THE SIX IMMUTABLE LAWS OF MOBILE BUSINESS THE SIX IMMUTABLE LAWS OF MOBILE BUSINESS PHILIP SUGAI MARCO KOEDER LUDOVICO CIFERRI Copyright © 2010 by John Wiley & Sons, Inc. All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4470, or on the web at www.copyright.com. 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Neither the publisher nor author shall be liable for any loss of profi t or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic formats. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Sugai, Philip. The six immutable laws of mobile business / Philip Sugai, Marco Koeder, Ludovico Ciferri. p. cm. Includes bibliographical references and index. ISBN 978-0-471-74146-6 (cloth) 1. Cellular telephone services industry—Japan. 2. Cellular telephones—Social aspects—Japan. 3. Mobile communication systems—Economic aspects. 4. Cellular telephone services industry— Management. 5. New products. I. Koeder, Marco. II. Ciferri, Ludovico. III. Title. HE9715.J3S84 2009 384.5(cid:1)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-Specifi c 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 signifi cant 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 fi rst 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 h omo 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 fi rst 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 fi eld 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 fi rst and stifl e 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 fl ourishing “ ecosystem ” , as the authors call it. In contrast to their peers overseas, Japanese carriers charged only small fees from professional content providers on the offi cial 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 “t ime 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 fi eld. 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 confi dence 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 fi nd 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 fi nd 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 fi nished 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 confi dent 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 diffi culty 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, w ww.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 fi rst 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 fi nal 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 fi ne - tuning the work, and to whom we are equally indebted: Lawrence Cosh - Ishii, Christopher Billich, Kei Shimada, Arjen van xiii