People Want to Use the Internet Anywhere, Anytime'

Japan's once-mighty business community has taken it on the chin during the last decade. Management models once admired and copied have been relegated to the trash bin. The Internet revolution that has transformed the U.S. has so far left out Japan. The major technological advances of the last decade have come not from Tokyo, but from Silicon Valley. The days when Americans fretted that Japan was going to take over the world through its economic might now seem like ancient history. Shining amidst all this gloom and doom is the one bright corporate star with a funny name: DoCoMo. The acronym, a stretch, stands for Do Communication Over the Mobile Network. Originally a division of NTT, the telephone monopoly, DoCoMo is now worth more than its corporate parent, and it single-handedly put Japan on the map in the world of mobile phone technology. DoCoMo has gone to great pains to present itself as a modern company for the 21st century with its franchise, the world's first Web-connected mobile phone service, i-mode. The service allows customers to use their phones to exchange e- mails, do their banking, make airline reservations and use other Internet services.}] Its offices are located in a sleek new 44-story office building in downtown Tokyo, where a phalanx of seven young women, all dressed in identical pink, rise in unison from behind desks that look like spaceship command posts to welcome visitors in the vast, high-ceilinged reception area. It was here that Time Tokyo Bureau Chief Tim Larimer talked to DoCoMo's CEO, 61-year-old Keiji Tachikawa. Here are the edited excerpts: TIME: What's the secret to DoCoMo's success?Tachikawa: We were founded only eight years ago, and had less than one million customers. Then Japanese consumers came to understand that mobile phones were very useful. Since 1994, the number of customers has doubled every year. Now we have more than 60 million customers. And demand is still strong. TIME: Didn't demands from the U.S. that Japan deregulate its phone industry have a lot to do with an increase in competition and declining connection rates that spurred the growth of the industry?Tachikawa: American people misunderstand Japan. The mobile communication industry in Japan, by 1998, was open to everybody. It was not closed as American people thought. TIME: But the start of deregulation happened in the early 1990s, so wasn't that really what created a competitive environment?Tachikawa: No. In 1994 there were some newcomers; there were six groups competing with each other. We lost market share. In 1996, we had only 48% of the market. But my predecessor took strong measures to recover market share -- which now stands at 58%. TIME: How much did DoCoMo's affiliation with NTT help you gain that market share?Tachikawa: The Japan mobile phone market has been open, and there has been fair competition. There are now three groups competing against each other: NTT DoCoMo, J-Phone and KDDI. But the U.S. is still applying pressure, and we don't understand why. TIME: What is the relationship between DoCoMo and the telephone handset manufacturers?Tachikawa: The manufacturers are competing against each other to see who can develop good products. At the same time they are trying to reach good economies of scale. TIME: How does DoCoMo work with manufacturers in terms of research and development?Tachikawa: We have our own research and development capability, with more than 700 engineers. They are developing the technology and functions to be provided to our customers. TIME: Is i-mode a triumph of technology or marketing?Tachikawa: Both. We introduced a new technology, the packet switching system, which nobody else had done. The technology existed -- and people were using it in wired networks -- but we were the first to use it with mobile technology. So customers can enjoy Internet access anytime. Our product helps people feel connected all the time. TIME: Why was that so important in winning over Japanese consumers?Tachikawa: People didn't want to spend time getting connected. With i-mode you don't need to wait; you just hit a key two or three times and you are on the Web. Using a PC at home takes time and it is slow. TIME: But the technology doesn't seem that revolutionary. It seems like the marketing behind i-mode -- the way customers are billed, all the content that is offered -- is the real key to its success. Do you think so?Tachikawa: People criticize us over the fact that a small display screen can only provide a small amount of information. But when you are on the move, do you really need or want so much information? People only want enough information to use while they are waiting, before going onto something else. You can fit about 200 letters or characters on a screen, and we think that's enough. The marketing of the product has helped. TIME: NTT doesn't have a reputation for innovation and creativity. How did DoCoMo manage to break away from a traditional corporate culture and create something like i-mode?Tachikawa: We hired people from outside [the company], plus a few young people from within. It was a good team. In the wired world, progress is very slow. But in the Internet and mobile world, a new idea appears every day and we need to be flexible. TIME: Was it hard to get people to sign onto DoCoMo in the beginning? I mean, nobody knew that it would be so successful.Tachikawa: There was no hope at first. Nobody could see the future; nobody dreamed it would be where it is today. At the beginning we hired about 50 people a year. Now we hire 500 to 600 people each year. If we were a college, you could say we have a lot of freshmen. Whereas the average age of staff at NTT is 45, the average age at DoCoMo is 35. TIME: Why is it so important to have young people?Tachikawa: Internet-related services should be targeted to young people, so we need young people to figure out what we should be doing. TIME: What's next for DoCoMo?Tachikawa: We want to promote the idea of wideband CDMA [short for code-division multiple access, a digital cellular technology], to help us with our goal of compatibility among different countries. That would establish our dream: that you can have one terminal that can be used throughout the world. Customers want that. TIME: Can you be as successful globally as you have been in Japan? After all, the markets and tastes are very different.Tachikawa: We need to perform everywhere. Our strategy is not to provide everything everywhere, but we have experience in Japan that we can share with others. TIME: What is DoCoMo getting out of its alliances overseas? It seems like DoCoMo is investing money and offering technology, but not getting much back?Tachikawa: Sometimes you don't need money in return, particularly in a good partnership. In the case of Hutchison [in Hong Kong], they need our money. But DoCoMo will get its return, through capital gains, dividends, royalties... TIME: Isn't the deal really about helping DoCoMo enter the huge China market?Tachikawa: Yes, that too. TIME: Do you use i-mode?Tachikawa: Yes, of course. I can watch the price of NTT DoCoMo stock any time of the day. TIME: Presumably you wouldn't need i-mode to do that! What else do you use it for?Tachikawa: E-mail. TIME: Really? I find it difficult because you can't write very long messages.Tachikawa: It's good for business. I can send a message that says O.K. or No. And I can receive e-mails anytime, anywhere. TIME: A government advisory group has announced plans to further deregulate telecommunications, by introducing a new regulatory body that is something like the FCC [Federal Communications Commission] in the U.S., and also by splitting up NTT. Is this a good idea?Tachikawa: We have a long history in Japan of modernizing our telecommunications industry. Since the 1980s we have tried various things. Key among them was the privatization of NTT. This advisory group has now asked the Japanese government to separate the policy-making and regulatory activities of the Ministry of Post and Telecommunications, but it hasn't occurred yet. TIME: Why not?Tachikawa: We are slow, but we are clever. We don't want the same revolution that occurred in the U.S. Look at what happened there. In the 1980s they split up companies like AT&T and then some time later the companies joined again. So why is the U.S. trying to break up NTT? TIME: Wouldn't DoCoMo be better off separated from NTT?Tachikawa: Why should we split up when you consider the U.S. experience? Our services need to be integrated. Mobile technology is progressing rapidly, and wired services are still growing, but slowly. In the next decade we don't know which will be growing faster. We need to think about the direction we should be heading. People want to use the Internet at home, in their car, while they are walking...they don't care if it is wired or wireless. They just want the freedom to use it wherever they are.