On the face of it, the value proposition of cellphones is quite straight forward: talk while you move. For the mobility and convenience, one is prepared to pay more and live with voice quality which would be downright unacceptable on a fixed line phone. Even this does not explain the tens of billions of dollars plonked down by telecom companies (especially in Europe) for the privilege of building next-generation (3G) wireless networks. All of them have hopes of doing to their markets what NTT Docomo has done in Japan with i-mode.
Introduced in February 1999, i-mode has over 25 million subscribers, one-fifth Japan’s population. It is still growing by about 1 million a month. i-mode is the world’s only successful wireless Internet service – and the Internet isn’t even mentioned in the ads for the service! Writes Frank Rose in Wired (September 2001):
Like most consumer success stories, i-mode is geared to the people who use it. Handsets are manufactured by name-brand consumer-electronics outfits like Sony and Panasonic, but DoCoMo subsidizes the phones heavily to keep the price low: A model that might ordinarily cost $600 retails for less than $350. Because DoCoMo’s wireless network is packet-switched, users are charged only for the number of data packets they send back and forth, not for the amount of time they’re connected, as on most networks outside Japan.
DoCoMo does not itself supply any of the services available on i-mode. But it’s not a dumb pipe, because in addition to the technological infrastructure, it provides the billing system that enables its partners to make money, and the marketing to sell the service to consumers.
At the heart of all this is a paradox: i-mode depends on outside providers for everything from handsets to content, yet it’s managed so carefully that nothing is left to chance.
i-mode’s success comes from a combination of many factors: technology selection (use of an HTML variation for the content), its “win-win” business model allowing big companies as well as small entrepreneurs to thrive in the services business, the billing relationship with its customers, marketing (focus is on the value provided, and not the underlying technology).
i-mode has created the virtuous cycle that Microsoft’s Xbox hopes to create: the user base now drives new content providers which drives more users. In all this, NTT Docomo has placed itself at the centre of the value chain. The handset operators make their money, but don’t get to build a brand; the content providers can get “official status” and better placement on the screens in return for a 9% fee; and consumers get almost infinite variety due to the use of open standards like HTML and Java.
Concludes Rose, “i-mode is a complex ecosystem – a self-sustaining world in which hundreds of companies feed off one another for their mutual benefit. Like water, sunlight, and soil, the elements that make up this world are everywhere. The trick, as anyone who’s ever played God can tell you, is getting the mix right.”
Getting the mix right is what we need to if we are to get a 10x increase in technology utilisation in enterprises in emerging markets like India.