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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

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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 9 8 7 6 5 4 3 2 1
CONTENTS

FOREWORD vii
PREFACE xi
ACKNOWLEDGMENTS xiii
INTRODUCTION xv

CHATPER 1 Immutable Law No. 1: Value Over Culture 1


CHAPTER 2 Immutable Law No. 2: The Law of the Ecosystem 22
CHAPTER 3 Immutable Law No. 3: Mobility Empowers 58
CHAPTER 4 Immutable Law No. 4: The Value of Time Zones 91
CHAPTER 5 Immutable Law No. 5: Mobile-Specific Business Models
are Essential 106
CHAPTER 6 Immutable Law No. 6: The Future Is Simplexity 134
CHAPTER 7 Parting Thoughts 174

BIBLIOGRAPHY 189
INDEX 191

v
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 peo-
ple 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 communi-
cate 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 mak-
ing 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
viii FOREWORD

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 char-
acteristics 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 appeal-
ing 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 serv-
ices, 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 com-
pany 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
xii PREFACE

In looking back at the changes that have already occurred since we finished writ-
ing 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, serv-
ices, 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 trans-
lation; and Yukie Masuda, who relentlessly assisted in setting up interview appoint-
ments. 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
xiv ACKNOWLEDGMENTS

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 serv-
ices 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
xvi 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 televi-
sion 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 profes-
sional 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 obvi-
ous 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 impor-
tant 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 wire-
less, 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 dig-
ital 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
xviii INTRODUCTION

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 serv-
ices rather than the cultural environment within which they are developed.
Chapter 2 presents our second law, the law of the ecosystem. We explore the dif-
ferent 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 busi-
nesses 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 evolu-
tion 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
INTRODUCTION xix

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 competi-
tive 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 addi-
tion 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.

1
2 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 communi-
cations 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 3

So, which perspective is correct? Did the mobile Internet succeed in Japan be-
cause 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 gadget-
lovers, 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 logi-
cal 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, com-
paring 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.).
4 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 Acad-
emy of Marketing Science, there is actually a Gadget-Lovers demographic segment dis-
tinct 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 multifunc-
tional 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 mar-
ket 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 pur-
chasing 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 technol-
ogy 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.
6 IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

TABLE 1.1 International Internet Users


Internet Users Per 100 Inhabitants (Source ITU World Tele communications Indicators)
1999 2000 2001 2002 2003 2004 2005 2006 CAGR
United States 36.6 44.1 50.1 55.2 55.6 63.0 66.3 69.1 10%
Japan 21.4 29.9 38.4 46.5 48.3 62.2 66.6 68.3 18%
Korea (Rep) 23.8 41.4 51.5 55.2 61.1 65.7 70.2 72.8 17%
Finland 32.3 37.2 43.0 48.6 49.1 51.4 53.3 55.6 8%
France 9.2 14.4 26.4 30.3 36.3 39.3 43.2 49.5 27%
Germany 20.8 30.2 31.5 33.9 40.0 43.3 43.2 46.7 12%
Italy 14.3 23.0 26.9 35.1 39.5 46.0 48.2 49.6 19%
Spain 7.0 13.6 18.0 19.1 25.8 35.1 40.4 42.8 29%
Sweden 41.4 45.6 51.6 57.3 63.0 75.5 76.2 77.0 9%
Switzerland 20.5 29.1 38.6 41.0 44.8 47.2 50.9 58.1 16%
United Kingdom 21.0 26.4 33.0 42.3 43.7 47.0 53.8 56.0 15%
Australia 29.6 34.5 39.7 45.8 47.8 50.2 52.6 54.2 9%
New Zealand 29.0 39.3 45.4 48.4 53.5 58.9 68.4 78.8 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 suc-
ceed 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 com-


muting, 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 cor-
relation 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 read-
ing. 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 en-
try (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 com-
mute 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 con-
clude 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 subscrib-
ers 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 advo-
cates 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 dif-
ferently 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 lan-
guage, 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, sociolo-
gists 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: Soft-
ware 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 indi-
vidual 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) charac-
teristics. 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.
10 IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

TABLE 1.2 Culture Match: Japan and the United States


Culture Match – Japan and the U.S.
Power Individuality Masculinity Uncertainty
Distance Avoidance
Japan 54 46 95 92
U.S. 40 91 62 46
Difference 40 45 33 46
Absolute Value of Difference 14 45 33 46
Sum of Absolute Values 138

TABLE 1.3 Looking for a Culture to Compare to Japan’s

Hofstede’s Comparisons and Mobile Phone Penetration Levels


Rank Country Difference from Japan Mobile Penetration Rate %
(Hofstede) (2003)1 — ITU
0 Japan 0 67.9
1 Denmark 212 88.3
2 Sweden 201 98.1
3 Singapore 177 85.8
4 Norway 175 88.8
5 Malaysia 171 44.4
6 Netherlands 170 81.1
7 Vietnam 159a 3.3
8 Indonesia 149 8.6
9 Guatemala 148 16.5
10 U.K. 148 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 originat-
ing 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 sim-
ilarities 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 nonver-
bal 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 nonvo-
cal 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 un-
derlying 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 hand-
sets 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 Mar-
keting Review, vol. 22, no. 6, pp. 641–657.
12 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 serv-
ices 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 hand-
sets 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 13

Figure 1.6 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 consum-
ers 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” catego-
ries, 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 in-
sist 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,
14 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 gene-
rated 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 serv-
ices 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
16 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 dra-
matically 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 engage-
ments 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 Acad-
emy 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 for-
ward for the mobile industry, what would these be?
META-MYTH NO. 4: THE JAPANESE ARE NATURALLY POLITE AND QUIET 17

Dr. Semmoto I would have to say that above all else, government officials together
with industry executives must work to stimulate far more entre-
preneurial 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 finan-
cial 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.
Six Laws And you believe that this is one of the most important roles for
government authorities to play?
Semmoto 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 competi-
tion 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,
18 IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

of course, existing operators, new entrants, the media, and repre-


sentatives 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.
Six Laws But even with such a strong entrepreneurial spirit, the United States
has been lagging far behind Japan in terms of mobile content and
services.
Semmoto This is mostly the result of the actions taken by their former admin-
istration. 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 solu-
tions 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, lit-
tle 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 19

Six Laws 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?
Semmoto I see enormous potential in both China and India. In China, com-
panies, such as Huawei, ZTE, and many of the small start-up
companies, have a very fresh and exciting spirit for entrepreneur-
ship 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 vis-
ited Tokyo recently for the trilateral commission meetings. During
our talks, I frankly and flatly stated that China is a very, very promis-
ing 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.
Six Laws And you also see significant potential in India?
Semmoto 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 tech-
nical innovation. For example, we are the first Japanese telecom
operator to decide to work with Chinese rather than Japanese tech-
nology for our base stations. We are working closely with Huawei,
and when we first announced that we would be using their technol-
ogy, 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 estab-
lished 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.
Six Laws 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?
20 IMMUTABLE LAW NO. 1: VALUE OVER CULTURE

Semmoto If we look at the mobile industry from the perspective of the con-
sumer, 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 out-
side 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 inno-
vation as consumers will be willing to spend more time using wireless
technologies and services.
Six Laws 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.
Semmoto 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-to-
use 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 cur-
rently 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 21

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.
Six Laws From a consumer behavior standpoint, I definitely can under-
stand 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?
Semmoto 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 exclu-
sively 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.
Six Laws Is this a business model that entrepreneurs in other markets around
the world could also implement?
Semmoto 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 entre-
preneur 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.

22
IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM 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 send-
ing 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.
24 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 offi-
cially 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 25

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 techno-
logies—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 engi-
neers 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 wire-
less 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 bet-
ter 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 home-
grown 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.
26 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

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 spe-
cifically 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 serv-
ice 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 home-
grown 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 organi-
zation 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 informa-
tion 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.


28 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 29

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.
30 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 31

The Value Chain

Human Resources / Infrastructure


Secondary

Ma
Activities Technology Development

rgi
n
Procurement

Ma
Inbound Operations Outbound Marketing Service

rg
Logistics & Sales

in
Logistics

Primary Activities

The Value System

Channel &
Supplier Firm Value Buyer Value
Value Chains Chain 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.
32 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

Infrastructure Middleware
Providers Providers

Handset Application
Manufacturers The Key Players Developers
Within the
Mobile Value
System Service
Consumers
Providers

Network Operators Content Providers

Figure 2.8 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 wire-
less 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 soft-
ware—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 33

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 play-
ers: network operators, handset manufacturers, content providers, service providers,
and customers. While application developers, infrastructure providers and middle-
ware 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 dynam-
ics of competition between companies. His early work mostly focused on how com-
panies 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 seg-
ment (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.
34 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

The other extreme is known as “perfect competition”, in which many businesses


selling essentially the same products compete for market share. Buyers hold incred-
ible 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, creat-
ing 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 com-
municate directly with the network operator to promote, distribute, and arrange
compensation for the sales of their products or services.
TEAMWORK AND QUALITY 35

Application
Developers

Handset
Manufacturers Middleware
Consumers
Providers

Service Network Operators


Content Providers
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
36 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

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 consid-
ered “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 pro-
viders. 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 sub-
scription content, they needed to promote the development of off-network, “unofficial”

Infrastructure
Providers

Handset Application
Manufacturers Developers
Network
Operators
Middleware
Consumers
Providers

Service
Providers Content Providers

Figure 2.10 Relationships in the wireless ecosystem revolve around the network operators.
TEAMWORK AND QUALITY 37

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 con-
tent 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 galvaniz-
ing 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
38 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

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 dif-
fered 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 improve-
ment 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 practi-
cal, valuable new capabilities that people could use to better their lives.
The mobile Internet has flourished in Japan because it arose in a cooperative environ-
ment. 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 opera-
tors 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 support-
ing 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 sub-
sidize 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
GOOGLE ANDROID’S ECOSYSTEM 39

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 discus-
sion 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 alli-
ance 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 expe-
riences 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
40 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

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 wire-
less 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 suc-
cessful, 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

Handset Application
Manufacturers Developers
Google
Android
Consumers Service
Providers

Network Operators Content Providers

Figure 2.11 How Google structured Android’s ecosystem.


THE TAKEAWAY 41

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 over-
coming 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.
42 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

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 devel-
oped the business strategy of all of
NTT DoCoMo’s multimedia-related
services, including i-mode strategic alli-
ances with global application–content
providers and key Internet players.
Mr. Natsuno, one of the key develop-
ers 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 develop-
ment 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 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?
Mr. Natsuno We approached the idea of mobile data services from the perspec-
tive of the Internet instead of as something that we exclusively should
own. To do this, we had to clearly understand how the Internet works,
THE TAKEAWAY 43

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 ecosys-
tem, 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?
Six Laws 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 under-
stood the Internet, why could not they replicate this model for their
mobile platforms? Why did this happen first in Japan?
Natsuno 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 devel-
opment. 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 ecosys-
tem 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.
Six Laws 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?
44 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

Natsuno 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 eco-
system 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.
Six Laws 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?
Natsuno Very, very interesting things are starting to happen now as everyone
has started to understand the necessity and profitability of mobile mul-
timedia 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 telecom-
munications 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 applica-
tions. 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.
THE TAKEAWAY 45

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.
Six Laws In this chapter, we compare Google Android with i-mode, in that
Google is positioned to make more money from advertising reve-
nues as more people use the mobile Internet, which is similar to
NTT DoCoMo making more money from packet fees as mobile
data usage grew.
Natsuno 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 big-
gest 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.
Six Laws 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?
Natsuno 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 opera-
tor’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.
46 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

Six Laws 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?
Natsuno 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 hand-
sets 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 compel-
ling services.
Six Laws 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?
Natsuno Yes, 10 million subscribers in one country or market is a very good
indicator of critical mass. We could consider 10 million subscrib-
ers 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 opportu-
nities going forward.
Six Laws 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?
Natsuno 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 possibili-
ties 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
THE TAKEAWAY 47

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 impor-
tance 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 plat-
form 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 technol-
ogy 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 dif-
ferent 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.
48 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

But we are also seeing a similar approach being taken by


Android and the other Internet players who are moving into the tel-
ecom 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.
Six Laws Do you now see Japan also moving in this direction?
Natsuno 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 hand-
set development costs and differentiating their on-deck content and
handset features, and then from this foundation heavily compet-
ing 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 corpo-
rate 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 com-
petitiveness 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 innovative-
ness, and emerging markets will become more and more exciting.
Six Laws Yes, at this point I have students from developing countries working
on how best to apply mobile banking services in their own countries.
Natsuno 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 addi-
tional 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.
Six Laws 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?
THE TAKEAWAY 49

Natsuno 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.
Six Laws And in creating these ideal services, do you see fundamental dif-
ferences between how content developers should approach their PC
Internet content versus mobile Internet content?
Natsuno 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 consum-
ers 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 ter-
rible. 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.
Six Laws So can you draw any conclusions from the experience with full
browsers on mobile phones?
Natsuno 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 serv-
ice 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.
50 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

Six Laws 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 exam-
ple, 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.
Natsuno Actually, I totally agree with you. This is the next big area for inno-
vation 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.
Six Laws 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?
Natsuno 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 con-
sultants, 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
THE TAKEAWAY 51

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.
Six Laws So in this case, McDonalds is using the mobile platform as a vehi-
cle 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.
Natsuno Exactly.

Expert Insight
Tom Moss
Head of Asia Pacific New Business
Development
Google

Tom is responsible for Android partner-


ships 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 embodi-
ment 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
52 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

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.
Tom Moss 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.
Six Laws But why does this concept of an ecosystem really matter? Are you
not losing the opportunity to extract higher profit margins and rev-
enues from the mobile platform by thinking about the value system
collectively? Why not just try to own the entire system?
Tom 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 innova-
tion, 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 out-
paced innovation in the United States and other markets.
So, if we build an ecosystem where everybody can be a stake-
holder, 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,
THE TAKEAWAY 53

then we are confident that this type of innovation will be possible


for the mobile internet as well.
Six Laws In coming up with this perspective, were you actively looking at
what was happening in Japan?
Tom Of course, yes. Japan is a very important market for Google over-
all 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 crum-
ble. 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 gar-
dens 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.
Six Laws And do you see the mobile platform itself changing what we under-
stand 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 inter-
viewing 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 pop-
ups 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?
Tom 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 har-
ness their capabilities. These devices will have information about
54 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

you and your surroundings that will offer ways for you to inter-
act 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 near-
est 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 peo-
ple 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 touch-
based 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.
Six Laws So then, how does Android fit into this overall framework that you
have described?
Tom We hope that Android will be an engine that helps bring these inno-
vations to market much sooner than was previously possible.
Six Laws And from your viewpoint, as you look at what you have accom-
plished to date, and what the future holds in store for Android, what
do you see as the major milestones that lie ahead of you?
Tom The way I look at it, there is the short, the long, and the very long-
term. 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
THE TAKEAWAY 55

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 conver-
gence that happens where Android will be found on all different
types of things. And when this starts to happen, you will see differ-
ent 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.
Six Laws And how about the very long term?
Tom 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 relation-
ship 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 independ-
ent 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.
Six Laws And as these developments take place, do you see devices becom-
ing 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?
Tom 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
56 IMMUTABLE LAW NO. 2: THE LAW OF THE ECOSYSTEM

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, service-
specific 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.
Six Laws Irrespective of which type of device the consumer ultimately
chooses, do you see a fundamental requirement for a clean and
simple user interface emerging?
Tom 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 exam-
ple 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.
Six Laws And is Android being developed in such a way that separates it from
other competing platforms to achieve these kinds of end results?
Tom 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 compo-
nent 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
THE TAKEAWAY 57

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 involve-
ment 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?
Six Laws 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 envi-
ronment where they will be dominant, and everyone else subservient
to their role.
Tom Exactly. That is exactly why we took the opposite approach.
Six Laws It is going to be an interesting few years to watch what actually
happens.
Tom 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 socio-
economic 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 neg-
ative 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 soli-
tary 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.

58
IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS 59

“Complete” Perceived Control


Over Surroundings

3 4

Lack of Robust
Communication Communication

1 2
Solitary
Confine-
ment
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, soli-
tary 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.
60 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

“Complete” Perceived Control


Over Surroundings Optimal,
Full
Control
Advanced
Mobile Phone

Map/Area Analog
Guide Mobile Phone
Empowered silence
Lack of Empowered communication Robust
Communication Communication
Fixed Line
Telephone

Solitary
Confine-
ment 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 commu-
nication. 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 activi-
ties 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.
NODES, LINKS, AND MESSAGES 61

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 interna-
tional 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 com-
municate 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 LINKS MESSAGES

Figure 3.3 The three basic elements of communications networks.


62 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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 anal-
ysis 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.

EMBRACE ESCAPE

Location-Based Services, etc. Games, etc.


ge
Sta
ter

Person in Context
n
Ce

Current Situation

Access to
e
tag
cks

People DigitalContent
Content Things
Things
People Digital
Ba

Figure 3.4 Mapping out the choices for embracing or escaping.


EMBRACING OR ESCAPING WITH PEOPLE, DATA, AND THINGS 63

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 escap-
ing 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.
64 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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 camera-
enabled 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.


EMBRACING OR ESCAPING WITH PEOPLE, DATA, AND THINGS 65

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 location-
specific 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 catego-
ries 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.


66 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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 radi-
cally 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
EMBRACING OR ESCAPING WITH PEOPLE, DATA, AND THINGS 67

Figure 3.9 With your mobile phone in hand, this barcode can take you far beyond the
bookstore.

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 with-
out 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 envi-
ronment 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 opportuni-
ties 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
68 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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 connect-
ing 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 interac-
tions 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.


EMBRACING OR ESCAPING WITH PEOPLE, DATA, AND THINGS 69

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 meet-
ing. 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 monitor-
ing 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
70 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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 sig-
nificant 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?


HOW MOBILITY EMPOWERS BUSINESSES 71

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 environ-
ments, 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
72 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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 sub-
scribers 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.
THE TAKEAWAY 73

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 cus-
tomers 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 previ-
ously 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 estab-
lished. He worked on standards, new
technology development, technology
marketing, carrier and industry rela-
tions, promotion of application plat-
form, 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 telecommunica-
tion services to consumers. Yamada began his career at Matsushita Communication
Industrial Co., Ltd., after graduating from Tokyo University in 1978. He was engaged
74 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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

Six Laws 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?
Mr. Yamada 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.
Six Laws 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 suc-
cess than the one in Japan. Why do you think this happened?
Yamada 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 lim-
itations 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 deliv-
ers 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.
THE TAKEAWAY 75

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 own-
ers have had to surrender 50% of the revenues that the end user
pays for their content in order to guarantee that the network opera-
tor 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.
Six Laws In Chapter 2, we mentioned that Apple’s AppStore and Google’s
Marketplace have started to replicate the i-mode business model.
Yamada 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 funda-
mental concept and business model is valid.
Six Laws 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 plat-
form 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.
Yamada I think that there are two important advancements that are cur-
rently 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”.
76 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

So as more and more services are available via the cloud, devices
that work seamlessly within such a context will surely be an impor-
tant 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 user-
friendly 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 func-
tion as cloud terminals. Efforts to optimize devices in this way are
essential at this point in time.
Six Laws 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?
Yamada That is actually the second piece of the equation. When devices
become optimized for taking full advantage of cloud comput-
ing, 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.
Six Laws Can you give an example of this type of device?
Yamada 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 hard-
ware 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.
Six Laws Do you see the iPhone as a competitor to Kindle, or do you see them
as separate?
THE TAKEAWAY 77

Yamada 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 intro-
duced. 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.
Six Laws 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 perspec-
tive 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?
Yamada 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 try-
ing 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.
Six Laws 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 serv-
ices. 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.
Yamada 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
78 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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.
Six Laws Are you seeing a growing interest in this type of technology where
more ways of accessing wireless technologies are becoming embed-
ded into the device?
Yamada 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.
Six Laws 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?
Yamada 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 continu-
ously 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.
Six Laws 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?
Yamada 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.
Six Laws In listening to the insights from others that we have interviewed for
this book, it is clear that developing economies host some of the
THE TAKEAWAY 79

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?
Yamada Qualcomm is not doing anything specific for developing countries
but we are seeing several interesting phenomenon or activities under-
way 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 con-
sumers 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.
Six Laws Can you explain how this works?
Yamada 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 soft-
ware 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.
80 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

Six Laws Looking forward then to the overall mobile industry, what do
you believe will be the most important technologies or innova-
tions currently in the market or being considered for introduc-
tion that will shape the future of the mobile markets around the
world?
Yamada 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 com-
plete 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.
Six Laws 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?
Yamada 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 surround-
ing environment. For example, some frequencies have difficul-
ties 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 wire-
less 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
THE TAKEAWAY 81

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.
Six Laws That is actually very interesting, and something that I feel gets over-
looked in the hype and excitement of deploying new technologies.
But this is a fundamental issue for the industry, is it not?
Yamada 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 envi-
ronment 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.
Six Laws So what would be the third important technology innovation that
you see as necessary for the future of the mobile platform?
Yamada 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.
Six Laws 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 cam-
puses 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?
Yamada 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,
82 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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.
Six Laws 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.
Yamada 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.
Six Laws Ok, that is very clear. And this brings us to the last technology on
your list for the future of the mobile platform.
Yamada Actually, my fourth point is not necessarily about a specific tech-
nology, but instead is a more general statement about the user inter-
face 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.
Six Laws 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?
Yamada 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 defi-
nitely set the bar very high for everyone in the industry regarding
how a mobile device should be designed to interact with the con-
sumer. 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.
Six Laws Is this similar to the RakuRaku phone for senior citizens in
Japan?
Yamada Yes, that phone did a very good job for senior citizens including
those who have poor eyesight. Whenever you touch a button, the
THE TAKEAWAY 83

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 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?
Mr. Yoshino 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
84 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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 after-
noon 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 com-
pleted her work, all without having to be at home to monitor the situ-
ation. 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.
Six Laws 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?
Yoshino 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 fur-
ther, the mobile phone will remain as the important, central point
THE TAKEAWAY 85

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.
Six Laws 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?
Yoshino 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 free-
dom 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.
Six Laws You are suggesting then that not only all our information, content,
and services will be going into the cloud, but devices and technolo-
gies themselves will also move in this direction.
Yoshino That is right.
Six Laws 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.
Yoshino Yes, that is right.
Six Laws But this type of future scenario obviously raises some very big con-
cerns, 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 detri-
ment of others. In listening to our discussion now, I cannot help but
feel we are really talking about enabling this type of Big Brother
86 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

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?
Yoshino 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 simi-
lar 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.
Six Laws 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.
THE TAKEAWAY 87

Yoshino 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 cus-
tomers 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.
Six Laws 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 regard-
ing FeliCa appearing in the media. Is it only a matter of time?
Yoshino 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 for-
ward. 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.
Six Laws 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
7
Evaluation Assurance Level (EAL).
88 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

differences for the consumer between these two approaches? Which


one will ultimately win?
Yoshino Whenever a new technology is introduced that is truly epoch-
making, 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 over-
come 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 wal-
lets, money, and personal identification to these new technologies.
Six Laws Which stakeholder do you believe holds the keys to making this
leap successfully?
Yoshino It is the content provider, of course. The reason why it has to
be the content provider is that these are the people and compa-
nies 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
THE TAKEAWAY 89

one of these applications that we will see the leap from card-
based to mobile FeliCa happen. That is what is most important in
Japan right now.
Six Laws Among these ideas, do you see any opportunities or innovations
you consider to hold the greatest potential going forward?
Yoshino 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 tech-
nology 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.
Six Laws 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.
Yoshino 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
90 IMMUTABLE LAW NO. 3: MOBILITY EMPOWERS

JR East’s Suica service, first you have to download the Suica appli-
cation. 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 redun-
dant 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 ticket-
ing 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.
Six Laws Do you have any parting thoughts for what will bring FeliCa to the
forefront of mobile business internationally?
Yoshino 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, infor-
mation or even other people from a mobile location, then FeliCa
can be applied.
Six Laws Anywhere in the world?
Yoshino 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. Work or school.
B. While commuting between home and work (or school).
C. Home.
D. Leisure (out and about) time.

Your Ranking
1. (Most often)
2. (Next most often)
3. (Third most often)
4. (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.

91
92 IMMUTABLE LAW NO. 4: THE VALUE OF TIME ZONES

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 publish-
ers, 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. Home.
2. Leisure (out and about).
3. Work–school.
4. Commute.

Men
1. Work–school.
2. Home.
3. Leisure.
4. 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 wak-
ing (and even sleeping) hours makes perfect sense, since the advantage of the
MOBILE CONTENT USE IS NOT LOCATION- OR TIME-SPECIFIC 93

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 bal-
ance 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 loca-
tion, 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 ques-
tion 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 spe-
cific 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
94 IMMUTABLE LAW NO. 4: THE VALUE OF TIME ZONES

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 “in-
between” 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 trans-
portation. 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, cheap-
est ways to get from point A to point B. These services provide accurate route infor-
mation 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.
GOLDEN TIME 95

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 valu-
able 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.
96 IMMUTABLE LAW NO. 4: THE VALUE OF TIME ZONES

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 dis-
covered 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 fash-
ion 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 dif-
ferent 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 embar-
rassment 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 offer-
ing 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.
STEP 2: CHARTING TIME 97

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 discus-
sion 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 inter-
acting 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.
98 IMMUTABLE LAW NO. 4: THE VALUE OF TIME ZONES

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 informa-
tion 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 99

Figure 4.4 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 repli-
cable 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
100 IMMUTABLE LAW NO. 4: THE VALUE OF TIME ZONES

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 advertis-
ing 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 Golden Time

Current content that fits this Current content that fits this
time zone time zone

1. Recorded broadcast TV 1. Broadcast TV programs


programs 2. Broadcast-related data
2. Broadcast-related data content
content 3. EPG content
3. EPG content 4. Targeted ads

Figure 4.5 Mobile TV time zones.


ANALYZING A MOBILE TIME ZONE FAILURE 101

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 text-
based 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 opportu-
nities 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
102 IMMUTABLE LAW NO. 4: THE VALUE OF TIME ZONES

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 com-
panies, 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
THE TAKEAWAY 103

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 execu-
tive 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 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?
Mr. Fujino 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 list-
ings. We are the first company in Japan to have developed the capa-
bility 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 down-
load ring tones of the music they are listening to on their mobile
phone’s FM radio tuner or even to purchase the full CD immedi-
ately 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.
Six Laws 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?
Fujino 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 affil-
iated 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,
104 IMMUTABLE LAW NO. 4: THE VALUE OF TIME ZONES

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.
Six Laws In this chapter, we have spoken about the concept of two differ-
ent “Time Zones”. The first is when users have short bursts of
“in-between-time” usage, and the second is when they are spend-
ing 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?
Fujino 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 base-
ball 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 try-
ing 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.
Six Laws 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?
Fujino I do not think so many new ways of using the mobile phone and
Mobile TV have appeared yet. This is because the same pro-
gramming available via terrestrial television broadcasts is also
available through the mobile phone. So we are seeing similar
THE TAKEAWAY 105

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 One-
Seg 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 inter-
esting results from the research. Perhaps more in line with your
Golden Time idea (from 10:00 P.M.) than my previous WBC exam-
ple, 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 mid-
night 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 find-
ings, 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.
Six Laws Based on your experiences in the Japanese market and your knowl-
edge of the global mobile industry, what do you feel are the most
important trends in the mobile industry today, and how must inter-
national business executives be thinking about integrating these
into their overall plans and strategies going forward?
Fujino 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 pro-
claimed 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 informa-
tion), 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 con-
tent 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 cap-
tured 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.

106
BLURRING THE LINES 107

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 serv-
ices 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 vari-
ous 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 out-
side 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
108 IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

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).


BLURRING THE LINES 109

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 activi-
ties 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).
110 IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

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).
10
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.
BLURRING THE LINES 111

Figure 5.4 Au one GREE screenshots (copyright © KDDI Corporation, 2008).

GREEs mobile services and basic functions when it came to social network func-
tions. There was one big strategic difference, however, and that is how GREE
worked together with the mobile carriers. Mixi had long tried to remain independ-
ent 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.
112 IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

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.
BLURRING THE LINES 113

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

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 con-
cept 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.
BLURRING THE LINES 115

User-Created Content
The key strategic move Mahou no Island made was to let users create content in addi-
tion 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 com-
ments, 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 nov-
els. 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.
116 IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

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, hob-
bies, 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 communi-
ties and seek out other users with similar interests, similar gaming profiles, or those
who live close to them.

19
DeNa IR Report 2008, fiscal Q2 results.
20
Keitai Whitebook 2008, Impress R&D 2007.
BLURRING THE LINES 117

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 heav-
ily 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 manage-
ment 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 subscrib-
ers 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
118 IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

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 intro-
duced 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.
BLURRING THE LINES 119

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 playl-
ists. They can also search for others with similar music tastes and contact them
120 IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

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 conver-
gence, 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.
BLURRING THE LINES 121

In September, au one introduced “au box”, an entertainment set-top box


designed specifically for mobile users. They can bring mobile phone LISMO con-
tent 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, ava-
tars, and a small element of Tamagotchi in a three-dimensional (3D) virtual environ-
ment (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.)
122 IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

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 inhabi-
tants 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 experi-
ence 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 plat-
form and 3D virtual worlds.
BLURRING THE LINES 123

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

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.


BLURRING THE LINES 125

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 pro-
vides 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 experi-
ences 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 envi-
ronment, 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 cat-
egories 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.


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

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. Social networking as the hub (mixi, GREE, Mobage-town).


2. Two-tier memberships (Nico Nico Douga).
3. Affiliate marketing opportunities (Nico Nico Douga).
4. User-generated media models (Mahou No Island, Mobage-town).
5. Value virtual currency (Mobage-town, S!Town).
6. Fixed mobile value (LISMO).
7. Stickiness (S!Town, Mobage-town).
8. 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 guaran-
tees 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 applica-
tions 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.
THE TAKEAWAY 127

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 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.
Dr. Onishi 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 plat-
form, 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.
Six Laws 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?
128 IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

Dr. Onishi 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 busi-
ness environment or for business purposes. This expectation was cor-
rect 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 meet-
ing up with friends or going to restaurants. This came as a surprise.
Six Laws 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 consump-
tion. In which category would NAVITIME belong?
Dr. Onishi Our basic service is looking or searching for directions to get some-
where, 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 dedi-
cate their time to look and to explore.
Six Laws 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.
Dr. Onishi 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 informa-
tion retrieval by using their mobile for all these activities instead of
switching between the PC and the mobile phone.
Six Laws 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?
THE TAKEAWAY 129

Dr. Onishi 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.
Six Laws Would this situation or trend also apply to other countries?
Dr. Onishi I believe there is a gap between Japan and the overseas markets.
Japan is already moving forward with the fourth-generation net-
works. In overseas markets, we are still looking at a better 3G net-
work 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.
Six Laws 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?
Dr. Onishi I would give the advice to overseas telecom operators. My under-
standing is that in Europe or the United States, the operator’s rev-
enue for the content is very high, and this hinders the growth of
the content provider. I think carriers need a fairer revenue sharing-
model 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 con-
tent 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.
Six Laws 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?
Dr. Onishi 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,
130 IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

but the users need much more simple interfaces to interact with the
technology.
Six Laws 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?
Dr. Onishi 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 suc-
cessful 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.
THE TAKEAWAY 131

Can you provide us with a brief overview of mixi, and your efforts
related to the mobile platform?
Mr. Kasahara 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 dia-
ries, 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 becom-
ing 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 individ-
ual to develop services.
Six Laws 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?
Kasahara 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.
Six Laws 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?
Kasahara It is because mobile devices were developed as communication
devices in the first place. They match with our communication
132 IMMUTABLE LAW NO. 5: MOBILE-SPECIFIC BUSINESS MODELS ARE ESSENTIAL

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.
Six Laws 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.
Kasahara 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.
Six Laws 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.
Kasahara 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.
Six Laws 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?
Kasahara 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.
THE TAKEAWAY 133

Six Laws 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 perspec-
tive what will come next?
Kasahara 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 opportu-
nities. 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.
Six Laws 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 scenar-
ios for Simplexity and how it might shape a new age of technology.
What is your take on mobile “Simplexity”?
Kasahara 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 serv-
ices. 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 technol-
ogy 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 func-
tions 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.

134
IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY 135

Most engineers would agree that technology inherently implies complexity. The fun-
damental 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 tech-
nology. 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 utili-
ties 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 per-
sonal 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 ver-
sions 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 ciga-
rettes, 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 capa-
bilities 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
136 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

Figure 6.1 A Suica RFID prepaid card.

Figure 6.2 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 soft-
ware (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.
PHASE I: SIMPLEXITY 137

Simplexification
Complexity of point
usage intelligence of
a system

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 mak-
ing 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
138 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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 rec-
ommends 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 inter-
face, 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 serv-
ice to customers. As the venerable saying goes, “Okyakusama wa kamisama desu”:
OVERVIEW OF THE THREE PHASES 139

Figure 6.4 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 pos-
sible 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 hair-
dresser, 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.
140 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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 progres-
sion 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 con-
trol 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 increas-
ing 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 recommenda-
tions 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 sys-
tems can do. Introduced in 2005, Carwings has evolved into a full-blown digital
CAR NAVIGATION SYSTEMS 141

Figure 6.5 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 connec-
tions 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 text-
to-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 emer-
gency, 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 informa-
tion), 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 hard-
core 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
142 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

Figure 6.6 The Carwings system showing the Yahoo! gourmet service (copyright © Nissan
Motors).

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 con-
sole 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).
CAR NAVIGATION SYSTEMS 143

Figure 6.8 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 com-
pany 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 produc-
ing 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 con-
sole, 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 gam-
ing and personal entertainment. Pen-based input and motion sensor controllers are
complex technical systems (complex back-end technology) that provided a very sim-
ple 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.
144 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

ELECTRONIC PROGRAM GUIDE (EPG)/TV GUIDES

Video recorders have gone from being devices requiring a Ph.D. to program-to-
intelligent 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 thumb-
nails, 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 exam-
ple, 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 informa-
tion 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 elec-
tronics 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.
THE MOBILE PLATFORM MANDATES SIMPLEXITY 145

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 con-
tent 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
146 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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 knowl-
edge 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 indus-
trial 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 cardhold-
ers, 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 con-
cept 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 smart-
phones, 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.
THE MOBILE PLATFORM MANDATES SIMPLEXITY 147

Figure 6.10 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 digi-
tal 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.
148 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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 revolu-
tion 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 informa-
tion 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 conversa-
tional 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 informa-
tion 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
THE MOBILE INTERNET AND THE WEST 149

Figure 6.12 The four levels of the simplexity pyramid.

sense, the Japanese mobile can be regarded as the DS–Wii of digital communica-
tions 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 inter-
esting 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,
150 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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, dat-
ing 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 exam-
ple, 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).
THE MOBILE INTERNET AND THE WEST 151

Simplexity combines technology, integrated services, intelligent analysis (prefer-


ence–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 mar-
keters. 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 sys-
tems 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 intelli-
gent 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.


152 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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 custom-
ized 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 profit-
able innovations in the mobile industry. While other players struggle to make
larger screens and wider keypads, or pump their content and services, simplex-
ity will be what truly empowers individual users through their mobile devices.

Figure 6.15 Flowing from expert to amateur and


Figure 6.14 The path to simplexity. mass market to personal.
THE MOBILE INTERNET AND THE WEST 153

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 day-
to-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 gov-
ernment 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 Mobile Game Town is today one of the most successful social net-
work, 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?
Ms. Namba 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
154 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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 over-
lap. 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 plat-
forms. 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 indus-
try. It is really more like a natural outcome for us.
Six Laws 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”.
Namba 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 serv-
ices. That is why we focused on providing a good mobile user
experience.
Six Laws 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?
Namba 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 network-
ing 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.
THE MOBILE INTERNET AND THE WEST 155

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 com-
municate 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.
Six Laws 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.
Namba Oh, sure, sure. Yes. It is quite universal. I think these mobile devel-
opments will also happen in other countries like the United States,
for example.
Six Laws So we are looking at a global development toward the mobile phone
becoming the preferred social network tool or device.
Namba 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 manage-
able. 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 evo-
lution, 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.
Six Laws 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?
Namba 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.
156 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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.
Six Laws 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?
Namba 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?
Six Laws 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?
THE MOBILE INTERNET AND THE WEST 157

Namba 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.
Six Laws 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?
Namba 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 informa-
tion. 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 compa-
nies 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.
Six Laws 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?
Namba 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
158 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

mobile phone. It is very complicated, as is the concept of per-


sonal 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 tel-
ephone 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.
THE MOBILE INTERNET AND THE WEST 159

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

Six Laws 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?
Brent Mori 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 eas-
ily 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 abil-
ity 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 standards-
based 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
160 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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 avail-
able 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?
Six Laws So is the concept of Simplexity embedded in your overall strategy?
Brent 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 imple-
mentation 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 appli-
cations 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.
Six Laws But do consumers not actually behave or interact with Internet con-
tent differently when they access it from different devices?
Brent Yes, you are absolutely right in that there are quite a few differ-
ences 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 var-
ies. 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.
Six Laws Is this an area you believe needs further investment and attention in
markets around the world?
Brent Yes, especially as we continue to work with many different devices
produced by a number of manufacturers around the world. We have
THE MOBILE INTERNET AND THE WEST 161

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.
Six Laws Can you give some examples of how you are doing this?
Brent 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 effec-
tive 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.
Six Laws 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?
Brent 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.
162 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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 sim-
ple 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 oper-
ating 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.
Six Laws 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?
Brent 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 widg-
ets. 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
THE MOBILE INTERNET AND THE WEST 163

cross-platform and cross-device is, we hope, going to be a larger


benefit that will attract enough people to make that a viable alterna-
tive to their dependence on the iPhone standard.
Six Laws 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.
Brent 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 pro-
prietary 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.
Six Laws Based on what you have experienced in Japan, do you believe
there may be a “formula” for other businesses looking to suc-
ceed in the Mobile Industry? Or maybe some keys to success that
operating the Opera business in Japan can provide to international
executives?
Brent I do not think there is a particular formula that can be easily dis-
tilled, but there definitely are keys to success, as well as clear traps
that will lead toward failure.
Six Laws Can you elaborate on this?
Brent 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 profit-
ability have changed with advances driven by increasing network
164 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

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 provid-
ers 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 flexibil-
ity 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.
Six Laws And at the foundation of these solutions, do you see an important
role for the Law of Simplexity?
Brent 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 cus-
tomers have recognized that web technologies are now advanced
enough and fast enough to enable more simple delivery of applica-
tions 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.
Six Laws Do you have any examples of how consumers are using full brows-
ers 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.
THE MOBILE INTERNET AND THE WEST 165

Brent 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 typi-
cally does not have a broadband connection or a reliable broad-
band 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.
Six Laws Do these differences mandate that people think much harder about
the mobile platform?
Brent For people who are serious about succeeding on mobile devices,
yes. Typically, executives are not thinking about implementa-
tion issues, the limitations in the mobile platform, and ulti-
mately 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 experi-
ence. 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.
166 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

Six Laws Is there anything that your experiences in Japan may be able to
teach the world about this way of thinking?
Brent 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 cre-
ated, not about this overall model.
So from a vendor standpoint, or a technology vendor stand-
point, 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 surround-
ing 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 think-
ing 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 success-
ful in doing so.
Six Laws 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 impor-
tant “Simplex” innovations will arise going forward?
Brent 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 usu-
ally 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 direc-
tory 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 com-
plexity of the devices. They will simply need to update their cur-
rent 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
THE MOBILE INTERNET AND THE WEST 167

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 con-
tent through their web browser irrespective of the device they pre-
fer and use.
But as you have outlined in your Law of Simplexity, many inter-
esting 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 promo-
tion and on new business development.
In 1999 he founded Interactive
Program Guide, Inc. (IPG), a joint ven-
ture between Gemstar and Dentsu and
was appointed as a director. In 2005
he was named President and CEO of
IPG.

Six Laws 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 fac-
tors behind it?
Mr. Toji First of all, one important prerequisite for G-GUIDE was that here
in Japan we have an established TV culture. People enjoy watch-
ing 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.
168 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

Having this information on your cellphone offers extra benefits


to the user, because this content was only available in newspa-
pers 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.
Six Laws Preinstalled on the mobile phone as a stand-alone application you
mean? Can you explain a bit more about this specific factor?
Mr. Toji 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 informa-
tion 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 exist-
ing demand. So we both started to work together on creating a spe-
cific mobile application for this.
Six Laws 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?
Toji 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
THE MOBILE INTERNET AND THE WEST 169

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 every-
one has an interest in.
Six Laws 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.
Toji 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 voice-
call users into application users and mobile web users by offering
services that are meaningful and relate to their actual needs and
behavior patterns.
Six Laws 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?
Toji 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 experi-
ence. 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.
170 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

Six Laws 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?
Toji 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.
Six Laws 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?
Toji 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.
Six Laws So what would this mean for different devices like the PC, mobile,
and the TV?
Toji 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
THE MOBILE INTERNET AND THE WEST 171

accessing and retrieving bigger chunks of information because of


the large screen. When we think more about TV and TV record-
ing, 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.
Six Laws 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?
Toji 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.
Six Laws So the PC as an online entertainment device will start to become
less and less important. The TV and mobile or, better, a combina-
tion of both will be our future tools of interactive entertainment?
Toji 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, with-
out 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.
Six Laws So this convergence concept uses the mobile device as a kind of
advanced TV interaction device. The mobile phone will act as
172 IMMUTABLE LAW NO. 6: THE FUTURE IS SIMPLEXITY

a “simplex” interface between the user and the interactive TV


services?
Toji 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 work-
ing 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 mak-
ing recommendations based on this. That is another very important
value that exists in the mobile.
Six Laws 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?
Toji One of the most important parts of G-GUIDE, and for EPGs in gen-
eral, 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 con-
tent, 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 them-
selves into perspective and have a “rhythm schedule” of content.
We selected the same approach for our EPG.
THE MOBILE INTERNET AND THE WEST 173

Six Laws 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.
Toji 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 down-
loads 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.

174
THINK BEYOND THE WEB 175

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 technolo-
gies 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 customi-
zation. 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 technology-
driven 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 seman-
tic 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, ren-
dered, and displayed in an accessible, easy-to-understand way.
176 PARTING THOUGHTS

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 with-
out 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
THINK OF THIRD WORLD USERS 177

Figure 7.1 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 coun-
tries 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 build-
ing 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 out-
side 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 pow-
ered, 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.
178 PARTING THOUGHTS

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 immu-
table 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, contact-
less 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 organi-
zations 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 pos-
sible in all markets, and as a guide for
how other markets can surpass devel-
opments 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, com-
ments, and insights, to the following
address:
authors@6immutablelaws.com

Expert Insight
Tetsuzo “Ted” Matsumoto
Senior Executive Vice President
Softbank Mobile Corp.
THINK OF THIRD WORLD USERS 179

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 pro-
moted 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 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 chal-
lenges that exist in Japan and internationally for the mobile indus-
try. 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 cur-
rent level of mobile Internet usage?
Matsumoto 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.
Six Laws 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 con-
sumers in Japan are no different from those in other countries.
Matsumoto 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
180 PARTING THOUGHTS

that significant. Japanese products are successful throughout the


world—animation, manga, games, etc., (Pokemon is a typical exam-
ple)—because kids are kids everywhere. When it comes to high
school or college students, however, some differences start to appear.
Six Laws Are these differences related to some uniqueness of Japanese culture?
Matsumoto 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.
Six Laws In other words, Japan is a large mass market that could be educated
more easily than, say, that of the United States.
Matsumoto On top of that, and this is my third point, Japanese young consum-
ers tend to be rich compared to their overseas peers. This is because
their parents, who are caught up in the typical hectic Japanese life-
style, 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 fol-
low. If good products are developed one after another, the market
will be further stimulated.
Six Laws 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?
Matsumoto 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 impos-
sible to get the whole corporate system to move quickly toward
THINK OF THIRD WORLD USERS 181

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.
Six Laws The Japanese mobile market is consumer driven, while we could
say that the European or American markets are business driven.
Matsumoto Let me set this straight: It is a market of “young consumers inter-
ested in anything new” versus “mature and intelligent business
people interested in real efficiency”.
Six Laws 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?
Matsumoto To a certain extent, yes. But there is also another reason. As you
know, the most attractive thing BlackBerry provides is synchroni-
zation 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.
Six Laws 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?
Matsumoto 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.
Six Laws Do you think this situation will continue for a while?
Matsumoto No. On the contrary, I think the entire world is at a turning point.
Now, finally, the smart phones developed for mature and intelli-
gent 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.
Six Laws Do you think Japanese business people can catch up with such a
change? I heard that the conservative nature of the Japanese cor-
poration is making it difficult for the employees to fully utilize
182 PARTING THOUGHTS

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.
Six Laws How do you position the success of i-mode in the story you are tell-
ing 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.
Matsumoto I agree that i-mode made a great contribution in opening the door
to the mobile Internet age. When it comes to influencing the glo-
bal 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 portabil-
ity 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.
Six Laws 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 say-
ing that iPhone could be successful in all markets?
Matsumoto 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 merg-
ing the two communities—intelligent business people and young
consumers.
Six Laws I understand that music is the common ground. What about gam-
ing? Can it exercise the same magic on the mobile industry?
Matsumoto 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.
THINK OF THIRD WORLD USERS 183

Six Laws OK. I agree that iPhone made it. Then, why did Japanese manufac-
turers 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 dec-
ades. Also, Sony has been much ahead of Apple in the mobile com-
munications market. Sony Ericsson is one of the largest mobile
phone vendors. Nevertheless, Sony could not make an iPhone-like
product. Why?
Matsumoto 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.
Six Laws 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.
Matsumoto That is exactly what I wanted to say, also. Although everything
started with the iPod, it is now only one of many attractive fea-
tures 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 inter-
ested 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 prob-
lem 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.
Six Laws 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%.
Matsumoto 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 ques-
tion is whether it is useful or not, and whether there is anything else
that is better.
Six Laws The fact that older people are using the iPhone instead of specifi-
cally 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.
184 PARTING THOUGHTS

Matsumoto Indeed, and I believe that is happening thanks to a simple and intui-
tive user interface and a big, beautiful screen.
Six Laws 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?
Matsumoto 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.
Six Laws Then what else might be missing in the iPhone that could make the
breakthrough?
Matsumoto 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.
Six Laws 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?
Matsumoto 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 any-
body 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.
Six Laws 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.
Matsumoto 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
THINK OF THIRD WORLD USERS 185

is not so important. Then why are we not making the screens even
bigger?
Six Laws Screen size is a subject you have talked about in the past, men-
tioning the “Law of the Screen” and how mobile Internet usage
matches closely with screen size and resolution.
Matsumoto 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 interest-
ing 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 capac-
ity battery) to occasionally connect to the handsets with USB cable,
or wirelessly via BlueTooth. I would tentatively call such a product
a “Viewpad”.
Six Laws A Viewpad?
Matsumoto 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.
Six Laws Business people may like it, but do you think consumers would
carry around an extra device like this?
Matsumoto 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.
Six Laws How would this work at home? Could Viewpad also replace the
TV, as it might replace the personal computer?
Matsumoto 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.
Six Laws 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
186 PARTING THOUGHTS

mobile phones. Industry-wise this may not seem like a big achieve-
ment, but it could help to increase mobile usage. We are now seeing
booths with 10 different chargers.
Matsumoto 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 dif-
ference 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.
Six Laws That takes us to the fatal problem of the uniqueness of technology
standards in Japan.
Matsumoto 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 mar-
ket 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.
Six Laws 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 stand-
ard. Do you have any idea about why this is not happening and how
this situation could be changed?
Matsumoto 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
THINK OF THIRD WORLD USERS 187

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.
Six Laws 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.
Matsumoto I do not want to discuss this too much, because we—mobile com-
munication 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 for-
eign 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.
Six Laws 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.
Matsumoto 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.
Six Laws: 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?
Matsumoto 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 applica-
tion downloads. The handset should also have a sophisticated self-
learning capability and become a real “companion” (or “servant”)
of the users.
Six Laws Which market segments do you believe are the most exciting? And
who will be the winner in each?
Matsumoto 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
188 PARTING THOUGHTS

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 net-
works to connect the former with the latter.
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INDEX

Access technologies, 33, 77–78, 90 Application development, 32, 175


ADSL, 17–18 Arabic countries, potential users in, 46
Advanced data services, 23, 28 ARM 3G handsets, 163
Advanced mobile data usage, 27 AT&T, 18, 32
Advanced Mobile Phone System au One:
(AMPS), 25 ecosystem, 121
Advertisements/advertising: GREE, 107, 110–113, 126, 154
mobile TV, 103–105 services, 113, 119
services, 14–15, 33, 64–66 Auctions, 13–14, 153–154
revenue, 45 Australia, 3–6, 24
sponsor sites, 117 Austria, 26
Africa, 46–47 Automotive technologies, 140, 187. See
Air interface technologies, 77–78, 81 also Car navigation systems
Amazon, xvii, 76, 109. See also Kindle
Analog cellular service, 25 Back-end complexity, 137–138, 143, 152,
Analog (1G) mobile phones, 24, 60 161
Analog networks, 25 Back-end databases, 32
Android (Google), 39–41, 44–46, 48, 51–52, Bandai, 122
54–57, 157, 175 Bandwidth, as scarce resource, 33
APIs, 52–53, 55, 131 Banking, mobile services, 13, 46–47
Apple: Barcode reading software, 64
AppStore, 75, 187 Barcodes, 64–67
ecosystem, 157 Base stations, 19, 32, 80–82
iPhone, see iPhone Batteries, charging/recharging, 80, 186
technologies, 44–45, 123, 166, 183 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 empowerment, 176


Blogs/blogging, 13–14, 63, 96, 98, loyalty, 33–34, 72
110, 123 needs, 97–101
Bluetooth technology, 81, 185 preferences, 33
Body language, 60 senior market, 48, 82, 183
Boredom buster content, 92 in value system, 30–31, 33
Braille applications, 67 Content, generally:
Bridging kits, 135 development, xvii, 49, 99–104, 175
Broadband: distribution, 55
connection, 165 ownership, 85
market statistics, 22–23, 72 providers, 30–36, 45–46, 74–75, 88
revolution, 16–17 Control:
Browsers, 49, 164 over environment and communications,
Bundled services, 78, 101 59–61
Business data protection, 86 evolution of, 60
Corporate profit, 48
Camera-enabled phones, 64–65
Coupon tickets services, 14
Cameras, digital, 137–138
Coverage, 25
Canada, 3
Credit cards, 135–137
Car navigation systems, 140–143
Critical mass, 46, 54
Carwings (Nissan), 140–142
Cultural influences, mobile Internet usage,
CDMA (Code Division Multiplex Access)
2–3, 8–15, 179–180
networks, 25–26, 28
Customer retention, 34
Centralized dashboard, 85
Cybird, 178
Charts, time/time zones, 97–98
China, xvi, 3–4, 19, 24, 46, 79, 186 Database marketing, 50
China Mobile, 47 Data information services, 12–14
Chipsets, 77, 79, 86 Data revenues, 23
cHTML technology, 74 Data throughput, rate of, 81
Clickable devices, 65, 67–68 Decoration mail (DecoMail), 14
Cloud computing, 75–76, 85 DeNa Co. Ltd., 117, 153
CNN Mobile, 27–28 Denmark, 10
Coca-Cola, c-Mode, 68 Denso Wave, 64
Communications networks, Dentsu, 7
components of, 61 Developed markets, 74
Commuting, mobile Internet use and, 6–8, Developing countries, 47, 177
92–94 Developing markets, 78–79
Compatible devices, 56 Device manufacturers:
Competition, 29, 33–35, 78 chipsets, 79
Competitive advantage, 33, 73 holistic approach of, 165
Complexity concept, xvii-xviii, 134–135, Device ownership, 85
137–140, 143. See also Back-end Dictionary translation services, 14
complexity Digital coupons, 50–51, 83–84
Confederation of European Posts and Digital divide, xvi
Telecommunications (CEPT), 24 Digital information age, 145
Connectivity, 26, 32, 55, 75, 77 Disempowerment corollary,
Consumer(s): 70–71, 178
behavior, influential factors, Disney Mobile, 32
71–72 DoCoMo (Do Communications Over the
data protection, 86 Mobile Network) technology. See
INDEX 193

Nippon Telephone & Telegraph (NTT), Embracing surroundings, 62–65, 67–70, 73,
DoCoMo technology 94
Dodgeball, 39 eMercury, Inc., 130
Double Teigaku, 20 Emerging markets, xvi, 46–48
Downloads: EMOBILE Ltd., 16, 20–21
e-books, 174 Empowerment. See Control; Mobility
games, 61, 67–68, 96 empowerment (Immutable Law 3)
music, 13–14, 67–68, 103 End-users, significance of, xvii-xviii, 30, 32,
ringtones, 13–14, 103 49. See also Consumer(s)
vending machines, 68 Entertain:
video, 118–121 content and services development,
D2C, 168 99–100, 125
DVBH, xvi Japanese usage trends, 12–13
DVR technology, 144–145, 169–170 simplexity, 147
Entertainment content providers, 72, 96
Entrepreneurship, 17–19
eAccess, 15–17 E-readers, 55
EAL4 Plus code, 87 Ericsson, 19, 26. See also Sony Ericsson
E-books, 13–14, 174 Escaping surroundings, 62–63, 67, 69–70,
E-commerce, 13 73, 94–95
Ecosystem law (Immutable Law 2): Europe, mobile usage trends, 8. See also
CDMA, 24–26, 28 specific European countries
ecosystem defined, 35 European Technical Standards Institute
expert insight, 42–57 (ETSI), 24
failures, 38–39 European wireless markets, 35
Google’s Android ecosystem, 39–41, Express:
44–46, 48, 51–52, 54–57 content and services development,
GSM, 24, 26 99–100, 125
Japanese ecosystem as model, Japanese usage trends, 12–13
41, 43–44 simplexity
PDC, 24–26, 28 EZ Digital Radio, 120
players in, 32–33, 43 EZ Gree, 112
scarce resources in, 33–35 EZ Web, 26, 28
success factors, 41
teamwork and quality, 37–38
value system vs. ecosystem, 29–31 Facebook, xvii, 52, 157, 159, 161, 175
WAP, 24, 26–30, 37–38, 43–44, 122 Fashion services, 96
Ecosystem relationships, 36, 175 Federal Communications Commission
E-coupon e-mails, 51. See also Digital (FCC), 18
coupons Fees/charges, types of, 20, 33, 36
Edy, 90 FeliCa Networks, 83
Electronic program guide (EPG): FeliCa technologies, 13, 68, 83–90
content, 100, 102–103, 143–145 Femtocell technology, 80
G-Guide, 144–143, 167–169, 172 Financial services/transactions, 47, 79
rhythm schedule, 172 Finland, 56, 24, 26
E-magazines, 96, 98 First generation (1G) technologies, 24, 60
E-mail: Fixed-line networks, 61
messaging, usage trends, 8 Fixed-line telephones, xvii, 21, 60
services, 44, 82 Flash Lite software (Adobe), 150
usage trends, 13–14, 94 Flat-rate pricing plan, 21
194 INDEX

FOMA (Freedom of Mobility Access), 26 Hackers, 87


Forrester Research, 3 Handset(s):
Fortunetelling services, 14, 112 easy-to-use, 20
Fourth generation (4G) technology, 82 manufacturers, xvii, 30–35, 38, 43
France, 3, 5–6, 8, 24, 38, 92 vendors, 187
Front-end simplicity, 152, 154 Hearing-impaired users, 82–83
Fuel cell technology, 80 High-speed mobile, xvi, 2
Fujino, Chiaki, 102–105 Hofstede, Geert, 9–10
Full browsers, 49 Holistic approach to technology, 165–166
Home:
Gadget-Lovers: mobile data usage at, 7, 92–94
demographic, 4 monitoring services, 69, 84
myth, 3–4 security services, 69
Gadgets, 176 Homepage, 85
Games, 13–14, 32, 61, 67–68, 92, 94, 96, Hong Kong, xvi, 3–4, 26
182 Horizontal manufacturing model, 79
Gaming services: HTML:
casual, 111, 116–117 5 carriers, 56
multiuser, 121–123 technology, 74
GeminiMobile, 122 Huawei, 19, 32, 186
General purpose devices, 76 Hundt, Reed, 18
Germany, 3, 5–6, 29
G-Guide, 144–145, 167–169, 172 Iceland, mobile adoption trends, 26
GirlsShopping.com, 96–98 i-Channel, 123–124
Global financial crisis, 17 i-Concier service, 50, 146–147
Global System for Mobile, 25 Identity-based applications, 68
Global wireless network, 61 IFRA, 92
Golden-time content, 95–102, Imai, Masaaki, 37
104–105, 128 i-mode:
Google: business model, 74–75
Android, see Android critical mass for, 46
Marketplace, 75 launch in Japan, 24, 26
mobile business, 53 limitations of, 53
technologies, xvii, 12, 44–45, 51, 123 services, xvii, 2, 28, 42–45, 159, 182
Goopas, 66 user data, 6
Government control/regulation, 19, 78 Impress R&D, 108
GPRS systems, deployment of, 24 In-between time content, 94–95, 97–102,
GPS: 104–105, 128, 157
capabilities, 86, 166 IN-FUSIO, 8, 92, 96
chips, 110 India, 3, 19, 46
services, 112, 125, 128 Individualism (IDV), cultural differences
Graphical user interface, 135, 161 research, 9–10
GREE, 107, 110–113, 126, 154 Indonesia, 10–11
GREE Mobile, 110 Industry standards, 162–164
Greeting cards, 14 Inform:
Growth opportunities, 21 content and services development,
GSM (Groupe Speciale Mobile) technology, 99–100, 125
24, 26, 186 Japanese usage trends, 12–13
Guatemala, 10 simplexity, 147
INDEX 195

Information: mobile phone penetration levels, 10


architecture, 98 mobile platform development, xvii
databases, 61 mobile revenues, 23
gathering services, 12 Mobile Marketing Data Labo, 13
nodes, 63–68 network capabilities, 22
sharing, 131 public transportation myth, 2, 6–8
Information Network System, 16 small houses that lack space for a
Infrastructure providers, 30, 32 computer myth, 2, 4–6
Innovation, 19–20, 44, 47–48, 52, 163, 181 Statistics Bureau, 6
Intellectual property, 19 wireless population, xvi-xvii
Intelligent anticipation, 139 Japanese management strategy, 37
Intelligent mobile search, 149 J-Phone, 26, 28, 159
Intelligent simplexity system, 150–152 JR East, Mobile Suica application, 89–90,
Intelligent systems, 157, 176 136
Interaction devices, 171–173 J-Sky service, 26, 28, 159
Interactive Program Guide, Inc. (IPG), 167
Interconnection charges, 20 Kaizen, 37
Interference management, 80–81 Kasahara, Kenji, 130–133
International Telecommunications Union KDD, 26
(ITU), 5, 16, 145–146 KDDI (Kyocera and DDI Corporation:
Internet: au one gadgets and services, 112,
classic, 177 124–125
intelligent, 177 LISMO, 112, 118–121
mobile platform, xvii music services, 119
PC-based, 54 technologies, 16–17, 20, 28, 158–160,
revenues, 64–65 164, 166
Investment services, 13 Key and lock systems, 84, 88
iPhone, 44, 53, 56, 76, 82, 135, 138, 146– Keypads, 71–72, 153
149, 155, 158, 161–162, 175, 182–185, Kindle, 55, 76, 174–175, 185–186
187 Korea, 5–6
iPods, 119, 182–183
iPod Touch, 53 Laptop computers, 4, 75, 84
IPTV, xvi, 152 Law of Simplexity, 48
Irate, 102 “Lean back” content, 106
ISDB-Tmm technology, 105 “Lean forward” content, 106
ISDN concept, 16 Leisure time, mobile data usage, 7, 92–94
Island Music Factory, 116 Limitations:
ISO standards, 87 of connectivity, 77
Israel, xvi of mobile phones, 53, 71–72
Italy, xvi, 3–6, 24, 26 Linux, 164
iTunes, 119 LISMO, 112, 118–121, 126
Lithium ion batteries, 80
Japan: Location-based services, 54, 56, 125, 127,
credit cards, 135–137 150
Internet user data, 5–6 LTE technology, 81, 105, 156–158
land of gadget-lovers myth, 2–4 Luxemburg, xvi
mobile device consumers, 3
mobile phone-based communications suit McAteer, Seamus, 12
the culture myth, 2–3, 8–15 Magic Library, 115–116
196 INDEX

Mahou No Island, 115–118, 126 affiliate marketing, 114–115, 126


Malaysia, 10 background to, 106, 126
Mapii, 150 executive interviews, 126–130
Market entry barriers, 33–34 expert insight, 130–133
Market research, 97 fixed mobile value, 119–121, 126
Market share, 163 social networking services (SNS),
Masculinity (MAS), cultural differences 107–113, 116–118, 126, 130–133
research, 9–10 stickiness, 116–118, 121–123, 126
Matsumoto, Tetzuzo “Ted,” 178–188 two-tier memberships, 114–115, 126
m-commerce, 96, 98 user-generated content, 115–119, 126
Me-too syndrome, 180 value-added tools, 123, 126
Media: value virtual currency, 116–118, 121–123,
in content development, 103–104 126
research, hot vs. cold theory, 71–72 Web 2.0, 106–107, 124–126, 133, 146,
Media-FLO technology, 105 151–152
MediaTech chip, 79 Mobile TV, 104–105. See also TV
Memory capacity, 71–72 Mobile virtual network operators, 32
Memory cards, TV content development, 100 Mobile wallet services, 47. See also Wallet
Mesh networks, 81 phone technologies
Microfinance, 78–79 Mobility empowers (Immutable Law 3):
Microsoft, xvii, 40, 44–45, 123, 141, 175 business applications, 71–73
Microtransactions, 78–79 control evolution, 60, 69
Middleware providers, 30–32 control over environment and
MIDI, 115, 119 communications, 59–60
MiFare: expert insight, 73–90
code, 87 flaws in, 70–71
technology, 68 information nodes, 63–68
Mind maps, 11–12 links, 61–62
Mixi: messages, 61–62
Mobile, 110 nodes, 61–62, 69–71
Radio, 110 people nodes, 62–63
Station, 109 “thing” nodes, 68–69
technologies, 52, 107–112, 116–119, Mocoa, 124
130–133, 154, 157 Modularity, 21
Mobage-town, 116–118, 126, 153–156 Money transfer services, 13, 79
Moba-Gold, 117 Monopolies, 33–34
MobaMingle, 155–156 Mori, Brent, 158–166
Mobile adoption trends, 26, 72, 181 Moss, Tom, 51–57
Mobile agents, 50 Motorola, 26, 32
Mobile browser, 49. See also Browsers Movies, 13–14
Mobile content use, nature of, 93–94 MP3 technology, 137
Mobile devices: Multimedia services, 42–44
as fixed-line telephone, 21 Music, 13–14, 32, 67–68, 103, 110, 182
upgrades, 34 Music Creators Corner, 117–118
Mobile Game Town, 153 MySpace, xvii, 157
Mobile Internet, in Japan, 2, 4–6, 60
Mobile internet devices (MIDs), 55 Namba, Tomoko, 153–158
Mobile-specific business models are NANO Media, Inc., 102–104
essential (Immutable Law No. 5): Nanoservice, 96
INDEX 197

Natsuno, Takeshi, xvii, 2–3, 12, 35, 37, “thing,” 68–69


42–51, 162–163, 168 Nokia, 3, 26–27, 32, 38, 44, 182
Navigation services/software, 32, 95, 112. Nonverbal communication, 11
See also GPS Nordic Mobile Telephone, 24
Naviblog, 128 Norway, 10, 24, 26
NAVITIME JAPAN, 94–95, 127–129
Near Field Communication (NFC) technol- Obama administration, 18
ogy, 47 OEMs (original equipment manufacturers),
NEC, 38, 176 56
Netbooks, 55, 185 Oligopoly, 34
Netherlands, 3–4, 10 One laptop per child (OLPC) concept, 177
Network: One-Seg technology, 103–105
analog, 25 Online channels, 71
capacity, 25 Open Handset Alliance (OHA), 39–41, 46,
CDMA, 25–26, 28 51–52, 56
connectivity, 26, 32, 55 OpenwaveSystems, 158
fixed-line, 61 Opera Japan, 158–164
global wireless, 61 Opera Software, 124
GSM, 24 Operating systems, 56
mesh, 81 “Out and about” myth, 91–93
operators, xvii, 24, 30–36, 38–39, 43, 45, Out-of-network calls, 20
74–75, 78–79, 86, 188 Over-the-air (OTA) technologies, 86, 88
TDMA, 25 Ownership needs, 85
2G, 75, 82, 88, 129–130, 133
3G, 129 Pachiring, 107
News services, 12–14, 61, 94–95, 98–99 Packet data communications, 26
New Zealand, 5–6 Packet fees, 36
Next-generation Internet, 106–107 Pan-European mobile technology, 24
Next-generation technology, 146 Panasonic, 38, 69
Niche devices, 76–77, 168 Partnerships, development of, 21, 56–57
Nico Nico: PDAs (personal digital assistants),
Douga, 101, 114–115, 126, 149 xvii, 60
Market, 115 PDC, 25–26, 28
Nintendo: Peer-to-peer wireless communications,
DS, 135, 142–143, 151–152, 168 81–82
DSI, 160 People nodes, 62–63
technologies, 158, 166 Perfect competition, 33–34
Wii, 135, 142–143, 151, 168 Personal computers (PCs):
Nippon Telephone & Telegraph (NTT), cloud computing and, 75–76
DoCoMo technology, 16–18, 20, 24– mobile phones compared with, xvii, 4, 49,
26, 28, 32, 35–38, 40–41, 50, 52, 67, 54–55, 71–73, 96, 122–123, 125, 132,
71, 112, 123–124, 136, 146, 159, 166, 146, 157, 171
168–169, 186 Personal Digital Cellular (PDC), 25–26
Niwango Mail, 149 Philippines, 8
Node: Phone.com, 26
defined, 61 Photo services, 14, 28, 110, 131, 159
information, 63–68 Physically-challenged, user-friendly devices,
people, 62–63 82–83
primary, 61 Picture frames, 55
198 INDEX

Pocket Affiliate, 117 Rights acquisitions, 33


Point-of-sale purchases, 13 Ringtone downloads, 13–14, 94, 103
Poland, 3 Risk-taking, 47
POP mail accounts, 45 Roaming agreement, international, 24
Portable phones, 25 “Robust” communications, 59–60, 74
Porter, Michael, 29–30, 33 Russia, xvi, 24
poshme.jp, 107
Power: Safari, 161
consumption, 79–80 Sales force automation solutions, 32
processing, 71 Samsung, 166
supply, 185–186 Saudi Arabia, 24
Power Distance Index (PDI), cultural differ- Scan Search, 66–68
ences research, 9–10 Scheduling software, 32
Powerless communication, 60 Schmidt, Eric, 39
Price barriers, 11 Screensavers, 13, 94
Pricing plans/strategies, 20 Screen size, 71–72, 146, 153, 184–185
Privacy issues, 85–87, 89 Search services, 12–14
Processing power, 71 Second-generation mobile networks, 75
Product diffusion: Security systems, 25, 32, 85–87
barriers to, xvii Semmoto, Dr. Sachio, 15–21
Internet user data, 5–6 Service-Content delivery systems, 187
Profile site (Purofu), 14 Service providers, 30–336
Profitability, 163 Servicescapes theory, 62
Proprietary technology, 45 Services development, time zones and, 99–102
Push-button generation, 5 Sha-Mail, 28
Sharp, 38, 158
QR (quick response) codes, 32, 64 Shopping applications, 13–14, 84, 96–97
Qualcomm, 25 Short Message Service (SMS) messaging:
QUALCOMM Japan, 74–77, 79 advance mobile data use, 23
Quality issues, 37–38 social impact of, 63
Quality of service, 78 usage trends, 8, 13, 184
QWERTY keyboard, 185 Siemen Networks, 32
Silicon Valley, 18
Radiolinja, 24 Silicon technology, 80
RakuRaku phone, 82 SIM-based services, 35, 87
R&D Japan, 110 Simplexity (Immutable Law No. 6):
Re-com, 102 in action, examples of, 139–140
Remote controls, 69 background to, 134–135
Research in Motion, 3, 44 car navigation systems, 140–143
Resellers, 32 Electronic Program Guide (EPG), 143–145
Revenue: expert insight, 153–173
from ads, 45 mandated simplicity, 145–146
data, 23 phases of, 137–139
generation, 23, 74–75 semantic web, 147–148
Internet, 64–65 significance of, 82, 88, 129–130, 133
sharing, 129, 175 theory of, 137–138
RFID: Western mobile services, 148–153
fraud, 178 Simplicity concept, xvii-xviii, 20, 137,
services, 13, 68–69, 136 139–140, 177
INDEX 199

Singapore, xvi, 10 Stock ticker, 123


SingTel, 332 S!Town, 121–123, 126
Six Immutable Laws of Mobile Business: Subscriber acquisitions, 39
digital divide and, xvi Subscription fees, 33
expert insight, 178–188 Suica application, 89–90, 136
future is simplexity, 82,88, 129–130, Sweden, 3–6, 10, 24, 26
133–174 Sweepstakes, 13–14
law of ecosystem, 22–57, 122 Swiss Army devices, 55–56, 148
mobile-specific business models are Switzerland, 5–6
essential, 106–133, 146, 151–152 Symbian, 40
mobility empowers, 58–73
overview of, xv-xvi
simplexity, 129–153 Tabelog, 157
value of time zones, 91–105, 156 Taiwan, xvi, 20, 26
value over culture, 1–21 Takahashi, Makoto, 120
Smart phones, 75–76, 84, 146, 185 Tamagotchi, 121–122
Smell-o-phone, 67 Target marketing, 50
Social networking services (SNS): Teamwork, 37–38
with added services, 110–112 Technical barriers, 11
benefits of, 13, 32, 62, 176 Technical innovation, barriers to, xvii. See
casual gaming, 111, 116–117 also Innovation
convergence, 108–110, 119 Telecom Finland, 24
multiuser gaming, 121–123 Telephone calls, 13–14
music services, 119–121 Telstra Australia, 24
popularity of, 154–155 Text messages/messaging, 8, 23, 60, 62–63,
total ecosystem integration, 112 67, 71, 95, 98
user-created content and, 112, 115 Third generation (3G) technologies:
video services, 118–121 network development, 129
from Web to Mobile, 107–108 phones, 60
Softbank, 17, 39 subscriber statistics, xvi
Softbank Mobile, 112, 122, 124 types of, 81–82, 168, 180, 186
Software: wireless broadband services, 26
bar code reading, 64 Third World countries, 177
applications, 32 3D gaming applications, 121–122
navigation, 32, 95, 112 Ticketing services, 88–89
providers, 30–31 Ticketless check-in, 88
scheduling, 32 Tier 1, two-tiered pricing scheme, 20
Solitary confinement analogy, 58–59 Tier 2, two-tiered pricing scheme, 21
Sony, 141, 158 Time Division Multiple Access (TDMA)
Sony Ericcson, 183 networks, 25
South Korea, 3–4 Time zone:
Spain, 3, 5–6 charting, 97
Spectrum: defined, 94
allocation, 17 golden time, 95–102, 104–105, 128
licenses, 33–34 in-between time, 94–95, 97–102,
Square Enix, 155 104–105, 128, 157
SSL connection, 159 mobile TV, 99–101
Standardization, 43, 45, 47–48, 186 value, see Time zone value (Immutable
Start-up companies, 19 Law No. 4)
200 INDEX

Time zone value (Immutable Law No. 4): URLs, 36, 72


charting time, 97–98 Usage trends, 7, 72, 92–94, 104–105
charting time zone needs, 97 User-created content, 117–119, 126
content and service analysis, 99–102 User-driven economy, 175
expert insight, 102–105 User-friendly technology, 138–139, 156
stretching time and blending content, User-generated content (UGC), 98, 132
98–99 User interface technologies, 20, 49, 55–56,
types of time zones, 94–97, 156 153–154, 157–158, 160–161, 184
Time-sharing protocols, 25 Utatomo, 119–120
Timing, significance of, 46
T-Mobile, Web and Walk offering, 162 Value chain, 29–30
Toji, Keisuke, 167–173 Value over culture (Immutable Law 1):
Toshiba, 158, 160 background to, 1–2
Touch-based interfaces, 54 expert insight, 15–21
Toyota, 140 meta-myths, 4–15
Traffic, on CDMA technology, 25 Value system:
Transact: defined, 30
content and services development, ecosystem vs., 29–31
99–100, 125 players in, 30–32
Japanese usage trends, 12–13 scarce resources, 33
simplexity, 147 teamwork in, 37
Transaction-based services, 13–14 traditional wireless, 34
Transportation/travel services, 14, 94 Verizon, 18
TV: Video-sharing services, 14, 110,
applications, 69, 84, 96 114–115
guides, 143–144 Vietnam, 10–11
services, xvii, 96, 99–102, 143–145, Viewpad, 185
167–173 Virgin Mobile, 32
2.5G mobile phones, 41, 60, 71 Vision-impaired users, 82–83
Vodafone, 24, 35–36, 38–39
Übernode, 61, 69–70 Voice-based interfaces, 54
Uncertainty Avoidance Index (UAI), Voice calls, 20
cultural differences research, Voice quality, 25
9–10 VPN connection, 159
United Kingdom, xvi, 3, 5–6, 10, 24, 26, 29,
35–36 Walled garden concept, 53, 72
United States: Wallet phone technologies, 83–84,
GSM networks, 24 86–88
innovation in, 52–53 Walt Disney Internet Group, 53,
internet user data, 5–6 72–73
mobile content and services, 18 WAP (Wireless Application Protocol)
mobile device consumers, 3 technology, 24, 26–30, 37–38,
mobile phone penetration levels, 10 43–44, 122, 159, 163–164
mobile usage trends, 8 WBC (World Baseball Classic), 104
technological potential in, 46 W-CDMA (wideband CDMA), 26
wireless population, xvi Weather services, 12–14, 61, 95, 123
Unlimited use plans, 20–21 Web browsers. See Browsers
Urban markets, 4, 6 webOS (Palm), 56
INDEX 201

Web 2.0, 106–107, 124–126, 133, 146, Yahoo!:


151–152 BB!, 17
West Germany, 24. See also Germany content and services, xvii, 72–73, 118,
Widgets, 123–124, 126, 161–162, 175 123–124
WiFi technology, 81 searches, 12
“Willingness to pay” concept, 72 Yamada, Jun, 73–83
WiMax, 81 Yelp, 157
Wired networks, 61 Yoshino, Hiroshi, 83–90
Wireless connectivity, 32, 55 YouTube Japan, xvii, 110
Workplace, mobile data usage, 7, 92–94
World Wide Web, 175. See also Internet
W3C technology, 161–163
Zaltman Metaphor Elicitation Technique
Xavel, 92, 95–98 (ZMET), 11
xDSL technology, 15 ZTE, 19, 186

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