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i-mode Strategy
Takeshi Natsuno
Managing Director, i-mode Strategy
NTT DoCoMo, Inc.
Japan

Translated by Ruth South McCreery


The Word Works, Ltd.
Yokohama, Japan
i-mode
Strategy
i-mode Strategy
Takeshi Natsuno
Managing Director, i-mode Strategy
NTT DoCoMo, Inc.
Japan

Translated by Ruth South McCreery


The Word Works, Ltd.
Yokohama, Japan
Translation from the Japanese language edition published by Nikkei BP Planning, Inc.
i-mode Strategy by Takeshi Natsuno, Copyright  2000 by Takeshi Natsuno, originally
published in Japan by Nikkei BP Planning, Inc.
Copyright  2003 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester,
West Sussex PO19 8SQ, England
Telephone (+44) 1243 779777

Email (for orders and customer service enquiries): [email protected]


Visit our Home Page on www.wileyeurope.com or www.wiley.com
All Rights Reserved. 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 under the terms of the Copyright, Designs and
Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency
Ltd, 90 Tottenham Court Road, London W1T 4LP, UK, without the permission in writing of
the Publisher. Requests to the Publisher should be addressed to the Permissions Department,
John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ,
England, or emailed to [email protected], or faxed to (+44) 1243 770571.
This publication is designed to provide accurate and authoritative information in regard to the
subject matter covered. It is sold on the understanding that the Publisher is not engaged in
rendering professional services. If professional advice or other expert assistance is required,
the services of a competent professional should be sought.

Other Wiley Editorial Offices


John Wiley & Sons Inc., 111 River Street, Hoboken, NJ 07030, USA
Jossey-Bass, 989 Market Street, San Francisco, CA 94103-1741, USA
Wiley-VCH Verlag GmbH, Boschstr. 12, D-69469 Weinheim, Germany
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Wiley also publishes its books in a variety of electronic formats. Some content that appears
in print may not be available in electronic books.

British Library Cataloguing in Publication Data


A catalogue record for this book is available from the British Library
ISBN 0470 85101 5
Typeset in 11/13pt Times by Laserwords Private Limited, Chennai, India
Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire
This book is printed on acid-free paper responsibly manufactured from sustainable forestry
in which at least two trees are planted for each one used for paper production.
About the Author

Takeshi Natsuno
Managing Director, i-mode Strategy
NTT DoCoMo, Inc.
Takeshi Natsuno is directly responsible for all of strategy i-mode, the
world’s largest wireless Internet service, with more than 34 million sub-
scribers. After he graduated from Waseda University, he first joined a
leading company in the Japanese energy industry. After gaining exten-
sive experience in real estate development projects there, he entered the
Wharton School at the University of Pennsylvania and earned an MBA.
Before he joined NTT DoCoMo in 1997 to launch the widely i-mode ser-
vice, he was an executive vice president at an Internet start-up company
from 1996 to 1997. He is well known as the founder of i-mode and was
selected as one of the 25 most influential e-business leaders worldwide by
Business Week in 2001. He has also written i-mode á la mode, a sequel
to this volume.
Foreword to the Japanese Edition

At two in the afternoon, Wednesday, August 1, 1997, in the President’s


office on the tenth floor of the NTT DoCoMo headquarters in Tora-
nomon, Tokyo, the then President, Koji Ohboshi, who is now DoCoMo’s
chairman, said to me ‘We’re going to start up a mobile multimedia busi-
ness based on cell phones!’ and handed me a fat report from McKinsey
& Company.
My gut reaction was ‘This sounds like a cool business. . . . we have a
good chance of success,’ but then I realized that the project team had
only one member – me. ‘What about some staff?’ I asked, and Ohboshi
replied, ‘Bring together whomever you like.’ The rest is i-mode history.
As is not unusual for salaried employees in Japanese corporations, my
network of connections outside my own company was limited. How on
earth was I to put together a team? I called my old friend and busi-
ness mentor Masafumi Hashimoto, President of a printing company in
Kumamoto, and asked him to give me some leads for acquiring the team
members I would need to help me.
That is how Mari Matsunaga joined the team. Through her, we also
acquired Takeshi Natsuno, the author of this volume. Masaki Kawabata
joined us to handle the server side of the business.
It was the characteristics and capabilities of the individual team mem-
bers combined with our shared conviction that we were bound to succeed
that made a success of the i-mode project. To those who want to learn
more about the project’s early days, I recommend Mari Matsunaga’s book,
The i-mode Affair (i-modo jiken, Kadokawa Shoten).
viii i-mode Strategy

As the number of i-mode subscribers started climbing, the media, even


overseas, began to show interest. One day, a television crew from the
United States came to do a story on us. The reporter asked, ‘Are you
interested in history?’ When I said yes, he asked, ‘Then what historical
event do you think i-mode corresponds to?’ That was a new way of
looking at it. I remember feeling impressed at how different his approach
was from the Japanese reporters.
The reply that instantly came to mind was Columbus’s discovery of
America late in the fifteenth century. Many Europeans agreed with Colum-
bus that the world was round, but he was the one who dared to set out to
prove it – and discovered more than he had bargained for.
If the European continent is the personal-computer-based, wired Internet
market of today, then i-mode is America, the new world. People had talked
about the possibility of Internet access from cellular phones, and some had
tried it, but no one had seriously set out to do it – until, that is, our i-mode
development team embarked on its voyage of discovery.
Today, five hundred years after that new world was discovered, the
Americas have surpassed Europe as a market. i-mode has a similar poten-
tial. It will be a market to rank with the wired Internet market. That is
why the eyes of the world are on i-mode.
Cellular phones, browsers, a packet-switching network, servers, and
content – they make up i-mode. But the technologies (and the content)
were already out there. It took no huge invention to make i-mode possible.
Many, learning about the process, will think they could have done it too:
it is easy when you know how. Why am I reminded of Columbus’s egg?
Before launching i-mode, we spent a long, long time hashing it out
thoroughly. Where is our market? What is the product concept? What
technologies will make it a reality? What about the fee structure? Content?
Marketing? How will we drive continuous growth? Those discussions led
to the success we see today.
Mari Matsunaga’s book is, as it was, a log of the voyage of discovery.
Takeshi Natsuno’s book describes the seamanship that made it possible.
But this book covers more than the basics of how to navigate. It is a
business strategy book that tells the reader how to conquer the incredibly
rich new world of mobile multimedia opening out before us.
The world’s cellular phone market will change into a mobile multime-
dia market. Who will be the winners in that market is yet to be decided.
Cellular phones, components, network equipment, servers, software, con-
tent, and telecommunications providers – enormous opportunities await
Foreword to the Japanese Edition ix

all those involved in mobile multimedia. I hope that you will read this
book, learn from it, and go on to toast your own success in this new world.
So now, let it begin – the story of the start of the i-mode develop-
ment saga.
October 2000
Keiichi Enoki
NTT DoCoMo Director, Gateway Business
Foreword to the English-language
Edition

Two years have already passed since I finished writing i-mode Strategy in
Japanese, describing the use of the service that has made specially format-
ted Internet sites and other online content available via NTT DoCoMo’s
mobile phones. Since then, the number of i-mode users has increased
in line with one of my personal theories, which I call the IT Business
Principle – namely, that in the case of information-technology business,
numbers tend to increase far beyond original expectations. When the book
was published, at the end of 2000, there were about 18 million i-mode
users in Japan; as of August 2002 the figure had surged to over 34 million.
This amounts to more than 80% of DoCoMo’s subscribers, and it is more
than a quarter of Japan’s entire population. (For details of the increase,
see Chapter 1.)
For DoCoMo, i-mode has been a major new source of earnings. In the
business year ending March 2002, the company’s i-mode data transmis-
sion (packet transmission) revenues topped ¥700 billion. This consisted
of a tremendous accumulation of tiny amounts – ¥0.3 per packet – and
accounted for more than 10% of total revenues for fiscal 2001.
Along with the sharp increases in the number of users and volume
of revenues, the past two years have seen a dramatic improvement in
the content of i-mode services. In January 2001, just after this book was
published in Japan, DoCoMo launched its i-αppli service for downloading
software applications, allowing users to install additional programs of their
own choice on their mobile phones just as they can do on their personal
xii i-mode Strategy

computers. As of August 2002 there were some 15 million i-αppli users;


in other words, close to half of all i-mode subscribers were using this addi-
tional software. The programs are compiled using the Java programming
language developed by Sun Microsystems; the 15 million i-αppli users
can be seen as constituting the largest Java community in the world.
Since the second half of 2001, DoCoMo has been working to extend
the range of ‘scenes’ where mobile phones can be used. The range of
additional uses that are now turning into reality include buying drinks
from vending machines, making purchases at convenience stores, and
withdrawing cash from bank ATMs. We are approaching the time when
mobile phones will become ‘electronic wallets’, as I advocated from the
beginning.
The new high-speed data transmission service FOMA (Freedom Of
Mobile multimedia Access), launched in May 2001, is making i-mode
even more attractive by allowing users to send and receive large volumes
of data more quickly and easily than before. This makes it possible, for
example, to download more complicated software applications. And with
‘i-motion’ users can download and watch video clips. I see this as a field
with great potential for further development of i-mode services.
Another change over the past two years has been the internationalization
of i-mode. DoCoMo has entered into alliances with overseas telecommu-
nication carriers that recognize the merit of the i-mode business model,
including KPN Mobile (Netherlands) and AT&T Wireless (United States),
and i-mode gradually is becoming available in other countries. In my
own work, I am constantly traveling to other Asian countries, Europe,
and America to promote the further spread of i-mode services around
the world, as well as striving for the further improvement of the services
available in Japan.
In this book I offer an extensive introduction both to the basic i-mode
concept, which is grounded in the theory of complex systems, and to the
actual operation of i-mode services. I hope that it will both contribute to
an understanding of i-mode and offer hints for readers in developing their
own IT businesses.
Takeshi Natsuno
August 2002
Many of the product and company names mentioned in this book are
trademarks or registered trademarks. The symbols  and  have,
however, been omitted in the text.
Contents

About the Author v

Foreword to the Japanese Edition vii

Foreword to the English-language Edition xi

Color Plates xxi

1 Success 1
1.1 IT Businesses Grow far More Than Expected or do not
Grow at All 1
1.1.1 The Pace Outstripped Our Expectations 1
1.1.1.1 One Million in 20 Days: 50,000 New
Subscribers a Day 2
1.1.1.2 One-Third of All Internet Users 3
1.2 i-mode: Born with a Sense of Crisis 4
1.2.1 A Multidisciplinary Team 4
1.2.2 Towards the Second S-Curve 5
1.2.2.1 From Volume to Value 6
1.3 Evolution of a Text-Based e-Mail Culture 7
1.3.1 From One-Way to Interactive 7
1.4 Beyond Talk 9
1.4.1 Content-Packed: The Virtuous Cycle 9
1.4.2 Active Users: 95% 10
1.4.3 i-mode in Mind When They Sign Up 11
xvi i-mode Strategy

1.4.4 Information Close to Home Works 13


1.4.5 Average Monthly Usage Fee is over ¥2000 15
1.4.5.1 Increase in DoCoMo’s Operating Revenues 15
1.4.5.2 Internet Services That Need
a Mobile Phone 16
1.4.5.3 Preventing Churning 18
1.4.6 Market Share Bounces Back 18
1.5 New Services Emerge 19
1.6 A Business Model the Wired Internet Cannot Support 21
1.6.1 Birth of a ¥30 Billion Annual Market
for Fee-Based Services 22
1.6.2 Customer Retention Programs in Use 23
1.6.3 Stimulating Replacement Demand for Mobile Phones 24
1.6.3.1 Lightness Ceased to be the Decisive Feature 26
1.6.4 Uniquely Successful: Service Providers
in Other Countries Not Doing Well 27
1.7 All Eyes on DoCoMo 28

2 Concepts 31
2.1 Why Has Our Success in the IT Business Been
so Overwhelming? 31
2.1.1 It is no Longer a Telecom Age 31
2.2 Differences in Platform are Meaningless 33
2.2.1 Customer Participation Boosts the Attractiveness
of Services 34
2.2.1.1 Customers and Service Providers are in
the Same Team – That is Internet Thinking 35
2.2.2 Alliances Create New Markets 36
2.2.3 Opportunities for Existing Businesses 37
2.3 Why is the Win so Overwhelming? 38
2.4 Life Today: Complex Systems 39
2.4.1 Self-Organization in Geese 39
2.4.2 Evaluating a Service in Terms
of the Service as a Whole 41
2.4.3 One Technology Cannot Lead a New Service 42
2.4.4 DoCoMo’s Role is to Coordinate
the System as a Whole 43
Contents xvii

3 Practice 45
3.1 Most People are Conservative; They Reject
What Seems too New 45
3.1.1 There Will be a ‘Wallet PC’ Someday 45
3.1.1.1 Add-Ons Stimulated the Appetite to Develop 46
3.1.1.2 One Industry Alone Could not do It 47
3.1.2 How to Kick-Start the Process? 48
3.1.2.1 Language Selection: A Keystroke 50
3.1.2.2 Our De Facto Standard Technology
Lures Content 51
3.1.2.3 A Lesson from a US Study 51
3.1.2.4 Kindergarten English? or French? 52
3.1.2.5 Thousands of Ringtones in No Time 53
3.1.2.6 Unusual Phones do not Sell 55
3.1.2.7 It’s a Mobile Phone, Stupid 56
3.1.2.8 Using Existing Web Servers 56
3.1.2.9 Minimizing the Need to Change Systems 57
3.1.3 A Business Concept That Attracts Partners in Droves 58
3.2 DoCoMo’s Role: Two Points Only 59
3.3 Sharing the Revenues Matters 61
3.4 Keep Service Providers Motivated 62
3.4.1 Four Conditions for Attractive Content 63
3.4.2 Nationwide Meetings Help Develop
an Eye for Content 64
3.5 What is Internet-Style Marketing? 65
3.5.1 The Concept Behind the Commercial with Hirosue 65
3.5.2 Who is the Lead Goose? 66
3.6 Finding i-mode Champions 67

4 Alliances 69
4.1 Win–Win Relationships 69
4.1.1 Sharing the Profits with Partners Who Share the Risk 69
4.2 Different Industries, Different Types of Alliances 70
4.2.1 Technology Alliances for the Promotion
of Mobile Phones 71
4.2.1.1 Music and Color Displays 71
4.2.1.2 Openness Enables Personalized Phones 73
4.2.1.3 Java: Continuing Use of De Facto Standards 74
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