumer driven, while we could say that the European or American markets are business driven. Let me set this straight: It is a market of “young consumers interested in anything new” versus “mature and intelligent business people interested in real efﬁciency”. BlackBerry arrived in Japan, yet it has not seemed to catch on very quickly. Do you think it is because Japanese business people are conservative? To a certain extent, yes. But there is also another reason. As you know, the most attractive thing BlackBerry provides is synchronization with the Intranet system of each corporation. Unfortunately, however, Japanese business people’s computer and Internet literacy is lower than in Europe and America, and the entire corporate IT system is not as efﬁciently used as in Europe and America. Thus, quite understandably, the merit of using BlackBerry is not as great as in Europe and America. I am getting confused. Japanese business users of mobile phones are behind their overseas peers, while Japanese consumer users are ahead of their overseas peers? Yes, and that also answers the typical question about why the rest of the world lagged so far behind Japan in adoption and usage of mobile data services. The logic is simple. Intelligent European and American business people are ahead of Japanese business people in utilizing mobile data services, but young consumers are usually faster than mature business people in adopting such new services. Do you think this situation will continue for a while? No. On the contrary, I think the entire world is at a turning point. Now, ﬁnally, the smart phones developed for mature and intelligent people are picking up. The technologies used here can also take care of the young consumers’ interests. Let me say it clearly: I believe the Japanese mobile market has only been “uniquely” ahead of the European and American markets, but the situation is going to be reversed due to the maturity of the smart phone market throughout the world. Do you think Japanese business people can catch up with such a change? I heard that the conservative nature of the Japanese corporation is making it difﬁcult for the employees to fully utilize

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various Internet services. I heard that Japanese employees are often forbidden to take their laptop out of the ofﬁce, even for work. Is not this killing the concept of mobility for corporate employees? Matsumoto

That is because of the corporation’s concern for security. It is true there have been many occurrences of heavy data leakage, which have made the corporate management nervous. But, I do not think it really affects the entire situation. In fact, there is already a sign that corporate Japan will start using the datacentric mobile phones as a serious business tool. I think Japanese business people will eventually catch up.

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How do you position the success of i-mode in the story you are telling now? This year i-mode celebrated its 10th anniversary. It was the ﬁrst mobile service in the world to marry data communications with mobile phones, enabling many valuable applications.

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I agree that i-mode made a great contribution in opening the door to the mobile Internet age. When it comes to inﬂuencing the global mobile community, however, I think iPhone is having a far bigger impact. iPhone somehow achieved the combination of the power and ﬂexibility of a personal computer and the portability and simplicity of a smart phone. I think we can really call it revolutionary. I am pretty sure that iPhone, or any evolution of the present smart phones stimulated by the success of iPhone, will be widely accepted by those people who have not been satisﬁed either by personal computers or the current smart phones.

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You said the success of the Japanese mobile market was because of young consumers, while smart phones from Nokia and BlackBerry are tailored for intelligent business people. But, now, are you saying that iPhone could be successful in all markets?

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Yes. The smart phone technologies, which have been developed primarily to support business people’s needs, can also support various kinds of entertainment applications. iPhone is clearly achieving both. iPhone is an extension of the iPod, the device for those who love music. Music, which is the most commonly shared and enjoyed entertainment application, has succeeded in merging the two communities—intelligent business people and young consumers.

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I understand that music is the common ground. What about gaming? Can it exercise the same magic on the mobile industry?

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Gaming is also a unifying element, yet a little bit twisted. To play a game, you have to be really into playing. Video is a unifying element, too. Yet, again, unlike music, it is not so easy to share and enjoy. Music is really universal, the most common denominator, a language for everybody. And it is also the easiest and cheapest to enjoy.

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OK. I agree that iPhone made it. Then, why did Japanese manufacturers fail to do the same thing and instead are now forced to chase Apple? The worldwide success of Walkman was a Sony invention, and Sony has been at the forefront of product innovation for decades. Also, Sony has been much ahead of Apple in the mobile communications market. Sony Ericsson is one of the largest mobile phone vendors. Nevertheless, Sony could not make an iPhone-like product. Why? I do not know. You are asking the question to the wrong person. Sony is like the famous and respected Japanese judo wrestler who, one day at the Olympic games, was unexpectedly beaten by the newcomer, a Dutch judo player. That is all. OK. In any case, Apple set the example, adding new momentum to the industry, and music played an important role. However, most of the people I know who have an iPhone did not buy it because of the music feature. Actually, they may never even use it to listen to music. That is exactly what I wanted to say, also. Although everything started with the iPod, it is now only one of many attractive features iPhone provides. I am a very happy user of iPhone, but I do not listen to music on the road. No game, no YouTube. Mailer and Scheduler are what I use most heavily. You may be surprised to know that I often use the camera, which I had not been interested in when I was using the Japanese handset. Even though the iPhone camera is only 2 million pixels, it is easy to use, and the photos look beautiful on the large screen. The biggest problem with the Japanese handset is that it is a bit too cumbersome to store the photos. iPhone solved this problem by preparing a lot of memory. Actually, I have already converted ﬁve of my senior friends to the iPhone by emphasizing this point. Senior people do not care about music and games, but many of them are interested in the camera. Senior citizens? I wonder what percentage of an iPhone’s capacity they might use: 10% Perhaps 10% is too much. The average may be more like 1%. One percent is probably right. If they are using 1% of the iPhone’s capability, this is still better than the personal computer, since the average person probably uses < 0.1% of the entire capability of a personal computer. The question is not the percentage. The question is whether it is useful or not, and whether there is anything else that is better. The fact that older people are using the iPhone instead of speciﬁcally designed devices with big numbers and digits is something worth noting. It seems that the iPhone is a tool of inclusion. That is very interesting.

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Indeed, and I believe that is happening thanks to a simple and intuitive user interface and a big, beautiful screen. Can we say that to some extent a device like the iPhone may help to bridge the digital divide between the younger and older generations? It could be, but probably that bridge has not been built yet. It is normal to have a digital divide between older non-computer guys and younger computer guys. Perhaps some other steps need to be made. Then what else might be missing in the iPhone that could make the breakthrough? That is a difﬁcult question, because iPhone is not missing much. It would be helpful, however, if the initial setup and download of some applications avoided too much dependency on the personal computer. Do you think we will see new kinds of mobile computing device as were, which some of our other interviewees have talked about? For example, what do you think of dedicated wireless devices for health maintenance or monitoring? Yes, it could be one area where we may see some signiﬁcant innovations emerge, but without the development of some very elegant user interfaces, the products could be too complicated for a sick or elderly person to manipulate by themselves. It is too much to expect the elderly to use such a device if there is no one to help them. Please do not forget that whenever anybody tries to introduce new IT systems into the mass market, there is always too much conﬁdence and ambition on the side of the technology provider. They very often underestimate the problems and frustrations most people would have when they initially use it. That sounds like a very strong endorsement for our concept of simplexity. As a personal example of this, my own father, who is now 81 years old, learned to write SMSs 2 years ago. He is now very proud of his ability to send messages to his nephews. As you pointed out, however, it took time for him to learn. Five minutes after we explained how to write and send an SMS message, he asked us again what SMSs are for. Interestingly, the best teacher for him was his 16-year old nephew. Younger and older generations can have very good conversations about mobile phones, because they tend to look at the essence of communication similarly. In any case, let me say that if somebody has to be assisted 10 times to repeat the learning process on how to use a device, this means the device is already faulty. What I found interesting about devices for the elderly market is that portability

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is not so important. Then why are we not making the screens even bigger? Screen size is a subject you have talked about in the past, mentioning the “Law of the Screen” and how mobile Internet usage matches closely with screen size and resolution. Indeed. In fact, I am a ﬁrm believer that the size and quality of the color screen will be a key success factor for every smart phone developed in the future. iPhone has already demonstrated this fact. For some people, as long as it ﬁts in their pocket and they can hold it with one hand, the larger the screen the better! I think the most popular screen size may become even bigger than the present iPhone screen. On the other hand, I recently started thinking about an interesting new idea to provide an auxiliary screen, which is carried not in the user’s pocket but in their bag, and taken out whenever the time and situation allows. This auxiliary screen does not need to have a high level of intelligence, because the user already has all the necessary intelligence in the handset. What it provides is only a larger screen (and a full-size QWERTY keyboard and large capacity battery) to occasionally connect to the handsets with USB cable, or wirelessly via BlueTooth. I would tentatively call such a product a “Viewpad”. A Viewpad? Yes. It should be far cheaper than any Netbook. I would be very disappointed if the price went above 100. It could be an accessory for all future intelligent handsets, or perhaps future handset cradles could be designed something like this. Business people may like it, but do you think consumers would carry around an extra device like this? Anybody who would carry around the Amazon Kindle would do so. Unlike the Kindle, the Viewpad user would also be able to see and enjoy large-sized maps, color pictures, and video. And the good news is that this device would be much cheaper than the Kindle. How would this work at home? Could Viewpad also replace the TV, as it might replace the personal computer? It could, but I would not be too excited about the idea. Users at home would have a better device than the Viewpad. The home TV set, itself, would serve as the auxiliary screen for the handset. The big, ﬂat home TV screens are a very attractive feature for enjoying any Internet content. Now let us talk about the power supply, which, I believe, is also key to the future development of mobile business. The European Commission is pushing toward the uniﬁcation of chargers for

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mobile phones. Industry-wise this may not seem like a big achievement, but it could help to increase mobile usage. We are now seeing booths with 10 different chargers. Yes, it is a very good initiative. Japan already took similar steps toward standardization 2 years ago. At least all new DoCoMo and SoftBank handset models have a common charger. Unfortunately, standardization applied only to the Japanese market at that time, which means it will not work in the GSM world, where market size is ~20 times that of Japan. It is embarrassing to explain that the difference is simply the small number of pins. Two extra pins in the Japanese charger were added for diagnostic testing and for some other possible future needs. That takes us to the fatal problem of the uniqueness of technology standards in Japan. That always makes me feel very sad. Let us remain for a moment on the universal charger. Japanese addressed the issue ahead of other countries. At that time, we should have initiated talks with the European Community and the GSM Association by saying, We have a problem, which we are addressing in this way. Would you join us, or at least let us know how we can cooperate? The problem is that most Japanese people tend to be shy. They do not speak up, and they miss the chance to take the lead in any global activity. Japanese companies should change their approach in the future. Whenever they have a new idea, they should target the global market from the beginning. They should try to convince, or at least communicate with, people outside of Japan. Look at Korea. The Korean market is not big enough, so, from day one, they target foreign markets. Look at China. Even though China has such a huge domestic market, the major global players in 3G equipment, Huawei and ZTE, have never counted on that alone. Instead, they have chosen to compete in the 3G market outside of China even before their domestic market gets ready. Japanese tend to believe that everything that works in Japan should work outside the country, while foreigners often joke by saying just the opposite. It is a joke, of course, yet it reﬂects stereotypical thinking that has some foundation of truth. In fact, a strategic issue for Japanese companies with cutting-edge technologies is how to quickly penetrate into the global market to create a de facto standard. Do you have any idea about why this is not happening and how this situation could be changed? I think the reason is the mentality, or mindset, of some Japanese people. They simply want to avoid complicated work outside of Japan before they gain conﬁdence through the success in the Japanese domestic market. But this process takes a long time, and

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the global market is not generous enough to wait for it. Thus, when the Japanese company gets ready to approach the foreign market, it is already too late. Japanese automobile manufacturers, however, seem to have avoided being bound by this mentality. They have been doing the right things at the right time. That is why they are successful in the global market. That is a good point, which leads to the question of why the mobile communications industry could not follow the same approach as the automobile industry. I do not want to discuss this too much, because we—mobile communication carriers—would probably be one of the parties to share the blame. As you know, handset vendors in Japan do not have a lot of decision-making power. Communication carriers do. But since the business of communication carriers is basically to take care of domestic users, we had no reason to care about the interests of foreign users. Having said this, however, I think the situation could have been better if we had been more long sighted and tried to make the Japanese handsets as common as what can be sold in the global market. If we had done so, Japanese handset vendors could have been more successful in overseas markets, and, accordingly, they could have reduced the cost of their handsets, which, in turn, would have beneﬁted us in the domestic market. Even in a better environment, do you think all Japanese handset vendors could have been successful in the global market? I think there are too many handset vendors in Japan. You are right. There appears to be too many handset vendors in Japan. There are 8 vendors now. During the boom years, the number reached 13. They were all competing with each other in only one market. Let us move on to a positive note. When you look at the current state of the mobile industry, either in Japan or globally, what do you see as the most exciting innovations or technologies currently being developed? Service–Content delivery systems like the iPhone’s Appstore. The future handset should be ready to serve all kinds of users’ needs on the road, and it should be constantly enriched by new application downloads. The handset should also have a sophisticated selflearning capability and become a real “companion” (or “servant”) of the users. Which market segments do you believe are the most exciting? And who will be the winner in each? Honestly, I cannot deﬁne it, and I do not think it is a good idea to try to focus on only one market segment. Every market segment

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is important and interrelated with the others. The word “mobile market” should mean an “ever changing and ever growing mass market”. Opportunity is everywhere. There is no need to focus on any one speciﬁc area. Having said this, however, if I were asked to give advice to young entrepreneurs thinking of starting a new business on the mobile platform, I would have one thing to say. I would advise them to ﬁrst look around for any new, exciting Internet service that people are accessing through their personal computer, and then try to apply that service to the small mobile handset. As a general rule, we should always think about what people want to do when they are outside of their work place or home (namely, when they are in the mobile environment). Since the opportunities to ﬁll the needs of mobile users are so huge and so diverse, anybody can be a player. However, the role of mobile network operators would continue to be important, because they are best positioned to integrate the capabilities of the handsets and services, and they own and operate the communication networks to connect the former with the latter.

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The Six Immutable Laws of Mobile Business, by Philip Sugai, Marco Koeder, and Ludovico Ciferri Copyright © 2010 John Wiley & Sons, Inc.

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ITU ICT eye, japan country report. (2009). Retrieved March 27, 2009, from http://www.itu. int/ITU-D/icteye/DisplayCountry.aspx?countryId=120 Kim, D., and Sugai, P. (2008). Differences in consumer loyalty and willingness to pay for service attributes across digital channels: A study of the japanese digital content market. Telecommunications Policy, 32(7), 480–489. Kunii, I., and Baker, S. (2000). Amazing DoCoMo. BusinessWeek, 2009. Louw, J., and O’Brien, C. (2007). The psychological effects of solitary conﬁnement: An early instance of psychology in south african courts. South African Journal of Psychology, 37(1), 96–106. McLuhan, M., and Lapham, L. H. (1994). Understanding media: The extensions of man The MIT Press. Mobile content and service usage 2008(2008). Mobile Marketing Data Labo. Natsuno, T. (2000). i-mode strategy. West Sussex, UK: John Wiley and Sons, Inc. Natsuno, T. (2003). The i-mode wireless ecosystem John Wiley & Sons, Inc. Plant, S. (2000). On the mobile, the effects of mobile telephones on social and individual lifeMotorola. Porter, M. E. (1998). Competitive advantage: Creating and sustaining superior performance (1st ed.) Free Press. Prahalad, C. K. (2005). The Fortune at the Bottom of the Pyramid, Ray, B. Culture matters: Why i-mode failed. Retrieved 3/26/2009, 2009, from http:// www.theregister.co.uk/2007/07/23/imode_fails/ Reichheld, F. (2006). Ultimate question: For driving good proﬁts and true growth (hardcover). (pp. 1) Reichheld, F. F. (2003). Loyalty rules: How today’s leaders build lasting relationships Harvard Business School Press. Ryan, O. Japan’s m-commerce boom. Retrieved 3/26/2009, 2009, from http://news. bbc.co.uk/1/hi/business/945051.stm Sharma, C. (2008). Global wireless data market update 2007. Sugai, P. (2005). Mapping the mind of the mobile consumer across borders: An application of the Zaltman metaphor elicitation technique. International Marketing Review, 22(6), 641–657. Williams, M. (2006). More mobile internet users than wired in japan | IDGNS | news |. Retrieved 10/27/2007, 2008, from http://www.infoworld.com/archives/emailPrint. jsp?R=printThis&A=/article/06/07/05/HNjapannetusers_1.html Wood, L. (2007). Global mobile data and content markets. Dublin, Ireland: Research and Markets. Zaltman, G., and Coulter, R. H. (1995). Seeing the voice of the customer: Metaphor-based advertising research. Journal of Advertising Research, 35(4), 35–51. /Statistical handbook of japan. Retrieved 3/26/2009, 2009, from http:// www.stat.go.jp/data/handbook/index.htm

INDEX

Access technologies, 33, 77–78, 90 ADSL, 17–18 Advanced data services, 23, 28 Advanced mobile data usage, 27 Advanced Mobile Phone System (AMPS), 25 Advertisements/advertising: mobile TV, 103–105 services, 14–15, 33, 64–66 revenue, 45 sponsor sites, 117 Africa, 46–47 Air interface technologies, 77–78, 81 Amazon, xvii, 76, 109. See also Kindle Analog cellular service, 25 Analog (1G) mobile phones, 24, 60 Analog networks, 25 Android (Google), 39–41, 44–46, 48, 51–52, 54–57, 157, 175 APIs, 52–53, 55, 131 Apple: AppStore, 75, 187 ecosystem, 157 iPhone, see iPhone technologies, 44–45, 123, 166, 183

Application development, 32, 175 Arabic countries, potential users in, 46 ARM 3G handsets, 163 AT&T, 18, 32 au One: ecosystem, 121 GREE, 107, 110–113, 126, 154 services, 113, 119 Auctions, 13–14, 153–154 Australia, 3–6, 24 Austria, 26 Automotive technologies, 140, 187. See also Car navigation systems Back-end complexity, 137–138, 143, 152, 161 Back-end databases, 32 Bandai, 122 Bandwidth, as scarce resource, 33 Banking, mobile services, 13, 46–47 Barcode reading software, 64 Barcodes, 64–67 Base stations, 19, 32, 80–82 Batteries, charging/recharging, 80, 186 BlackBerry™, 3, 8, 44, 181–182

The Six Immutable Laws of Mobile Business, by Philip Sugai, Marco Koeder, and Ludovico Ciferri Copyright © 2010 John Wiley & Sons, Inc.

191

192

INDEX

Blended content, 98–99, 101 Blogs/blogging, 13–14, 63, 96, 98, 110, 123 Bluetooth technology, 81, 185 Body language, 60 Boredom buster content, 92 Braille applications, 67 Bridging kits, 135 Broadband: connection, 165 market statistics, 22–23, 72 revolution, 16–17 Browsers, 49, 164 Bundled services, 78, 101 Business data protection, 86 Camera-enabled phones, 64–65 Cameras, digital, 137–138 Canada, 3 Car navigation systems, 140–143 Carwings (Nissan), 140–142 CDMA (Code Division Multiplex Access) networks, 25–26, 28 Centralized dashboard, 85 Charts, time/time zones, 97–98 China, xvi, 3–4, 19, 24, 46, 79, 186 China Mobile, 47 Chipsets, 77, 79, 86 cHTML technology, 74 Clickable devices, 65, 67–68 Cloud computing, 75–76, 85 CNN Mobile, 27–28 Coca-Cola, c-Mode, 68 Communications networks, components of, 61 Commuting, mobile Internet use and, 6–8, 92–94 Compatible devices, 56 Competition, 29, 33–35, 78 Competitive advantage, 33, 73 Complexity concept, xvii-xviii, 134–135, 137–140, 143. See also Back-end complexity Confederation of European Posts and Telecommunications (CEPT), 24 Connectivity, 26, 32, 55, 75, 77 Consumer(s): behavior, inﬂuential factors, 71–72 data protection, 86

empowerment, 176 loyalty, 33–34, 72 needs, 97–101 preferences, 33 senior market, 48, 82, 183 in value system, 30–31, 33 Content, generally: development, xvii, 49, 99–104, 175 distribution, 55 ownership, 85 providers, 30–36, 45–46, 74–75, 88 Control: over environment and communications, 59–61 evolution of, 60 Corporate proﬁt, 48 Coupon tickets services, 14 Coverage, 25 Credit cards, 135–137 Critical mass, 46, 54 Cultural inﬂuences, mobile Internet usage, 2–3, 8–15, 179–180 Customer retention, 34 Cybird, 178 Database marketing, 50 Data information services, 12–14 Data revenues, 23 Data throughput, rate of, 81 Decoration mail (DecoMail), 14 DeNa Co. Ltd., 117, 153 Denmark, 10 Denso Wave, 64 Dentsu, 7 Developed markets, 74 Developing countries, 47, 177 Developing markets, 78–79 Device manufacturers: chipsets, 79 holistic approach of, 165 Device ownership, 85 Dictionary translation services, 14 Digital coupons, 50–51, 83–84 Digital divide, xvi Digital information age, 145 Disempowerment corollary, 70–71, 178 Disney Mobile, 32 DoCoMo (Do Communications Over the Mobile Network) technology. See

INDEX

Nippon Telephone & Telegraph (NTT), DoCoMo technology Dodgeball, 39 Double Teigaku, 20 Downloads: e-books, 174 games, 61, 67–68, 96 music, 13–14, 67–68, 103 ringtones, 13–14, 103 vending machines, 68 video, 118–121 D2C, 168 DVBH, xvi DVR technology, 144–145, 169–170 eAccess, 15–17 EAL4 Plus code, 87 E-books, 13–14, 174 E-commerce, 13 Ecosystem law (Immutable Law 2): CDMA, 24–26, 28 ecosystem deﬁned, 35 expert insight, 42–57 failures, 38–39 Google’s Android ecosystem, 39–41, 44–46, 48, 51–52, 54–57 GSM, 24, 26 Japanese ecosystem as model, 41, 43–44 PDC, 24–26, 28 players in, 32–33, 43 scarce resources in, 33–35 success factors, 41 teamwork and quality, 37–38 value system vs. ecosystem, 29–31 WAP, 24, 26–30, 37–38, 43–44, 122 Ecosystem relationships, 36, 175 E-coupon e-mails, 51. See also Digital coupons Edy, 90 Electronic program guide (EPG): content, 100, 102–103, 143–145 G-Guide, 144–143, 167–169, 172 rhythm schedule, 172 E-magazines, 96, 98 E-mail: messaging, usage trends, 8 services, 44, 82 usage trends, 13–14, 94

193

Embracing surroundings, 62–65, 67–70, 73, 94 eMercury, Inc., 130 Emerging markets, xvi, 46–48 EMOBILE Ltd., 16, 20–21 Empowerment. See Control; Mobility empowerment (Immutable Law 3) End-users, signiﬁcance of, xvii-xviii, 30, 32, 49. See also Consumer(s) Entertain: content and services development, 99–100, 125 Japanese usage trends, 12–13 simplexity, 147 Entertainment content providers, 72, 96 Entrepreneurship, 17–19 E-readers, 55 Ericsson, 19, 26. See also Sony Ericsson Escaping surroundings, 62–63, 67, 69–70, 73, 94–95 Europe, mobile usage trends, 8. See also speciﬁc European countries European Technical Standards Institute (ETSI), 24 European wireless markets, 35 Express: content and services development, 99–100, 125 Japanese usage trends, 12–13 simplexity EZ Digital Radio, 120 EZ Gree, 112 EZ Web, 26, 28 Facebook, xvii, 52, 157, 159, 161, 175 Fashion services, 96 Federal Communications Commission (FCC), 18 Fees/charges, types of, 20, 33, 36 FeliCa Networks, 83 FeliCa technologies, 13, 68, 83–90 Femtocell technology, 80 Financial services/transactions, 47, 79 Finland, 56, 24, 26 First generation (1G) technologies, 24, 60 Fixed-line networks, 61 Fixed-line telephones, xvii, 21, 60 Flash Lite software (Adobe), 150 Flat-rate pricing plan, 21

194

INDEX

FOMA (Freedom of Mobility Access), 26 Forrester Research, 3 Fortunetelling services, 14, 112 Fourth generation (4G) technology, 82 France, 3, 5–6, 8, 24, 38, 92 Front-end simplicity, 152, 154 Fuel cell technology, 80 Fujino, Chiaki, 102–105 Full browsers, 49 Gadget-Lovers: demographic, 4 myth, 3–4 Gadgets, 176 Games, 13–14, 32, 61, 67–68, 92, 94, 96, 182 Gaming services: casual, 111, 116–117 multiuser, 121–123 GeminiMobile, 122 General purpose devices, 76 Germany, 3, 5–6, 29 G-Guide, 144–145, 167–169, 172 GirlsShopping.com, 96–98 Global ﬁnancial crisis, 17 Global System for Mobile, 25 Global wireless network, 61 Golden-time content, 95–102, 104–105, 128 Google: Android, see Android Marketplace, 75 mobile business, 53 technologies, xvii, 12, 44–45, 51, 123 Goopas, 66 Government control/regulation, 19, 78 GPRS systems, deployment of, 24 GPS: capabilities, 86, 166 chips, 110 services, 112, 125, 128 Graphical user interface, 135, 161 GREE, 107, 110–113, 126, 154 GREE Mobile, 110 Greeting cards, 14 Growth opportunities, 21 GSM (Groupe Speciale Mobile) technology, 24, 26, 186 Guatemala, 10

Hackers, 87 Handset(s): easy-to-use, 20 manufacturers, xvii, 30–35, 38, 43 vendors, 187 Hearing-impaired users, 82–83 High-speed mobile, xvi, 2 Hofstede, Geert, 9–10 Holistic approach to technology, 165–166 Home: mobile data usage at, 7, 92–94 monitoring services, 69, 84 security services, 69 Homepage, 85 Hong Kong, xvi, 3–4, 26 Horizontal manufacturing model, 79 HTML: 5 carriers, 56 technology, 74 Huawei, 19, 32, 186 Hundt, Reed, 18 Iceland, mobile adoption trends, 26 i-Channel, 123–124 i-Concier service, 50, 146–147 Identity-based applications, 68 IFRA, 92 Imai, Masaaki, 37 i-mode: business model, 74–75 critical mass for, 46 launch in Japan, 24, 26 limitations of, 53 services, xvii, 2, 28, 42–45, 159, 182 user data, 6 Impress R&D, 108 In-between time content, 94–95, 97–102, 104–105, 128, 157 IN-FUSIO, 8, 92, 96 India, 3, 19, 46 Individualism (IDV), cultural differences research, 9–10 Indonesia, 10–11 Industry standards, 162–164 Inform: content and services development, 99–100, 125 Japanese usage trends, 12–13 simplexity, 147

INDEX

Information: architecture, 98 databases, 61 gathering services, 12 nodes, 63–68 sharing, 131 Information Network System, 16 Infrastructure providers, 30, 32 Innovation, 19–20, 44, 47–48, 52, 163, 181 Intellectual property, 19 Intelligent anticipation, 139 Intelligent mobile search, 149 Intelligent simplexity system, 150–152 Intelligent systems, 157, 176 Interaction devices, 171–173 Interactive Program Guide, Inc. (IPG), 167 Interconnection charges, 20 Interference management, 80–81 International Telecommunications Union (ITU), 5, 16, 145–146 Internet: classic, 177 intelligent, 177 mobile platform, xvii PC-based, 54 revenues, 64–65 Investment services, 13 iPhone, 44, 53, 56, 76, 82, 135, 138, 146– 149, 155, 158, 161–162, 175, 182–185, 187 iPods, 119, 182–183 iPod Touch, 53 IPTV, xvi, 152 Irate, 102 ISDB-Tmm technology, 105 ISDN concept, 16 Island Music Factory, 116 ISO standards, 87 Israel, xvi Italy, xvi, 3–6, 24, 26 iTunes, 119 Japan: credit cards, 135–137 Internet user data, 5–6 land of gadget-lovers myth, 2–4 mobile device consumers, 3 mobile phone-based communications suit the culture myth, 2–3, 8–15

195

mobile phone penetration levels, 10 mobile platform development, xvii mobile revenues, 23 Mobile Marketing Data Labo, 13 network capabilities, 22 public transportation myth, 2, 6–8 small houses that lack space for a computer myth, 2, 4–6 Statistics Bureau, 6 wireless population, xvi-xvii Japanese management strategy, 37 J-Phone, 26, 28, 159 JR East, Mobile Suica application, 89–90, 136 J-Sky service, 26, 28, 159 Kaizen, 37 Kasahara, Kenji, 130–133 KDD, 26 KDDI (Kyocera and DDI Corporation: au one gadgets and services, 112, 124–125 LISMO, 112, 118–121 music services, 119 technologies, 16–17, 20, 28, 158–160, 164, 166 Key and lock systems, 84, 88 Keypads, 71–72, 153 Kindle, 55, 76, 174–175, 185–186 Korea, 5–6 Laptop computers, 4, 75, 84 Law of Simplexity, 48 “Lean back” content, 106 “Lean forward” content, 106 Leisure time, mobile data usage, 7, 92–94 Limitations: of connectivity, 77 of mobile phones, 53, 71–72 Linux, 164 LISMO, 112, 118–121, 126 Lithium ion batteries, 80 Location-based services, 54, 56, 125, 127, 150 LTE technology, 81, 105, 156–158 Luxemburg, xvi McAteer, Seamus, 12 Magic Library, 115–116

196

INDEX

Mahou No Island, 115–118, 126 Malaysia, 10 Mapii, 150 Market entry barriers, 33–34 Market research, 97 Market share, 163 Masculinity (MAS), cultural differences research, 9–10 Matsumoto, Tetzuzo “Ted,” 178–188 m-commerce, 96, 98 Me-too syndrome, 180 Media: in content development, 103–104 research, hot vs. cold theory, 71–72 Media-FLO technology, 105 MediaTech chip, 79 Memory capacity, 71–72 Memory cards, TV content development, 100 Mesh networks, 81 Microﬁnance, 78–79 Microsoft, xvii, 40, 44–45, 123, 141, 175 Microtransactions, 78–79 Middleware providers, 30–32 MIDI, 115, 119 MiFare: code, 87 technology, 68 Mind maps, 11–12 Mixi: Mobile, 110 Radio, 110 Station, 109 technologies, 52, 107–112, 116–119, 130–133, 154, 157 Mobage-town, 116–118, 126, 153–156 Moba-Gold, 117 MobaMingle, 155–156 Mobile adoption trends, 26, 72, 181 Mobile agents, 50 Mobile browser, 49. See also Browsers Mobile content use, nature of, 93–94 Mobile devices: as ﬁxed-line telephone, 21 upgrades, 34 Mobile Game Town, 153 Mobile Internet, in Japan, 2, 4–6, 60 Mobile internet devices (MIDs), 55 Mobile-speciﬁc business models are essential (Immutable Law No. 5):

afﬁliate marketing, 114–115, 126 background to, 106, 126 executive interviews, 126–130 expert insight, 130–133 ﬁxed mobile value, 119–121, 126 social networking services (SNS), 107–113, 116–118, 126, 130–133 stickiness, 116–118, 121–123, 126 two-tier memberships, 114–115, 126 user-generated content, 115–119, 126 value-added tools, 123, 126 value virtual currency, 116–118, 121–123, 126 Web 2.0, 106–107, 124–126, 133, 146, 151–152 Mobile TV, 104–105. See also TV Mobile virtual network operators, 32 Mobile wallet services, 47. See also Wallet phone technologies Mobility empowers (Immutable Law 3): business applications, 71–73 control evolution, 60, 69 control over environment and communications, 59–60 expert insight, 73–90 ﬂaws in, 70–71 information nodes, 63–68 links, 61–62 messages, 61–62 nodes, 61–62, 69–71 people nodes, 62–63 “thing” nodes, 68–69 Mocoa, 124 Modularity, 21 Money transfer services, 13, 79 Monopolies, 33–34 Mori, Brent, 158–166 Moss, Tom, 51–57 Motorola, 26, 32 Movies, 13–14 MP3 technology, 137 Multimedia services, 42–44 Music, 13–14, 32, 67–68, 103, 110, 182 Music Creators Corner, 117–118 MySpace, xvii, 157 Namba, Tomoko, 153–158 NANO Media, Inc., 102–104 Nanoservice, 96

INDEX

Natsuno, Takeshi, xvii, 2–3, 12, 35, 37, 42–51, 162–163, 168 Navigation services/software, 32, 95, 112. See also GPS Naviblog, 128 NAVITIME JAPAN, 94–95, 127–129 Near Field Communication (NFC) technology, 47 NEC, 38, 176 Netbooks, 55, 185 Netherlands, 3–4, 10 Network: analog, 25 capacity, 25 CDMA, 25–26, 28 connectivity, 26, 32, 55 ﬁxed-line, 61 global wireless, 61 GSM, 24 mesh, 81 operators, xvii, 24, 30–36, 38–39, 43, 45, 74–75, 78–79, 86, 188 TDMA, 25 2G, 75, 82, 88, 129–130, 133 3G, 129 News services, 12–14, 61, 94–95, 98–99 New Zealand, 5–6 Next-generation Internet, 106–107 Next-generation technology, 146 Niche devices, 76–77, 168 Nico Nico: Douga, 101, 114–115, 126, 149 Market, 115 Nintendo: DS, 135, 142–143, 151–152, 168 DSI, 160 technologies, 158, 166 Wii, 135, 142–143, 151, 168 Nippon Telephone & Telegraph (NTT), DoCoMo technology, 16–18, 20, 24– 26, 28, 32, 35–38, 40–41, 50, 52, 67, 71, 112, 123–124, 136, 146, 159, 166, 168–169, 186 Niwango Mail, 149 Node: deﬁned, 61 information, 63–68 people, 62–63 primary, 61

197

“thing,” 68–69 Nokia, 3, 26–27, 32, 38, 44, 182 Nonverbal communication, 11 Nordic Mobile Telephone, 24 Norway, 10, 24, 26 Obama administration, 18 OEMs (original equipment manufacturers), 56 Oligopoly, 34 One laptop per child (OLPC) concept, 177 One-Seg technology, 103–105 Online channels, 71 Open Handset Alliance (OHA), 39–41, 46, 51–52, 56 OpenwaveSystems, 158 Opera Japan, 158–164 Opera Software, 124 Operating systems, 56 “Out and about” myth, 91–93 Out-of-network calls, 20 Over-the-air (OTA) technologies, 86, 88 Ownership needs, 85 Pachiring, 107 Packet data communications, 26 Packet fees, 36 Pan-European mobile technology, 24 Panasonic, 38, 69 Partnerships, development of, 21, 56–57 PDAs (personal digital assistants), xvii, 60 PDC, 25–26, 28 Peer-to-peer wireless communications, 81–82 People nodes, 62–63 Perfect competition, 33–34 Personal computers (PCs): cloud computing and, 75–76 mobile phones compared with, xvii, 4, 49, 54–55, 71–73, 96, 122–123, 125, 132, 146, 157, 171 Personal Digital Cellular (PDC), 25–26 Philippines, 8 Phone.com, 26 Photo services, 14, 28, 110, 131, 159 Physically-challenged, user-friendly devices, 82–83 Picture frames, 55

198

INDEX

Pocket Afﬁliate, 117 Point-of-sale purchases, 13 Poland, 3 POP mail accounts, 45 Portable phones, 25 Porter, Michael, 29–30, 33 poshme.jp, 107 Power: consumption, 79–80 processing, 71 supply, 185–186 Power Distance Index (PDI), cultural differences research, 9–10 Powerless communication, 60 Price barriers, 11 Pricing plans/strategies, 20 Privacy issues, 85–87, 89 Processing power, 71 Product diffusion: barriers to, xvii Internet user data, 5–6 Proﬁle site (Purofu), 14 Proﬁtability, 163 Proprietary technology, 45 Push-button generation, 5 QR (quick response) codes, 32, 64 Qualcomm, 25 QUALCOMM Japan, 74–77, 79 Quality issues, 37–38 Quality of service, 78 QWERTY keyboard, 185 Radiolinja, 24 RakuRaku phone, 82 R&D Japan, 110 Re-com, 102 Remote controls, 69 Research in Motion, 3, 44 Resellers, 32 Revenue: from ads, 45 data, 23 generation, 23, 74–75 Internet, 64–65 sharing, 129, 175 RFID: fraud, 178 services, 13, 68–69, 136

Rights acquisitions, 33 Ringtone downloads, 13–14, 94, 103 Risk-taking, 47 Roaming agreement, international, 24 “Robust” communications, 59–60, 74 Russia, xvi, 24 Safari, 161 Sales force automation solutions, 32 Samsung, 166 Saudi Arabia, 24 Scan Search, 66–68 Scheduling software, 32 Schmidt, Eric, 39 Screensavers, 13, 94 Screen size, 71–72, 146, 153, 184–185 Search services, 12–14 Second-generation mobile networks, 75 Security systems, 25, 32, 85–87 Semmoto, Dr. Sachio, 15–21 Service-Content delivery systems, 187 Service providers, 30–336 Servicescapes theory, 62 Services development, time zones and, 99–102 Sha-Mail, 28 Sharp, 38, 158 Shopping applications, 13–14, 84, 96–97 Short Message Service (SMS) messaging: advance mobile data use, 23 social impact of, 63 usage trends, 8, 13, 184 Siemen Networks, 32 Silicon Valley, 18 Silicon technology, 80 SIM-based services, 35, 87 Simplexity (Immutable Law No. 6): in action, examples of, 139–140 background to, 134–135 car navigation systems, 140–143 Electronic Program Guide (EPG), 143–145 expert insight, 153–173 mandated simplicity, 145–146 phases of, 137–139 semantic web, 147–148 signiﬁcance of, 82, 88, 129–130, 133 theory of, 137–138 Western mobile services, 148–153 Simplicity concept, xvii-xviii, 20, 137, 139–140, 177

INDEX

Singapore, xvi, 10 SingTel, 332 Six Immutable Laws of Mobile Business: digital divide and, xvi expert insight, 178–188 future is simplexity, 82,88, 129–130, 133–174 law of ecosystem, 22–57, 122 mobile-speciﬁc business models are essential, 106–133, 146, 151–152 mobility empowers, 58–73 overview of, xv-xvi simplexity, 129–153 value of time zones, 91–105, 156 value over culture, 1–21 Smart phones, 75–76, 84, 146, 185 Smell-o-phone, 67 Social networking services (SNS): with added services, 110–112 beneﬁts of, 13, 32, 62, 176 casual gaming, 111, 116–117 convergence, 108–110, 119 multiuser gaming, 121–123 music services, 119–121 popularity of, 154–155 total ecosystem integration, 112 user-created content and, 112, 115 video services, 118–121 from Web to Mobile, 107–108 Softbank, 17, 39 Softbank Mobile, 112, 122, 124 Software: bar code reading, 64 applications, 32 navigation, 32, 95, 112 providers, 30–31 scheduling, 32 Solitary conﬁnement analogy, 58–59 Sony, 141, 158 Sony Ericcson, 183 South Korea, 3–4 Spain, 3, 5–6 Spectrum: allocation, 17 licenses, 33–34 Square Enix, 155 SSL connection, 159 Standardization, 43, 45, 47–48, 186 Start-up companies, 19

199

Stock ticker, 123 S!Town, 121–123, 126 Subscriber acquisitions, 39 Subscription fees, 33 Suica application, 89–90, 136 Sweden, 3–6, 10, 24, 26 Sweepstakes, 13–14 Swiss Army devices, 55–56, 148 Switzerland, 5–6 Symbian, 40

Tabelog, 157 Taiwan, xvi, 20, 26 Takahashi, Makoto, 120 Tamagotchi, 121–122 Target marketing, 50 Teamwork, 37–38 Technical barriers, 11 Technical innovation, barriers to, xvii. See also Innovation Telecom Finland, 24 Telephone calls, 13–14 Telstra Australia, 24 Text messages/messaging, 8, 23, 60, 62–63, 67, 71, 95, 98 Third generation (3G) technologies: network development, 129 phones, 60 subscriber statistics, xvi types of, 81–82, 168, 180, 186 wireless broadband services, 26 Third World countries, 177 3D gaming applications, 121–122 Ticketing services, 88–89 Ticketless check-in, 88 Tier 1, two-tiered pricing scheme, 20 Tier 2, two-tiered pricing scheme, 21 Time Division Multiple Access (TDMA) networks, 25 Time zone: charting, 97 deﬁned, 94 golden time, 95–102, 104–105, 128 in-between time, 94–95, 97–102, 104–105, 128, 157 mobile TV, 99–101 value, see Time zone value (Immutable Law No. 4)

200

INDEX

Time zone value (Immutable Law No. 4): charting time, 97–98 charting time zone needs, 97 content and service analysis, 99–102 expert insight, 102–105 stretching time and blending content, 98–99 types of time zones, 94–97, 156 Time-sharing protocols, 25 Timing, signiﬁcance of, 46 T-Mobile, Web and Walk offering, 162 Toji, Keisuke, 167–173 Toshiba, 158, 160 Touch-based interfaces, 54 Toyota, 140 Trafﬁc, on CDMA technology, 25 Transact: content and services development, 99–100, 125 Japanese usage trends, 12–13 simplexity, 147 Transaction-based services, 13–14 Transportation/travel services, 14, 94 TV: applications, 69, 84, 96 guides, 143–144 services, xvii, 96, 99–102, 143–145, 167–173 2.5G mobile phones, 41, 60, 71 Übernode, 61, 69–70 Uncertainty Avoidance Index (UAI), cultural differences research, 9–10 United Kingdom, xvi, 3, 5–6, 10, 24, 26, 29, 35–36 United States: GSM networks, 24 innovation in, 52–53 internet user data, 5–6 mobile content and services, 18 mobile device consumers, 3 mobile phone penetration levels, 10 mobile usage trends, 8 technological potential in, 46 wireless population, xvi Unlimited use plans, 20–21 Urban markets, 4, 6

URLs, 36, 72 Usage trends, 7, 72, 92–94, 104–105 User-created content, 117–119, 126 User-driven economy, 175 User-friendly technology, 138–139, 156 User-generated content (UGC), 98, 132 User interface technologies, 20, 49, 55–56, 153–154, 157–158, 160–161, 184 Utatomo, 119–120 Value chain, 29–30 Value over culture (Immutable Law 1): background to, 1–2 expert insight, 15–21 meta-myths, 4–15 Value system: deﬁned, 30 ecosystem vs., 29–31 players in, 30–32 scarce resources, 33 teamwork in, 37 traditional wireless, 34 Verizon, 18 Video-sharing services, 14, 110, 114–115 Vietnam, 10–11 Viewpad, 185 Virgin Mobile, 32 Vision-impaired users, 82–83 Vodafone, 24, 35–36, 38–39 Voice-based interfaces, 54 Voice calls, 20 Voice quality, 25 VPN connection, 159 Walled garden concept, 53, 72 Wallet phone technologies, 83–84, 86–88 Walt Disney Internet Group, 53, 72–73 WAP (Wireless Application Protocol) technology, 24, 26–30, 37–38, 43–44, 122, 159, 163–164 WBC (World Baseball Classic), 104 W-CDMA (wideband CDMA), 26 Weather services, 12–14, 61, 95, 123 Web browsers. See Browsers webOS (Palm), 56

INDEX

Web 2.0, 106–107, 124–126, 133, 146, 151–152 West Germany, 24. See also Germany Widgets, 123–124, 126, 161–162, 175 WiFi technology, 81 “Willingness to pay” concept, 72 WiMax, 81 Wired networks, 61 Wireless connectivity, 32, 55 Workplace, mobile data usage, 7, 92–94 World Wide Web, 175. See also Internet W3C technology, 161–163 Xavel, 92, 95–98 xDSL technology, 15

201

Yahoo!: BB!, 17 content and services, xvii, 72–73, 118, 123–124 searches, 12 Yamada, Jun, 73–83 Yelp, 157 Yoshino, Hiroshi, 83–90 YouTube Japan, xvii, 110

Zaltman Metaphor Elicitation Technique (ZMET), 11 ZTE, 19, 186