Conventional wisdom teaches that Japan’s mobile industry is at least 18 months in front of Europe (and years ahead of the US). That truism is no more, however, as Europe’s cellular carriers, handset makers, and wireless Internet content providers have sweated blood to catch up – and catch up they have indeed. Daniel Scuka is in Germany this fall where he will co-produce a series of seminars entitled “Mobile Kaizen in Japan” examining how Japan’s mobile industry maintains its lead through the continuous roll-out of improvements in all aspects of the wireless Internet.
Germany’s current mobile economy: Proof that Europe now equals Japan?
If you need proof, just walk into any cell-phone shop in, say, Frankfurt or Berlin. The new Java-based data services, the full-colour, full-tone clamshell handsets, integrated cameras, and the general buzz surrounding the latest and greatest content equals anything seen in downtown Tokyo – wellspring of the original mobile Internet boom.
Some of the brand names are even the same. In Germany, there’s i-mode on offer from carrier E-Plus, Sharp GX10 and GX20 handsets from Vodafone, and ring tones and Java games from Tokyo-based Index and G-Mode. Toss in a sushi shop and some multi-hued teens, and you’d be forgiven for thinking you were in central Shibuya.
Well, perhaps not quite. But Europe has pretty much closed the gap on Japan’s mobile lead. Handys here (like keitai in Japan) have become seriously fun and the industry has realised that people want simple services, enjoyable content, cool handsets, responsive networks, and usage-based billing, pretty much the same – Surprise! – as what mobile users in Japan want. Culture appears to be a minor factor in mobile success.
The marketing even feels similar. Gone are any TV spots or billboard copy that tout grey-suited business men making voice calls at boring airports. Now, gorgeous 20-something-year-olds lounge around fiddling with a cool clamshell handy from Vodafone or E-Plus or whoever – accompanied by an ultra contemporary soundtrack. As in Japan, where the coolest teen idols have long been recruited to push the latest in mobile trends, David Beckham has become a Vodafone icon for all Europe.
In Germany, local market heavyweight T-Mobile co-brands its phones and wireless web content with music stars, Bundesliga events, yoghurt, and MTV. Carriers in Germany have clearly taken a page or two out of NTT DoCoMo’s domestic marketing play book – and the results are showing up in the bottom line.
In August 2003, T-Mobile parent Deutsche Telekom reported a positive net income after almost continuous losses since 2000. T-Mobile contributed nicely to the windfall, reporting revenues of 10.9 billion Euro, an increase of 19 percent, and EBITDA of 3.3 billion Euro, an increase of 27 percent, for the first 6 months in 2003. Compared to the end of 2002, total subscribers at T-Mobile (including international customers) grew by 2.6 million to 56.6 million.
Mobile Kaizen: Japan still leads the global wireless industry
While it may be tempting to suppose that Japan’s mobile industry no longer has much to teach, such a conclusion would be short-sighted and premature. Indeed, the fundamental processes that gave rise to i-mode, Au, and J-Sky – the first successful mobile Internet services – remain in play in Japan; extracting business intelligence from that market continues to be a valuable exercise.
In Japan, the mobile Internet is animated by the existence of a carrier-centric market, fierce, retail-level competition, and a sophisticated electronics industry that puts a premium on miniaturization and multi-feature integration. (Ironically, Japan’s carriers also engage in behind-the-scenes cooperation. Engineers from J-Phone and NTT DoCoMo have maintained close contact for years for managing and improving their second-generation PDC cellular networks.)
The success of i-mode et al is at least partly based on the premise that the service provider is obligated to meet customer needs (on-giri – obligation – is a powerful theme in Japanese culture) and on continuous, incremental service improvement. This continuous improvement is driven by kaizen – another Japanese concept that first gained attention in the 1980s when Japan’s auto makers achieved global prominence with their high-quality cars (better than anything Detroit could produce).
As a result, even as 2003 has unfolded, and even as European carriers have rolled out cutting-edge handsets and creative new services (like multimedia messaging and MMS postcards), Japan’s mobile troika – NTT DoCoMo, KDDI, and J-Phone/Vodafone – continue to maintain the lead.
Just since June, DoCoMo’s newest 505i-series of second-generation handsets – featuring enhanced Java, mobile Flash display capability, enhanced onboard memory, removable memory sticks, a 1.3-megapixel camera, QVGA-resolution displays, finger-print-scanning authentication, bar-code scanners, and enhanced i-mode mail – have helped confirm Japan’s lead. There are also cool new form factors – Sony’s retro SO505i looks for all the world like a digicam circa 1999.
And the DoCoMo competitors haven’t been idle. In July, KDDI launched two new 3G handsets supporting movie mail; the one from Toshiba can capture full-screen-sized video clips using a dedicated onboard video processor from Kyocera. J-Phone/Vodafone’s June models featured 8-MB removable memory cards and 36,000-word Japanese-English dictionary.
Japan’s carriers follow carefully planned upgrade cycles where entirely new handset series are released once per year while incremental upgrades are fielded 4 to 6 months later (both conveniently timed to coincide with the winter and summer corporate bonus seasons). You can expect to see the 505iS upgrades from DoCoMo around December 2003.
The handset makers, like Sony, Mitsubishi, Matsushita, NEC, Sharp, Fujitsu, Toshiba, Hitachi, et al, bust their rears to meet the carriers’ launch cycles as well as their demands for more features and ever higher quality. In February 2003, a senior manager at Panasonic (Matsushita Communications) admitted his company had “missed the boat” in failing to launch camera-equipped phones on time; the firm missed its 25-percent-share target for 2002 and limped in at under 20.
And when not messing with new handsets, the carriers continuously launch enhanced data, voice, and marketing services based on the current fleet – all planned to ensure that packet-using subscribers don’t forget to log on or dial up.
Japan has also created a unique ecosystem of third-party content and application providers – all manoeuvring to reap profit by delivering digital entertainment and services to mobile users. While similar ecosystems are now in place in Europe and elsewhere, the Japanese mobile economy remains the first and in the lead for sheer number of players and continuing opportunities for new entrants.
These players, too, experience continual pressure to innovate. As soon as a carrier decides to adopt a new technology (say, Java applications that can access onboard cameras or infrared ports) the content and application players scramble to create revenue-generating services (like Java programs that use the phone camera to scan and react to a barcode and upload data to a point-of-sale terminal). In June, Tokyo-based Java developer Dwango said it would launch 3D, surround-sound ring-tone services for advanced mobile handsets. In August, mobile software developer HI Corp. said its 3D graphics rendering engine – now used by all three Japanese carriers – had been adopted by leading US phone maker Motorola.
In the regulated, pre-wireless Internet era, Japan’s carriers experienced little pressure to innovate; there was no need for kaizen. Now, pressure to improve comes not only from anxious subscribers always liable to churn to a competitor, but also from the third-party ecosystem and from the handset makers (who pressure the carriers to adopt models that can be sold overseas, too). Pressure also comes from the carriers’ own internal managers, many of whom are engineers (and who push big-ticket, engineering-centric programs like W-CDMA) and some of whom are open-platform-mantra Net gurus (who push open-standard solutions like HTML). Kaizen thrives in such a creatively tense environment.
Just as with the auto makers a generation ago, kaizen is pushed down from the top while the market pushes up from below. It’s a tough mobile world, and Japanese industry players – using a new “mobile kaizen” – survive the best. Japan is still worth watching, and will be so long as continuous improvement animates that country’s wireless Internet.
— Daniel Scuka