Posts Tagged ‘Galapagos’
William Gibson is known mainly for science fiction work, but these days he is more often referenced as the man who wrote the line “The future is here, it’s just not evenly distributed”. When it comes to mobile marketing, the future clearly is here in Japan. The future is also found in Korea, but unlike Japan’s mobile market, it has two levels to its mobile business; the first is very advanced and linked to Korea alone; the second is global, with Samsung and LG being players on the world stage; the local business is much more futuristic than the global business.
In Japan, everything the “outside world” does on a PC, is done on a smart phone - and more. The list of attributes, functions and services on Japanese handsets is impressive and includes auctions, blogging, compasses, conference calls, contactless payment for soft drinks and subway fares, e-Books, e-commerce, games, GPS, manga downloads, navigation systems, iPTV, QR code readers, phones that can be used as projectors, search, social networking, solar charged phones, voice activation, waterproof telephones, etc..
Like the original Galapagos Islands, Japan’s mobile phone industry has evolved under a unique set of conditions, including:
- Strong telecommunication infrastructure - 3G (a rate at which data can be transmitted) was introduced in Japan in 2001 and did not reach the West until 2003 or 2004.) Japan is now running at 3.5G speeds and moving to 3.9G in 2010. North Asia is generally seen to be 3 years ahead of the rest of the world in terms of mobile development.
- Hyper-competitive handset manufacturers - Japan is home to about a dozen top electronics companies who compete vigorously in the technology arena and particularly with handsets. Each year this group produces over 100 models of cell phones. This industry has led the world with such cell-phone innovations personalized email (Decomail) vs. SMS transmissions (1999), mobile internet (1999), cameras (2000), music for phones (2002), mobile wallets (2004), digital TV (2005) etc. etc.
- Technology hungry consumers – Japanese consumers purchase over 50 million cell-phones each year. While this is not huge from a global perspective, it is significant because this figures means that about 40% of Japan’s entire population of 129 million people buys a new phone each year. Moreover, they absorb new technologies more quickly than almost any other market.
- Strong relationships between handset manufacturers and the major carriers – KDDI’s au, NTT’s DoCoMo and Softbank. These collaborative relationships where the carriers pay for the development of handsets, allow for a continuous stream of unique products, features and services.
- Flat rate programs and relatively cheap rates – the cost of the service in Japan is low relative to other markets, and the flat fee allows for much greater usage and revenue generated from value added products and services.
- Revenue sharing models that reward application and content developers with 90% or more of the commission from the carrier’s revenue stream. This compares with 70% for Apple’s iPhone, Blackberry and Nokia.
While the Japan mobile market can be seen to be a local paradise, it is really an enigma. Japan’s telecom industry has developed largely in isolation, and like a number of local technologies - including super high speed trains (France has done this as well) robots, Washlet toilets - these have not really gone global. As a result, Japan has become somewhat of a “Technology Galapago”s.
Like the Galapagos, the Japanese telecom environment is vulnerable to outside threats such as Apple’s iPhone which recently disrupted the market. The iPhone pushed cell-phones beyond the technology arena into the experiential arena and redefined the space. The Japanese industry also remains vulnerable to the Korean, Taiwanese, and Chinese marketers who can often provide comparable technology at a lower price. This threat is real because value for money is becoming more important in Japan, as it continues to wrestle with a difficult economy.
So what are the lessons from this “Galapagos syndrome” and what – if anything – can the Japanese mobile marketers do about it?
- Global perspective – in the technology arena companies need to have a global business plan to avoid developing sophisticated businesses that develop and remain within a “canyon” where they cannot escape. Technology develops at a tremendous pace, and businesses that do not take a global perspective and scale outwards quickly, risk getting shut out by global and local competitors who will learn, improve and quickly take away the first-mover advantage.
- Re-disrupt the market – as Apple has changed the global smart phone business, the Japanese should find a way to take it to another level. The game has now changed from a technology battlefield of features to one of experience. The trick is to disrupt the market again in their favor.
- Adapt the Business Model from Japan for use abroad – there are many features of the Japanese model that could work abroad. For example by sharing a larger proportion of commission with developers e.g., 90% vs. 70% the Japanese marketers could really accelerate their business outside Japan.
- Open source – given that “walled gardens” can be used to protect local players, global players should consider such models as Symbian and Android that are open sourced. This will increase flexibility and allow quicker adaptation of innovation.
The good news is that the Japanese are already working on a Post Galapagos plan. I’m looking forward to see it in action.
Tags: Galapagos, Japan, Mobile, Technology
Posted in Digital | No Comments »
