It comes at a critical time, when Japan’s share of global exports is dropping. Elite manufacturers like Sony and Honda are moving plants overseas, leaving the domestic economy increasingly reliant on doddering farms, food services and construction companies. After more than a decade of recession, Japan was all but left out of the information-technology revolution. Now along comes DoCoMo, leading the world in mobile-Internet technology and poised to go global in what some see as the industry of the future. “What’s happening to the elite exporters is scary to Japan. They’re losing share in industries of the past, but also industries of the future,” says Richard Katz, senior editor of the Oriental Economist. “From the Japanese point of view, to have DoCoMo is a welcome development, and would seem like a return to the glory days when their exports did dominate the world.”
DoCoMo is an unlikely icon, since it is a subsidiary of one of Japan’s most disliked companies, Nippon Telephone and Telegraph. After the war, Tokyo tried to create four or five competitors in each major industry. Only in the telephone business would a monopoly became more powerful than the agency that was supposed to regulate it. NTT became synonymous with high fixed prices and bad service. Its reputation changed little after Japan finally opened up the industry in the early 1990s. In 1992 NTT put a few key executives in charge of DoCoMo, its entry in the new wireless market, and stepped aside. “NTT allowed DoCoMo to be independent, which was highly unusual,” says Mariko Sakakibara, a co-author of “Can Japan Compete?” “NTT underestimated the potential of wireless communication, and knew little about cell phones. Even if they wanted to intervene, they didn’t know how.”
DoCoMo was thus an accidental success, an entrepreneurial orphan child of the phone monopoly. Its leaders were not mavericks like the legendary entrepreneurs who bucked the Japanese system and risked bankruptcy to create Sony and Honda. DoCoMo brass like president Keiji Tachikawa came from NTT and risk nothing of their own, yet they have had the freedom and cleverness to hire talented recruits from publishing and other fields outside NTT. These recruits would supply the creative brains that seem to have separated DoCoMo from the pack of less promising Japanese technology ventures, and created its biggest hit.
Launched in 1999, i-mode was the world’s first Internet phone, with a mini screen to play games, cruise the Net or send e-mail. An instant sensation among teens, it is still signing up 32,500 customers a day. “I-mode is a real device, a real innovation that made Internet communication over the cell phone possible,” says Sakakibara. Compared to Honda and Sony, which perfected the production of existing inventions like the car and the radio, she adds, “What DoCoMo has done might be even more significant.”
DoCoMo’s ambition in Japan is to rule its “thumb culture,” to make a mobile phone that will replace all the beepers, pagers, and other hand-held gizmos that Japanese control and play with their thumbs. Yet DoCoMo created much more than a gadget. It invented a new wireless dialect based on the programming language of the internet, set rigid specs for handsets to work with this i-mode dialect and developed the first business model in the world that makes mobile-Internet service profitable. “DoCoMo is the only company on the planet that has got mobile services right,” says Jon Bibo, an analyst at Cap Gemini Ernst & Young in London. “Everyone else may have excellent strategic plans and vision but it is only DoCoMo that is actually delivering.”
DoCoMo’s broad innovations are both its strength and its weakness as it expands abroad. In Japan, DoCoMo features only “official” i-mode Web sites on its screen menu, controlling both revenue and content from the top down. Government regulators and rivals accuse of DoCoMo of being a monopoly in the making, and those complaints are likely to grow louder as DoCoMo moves overseas. “I don’t think a closed club would work here,” says Leonard Waverman, a telecom expert at London Business School. “Europeans who are used to openness on the Internet would not be prepared to tolerate it.” DoCoMo will also collide in Europe with a dozen rival mobile-Internet companies, many also tied to former state monopolies, all with their own plans for wireless standards, handsets and business models. That’s a tall order for NTT, which didn’t even have an international division until recently. “NTT is terribly inexperienced,” says Louis Turner, president of the Asia Pacific Technology Network in London. “As to whether they’ll take over the world, I tend to be skeptical.”
DoCoMo wants its technology to become the global standard, but moves more discreetly abroad than at home. In fact it has been criticized in Japan for failing to press its technological advantage more aggressively overseas. In the last year DoCoMo spent nearly $15 billion buying stakes–but only minority stakes–in blue-chip partners around the world, from AT&T Wireless in the United States to KPN Wireless in Holland and KG Telecom of Taiwan. The Dusseldorf advance team is recrafting DoCoMo’s software and Internet connections to work in Europe.
DoCoMo’s Japanese allies are rushing all over the continent to prepare the launch as well. Access of Tokyo is developing i-mode browsers and software for Europe. Cybird is signing up European clients for its services, which make games and other internet content work on i-mode. In Taiwan, NEC has production lines ready for i-mode handsets for Europe, waiting to crank them up when it gets the call. “We want to make our platform as open as possible. But unlike the voice-only services, i-mode needs a total coordination from handsets to network and to content. You cannot separate them from each other easily,” says Kiyoyuki Tsujimura, DoCoMo’s managing director for global business. “We have such a successful business model in Japan. I hope our partners take advantage of it, but it’s completely up to them.”
DoCoMo’s advance in Europe has been slowed dramatically by the recent crash of telecom stocks, and the failure of high-profile test runs of “third generation” mobile-Internet phones, including its own. Yet the crash has done little to affect DoCoMo’s competitive position, since weak stocks and heavy debts plague not only its European allies, but also its rivals. “It’s an incredibly hot race in Europe,” says Fellger, the Berlin consultant. “The first to come out with mobile multimedia has the chance to build a huge customer base.”
The biggest rival is Vodafone of Britain, which has launched a global buying spree of its own, including a foray onto DoCoMo turf in Japan. As the first to market, DoCoMo still enjoys a clear advantage in the race to send Internet data over wireless phones. “Vodafone is really just a voice company,” says Simon Buckingham of Mobile Lifestreams, a British consultant. “If you put Vodafone against DoCoMo, it’s the DoCoMo model that will win in five years time.”
Even DoCoMo failed to foresee how i-mode service would take off in Japan: not as a business tool but as a vital fashion statement of the thumb culture. About 50 percent of its customers are in their teens and 20s, and they accessorize their phones with custom designs, straps and so on. Having expected strong demand for stock-market reports, traffic information and online banking, DoCoMo has found instead that its big sellers are e-mail and silly stuff like cartoon characters, personalized screen savers, games and fortunetelling services. Widely seen as a sign of growing alienation among youths, the thumb culture is nowhere as intense as in Japan. And that raises broad questions about the demand–and the welcome–for i-mode around the world.
Official i-mode Web sites know they will have to rethink their offerings for overseas markets. Japanese consumers are far more likely than Europeans or Americans to commute long distance in crowded trains, which gives them plenty of time and just enough space to click around on an i-mode phone, amusing themselves with fortunetellers and games. The pastel colors and cutesy cartoons, designed to appeal to Japanese teens, will have to go. Bandai Networks sees at least one surefire export hit in its stable of games: Fall in Love by Mail, a role-playing game that challenges players to woo a virtual member of the opposite sex by e-mail. “I know many Europeans and Americans would say, ‘Why don’t you go out and try to get a real love if you have the time?’ " admits Naoko Kino, Bandai Networks manager of overseas marketing. “But I believe the attraction [of the game] is universal.”
DoCoMo’s foreign partners aren’t sure what will work outside Japan, and are treating their plans almost as state secrets. “Everything is still on the move,” says Carla van Lomwel, a spokeswoman for KPN, which is struggling under a heavy debt burden. “We are playing on 10 or 15 different fields at once. But the purpose is quite clear: DoCoMo wants to find a place in Europe for i-mode.” In the United States, AOL and Palm refuse even to comment on new alliances with DoCoMo. And AT&T Wireless, in which DoCoMo recently acquired a 16 percent stake for $9.8 billion, is circumspect. “The i-mode service as it exists today in Japan is not going to be what our companies are going to deliver here in the U.S.,” says AT&T Wireless spokesman Richard Blasi, hinting only that the focus will be more on businessmen than on teens.
Japan’s first big global companies were also greeted with enormous skepticism and doubt when they ventured abroad. Now some observers believe DoCoMo may be poised to exploit a previously unseen and unmet demand, much the way Honda discovered a surprising American demand for compact cars in the 1970s. John Nathan, author of a new book profiling Sony, says the Japanese giant “emerged almost organically” from the demand of information-starved postwar Japan for wireless transistor radios. He sees a clear parallel in DoCoMo and the wireless Internet. “What DoCoMo sensed was the desire of Japanese to avoid face-to-face confrontation, by losing themselves in e-mail and games,” says Nathan. “It horrifies me to say it, but I think they very well may be poised to export this revolution abroad.” For better or worse, i-mode may soon be a big name to a teenager near you.
