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The Executive Question: Good news for Japan is good news for all - or is it?
Mobile market thriving in Japan - and Europe could be next

By David Butler

Published: Wednesday 05 May 2004

Japan is way ahead of Europe and the US when it comes to mobile technology. But, says David Butler, that country's successes don't necessarily translate into wins elsewhere.

On Good Friday, appropriately enough, the Bank of Japan delivered an upbeat assessment of the prospects for the Japanese economy, detecting signs of an end to the long recession that has afflicted the country. On the same day, Toshiba announced a business plan with a profit target for 2006 to 2007 that is twice as large as it achieved in the year to March 2004.

This is good news for all of us, even for those who compete with Japanese companies. The world economy can't move at a healthy rate if the wheel marked 'Japan' is hanging off the axle. All we need now is for Germany to pick up its bed and walk and we may be in for a period of sustained global growth.

Before we can assess the extent of Japan's potential economic recovery, however, we must take a view of one of its major drivers for future growth – mobile technology. Japan has a lead over the rest of the world in the use of mobile technology that's variously assessed at three to five years. But to assert that Japan has a lead at all is to assume that Japan and the rest of us are on the same road, that markets in Europe and the US will evolve in much the same way as Japan, but some steps behind. And this is far from clear.

In the rest of the world, developments in mobile markets have been supplier-led. A company comes up with a bright idea and does its best to persuade consumers to buy what they need to use it. In contrast, the Japanese consumer is the one who leads the development cycle, sometimes with requests for nothing more than fancy ring tones and screen savers, leaving corporations to exploit the mass market as they can.

The differences don't stop there. Japanese are famously enamoured of gizmos. European and US suppliers, on the other hand, set out deliberately to incubate business applications for mobile technology, watching with a supercilious eye as Japanese suppliers hustled ring tones and savers – with the micro-payment systems that support them. The Japanese created the mass market first, and now have more mobile internet users than Europe or the US. They are winning a race they didn't even enter!

Every technological revolution needs a prophet, someone who can spell out its message with compelling clarity. My candidate for this revolution is Jeffrey L. Funk, professor at Hitotsubashi University's Institute of Innovation Research and probably the world's greatest expert on the Japanese mobile industry. This article should be regarded, in all modesty, as a footnote to Funk's monumental studies.

According to Funk's research, many Japanese firms using advanced mobile Internet services haven't progressed along the usual path of sophistication. Funk has found that firms using mobile systems in areas such as delivery, construction, maintenance and sales have not gone down the well-trodden paths of ERP and CRM – and have never relied on the usual suspects like SAP, PeopleSoft, Oracle or Siebel. By mid-2003 more than 50 companies whose names would be unknown to Western ears were offering mobile services. When the mass market already exists, suppliers are drawn into the game.

On top of that – hold on to your hat – most Japanese users of these advanced systems are doing their own systems integration (SI). According to Funk, they provide far more of the innovative features than the suppliers, simply because they know their business better than any supplier. This may be the start of the reversal of a 30 year trend, with SI consistently outsourced.

Funk identifies three stages of mobile Internet usage, namely mail, groupware and access to corporate databases. The simplest mail systems just forward mail to the phone, but they risk viruses, a crowded inbox on the phone and logjams at the server. Japanese mail agencies now convert PC mail into c-HTML format and send on requests, for a few dollars a month. As a result, mobile phones are being used for email by package delivery firms instead of customised PDAs. Back-office costs reduce too with the Japanese method, as the new systems are easier to manage.

In the past, groupware systems have often (as you'd expect) depended on well-known products like Lotus Notes and Outlook Express, though some systems focus on specific tasks such as instant messaging or exchanging multimedia images. Some industry observers believe that Windows-based applications are too unwieldy for the small screens, keyboards and memories of phones. If so, that may explain why Mobimagic, the much-vaunted collaboration of Microsoft and NTT DoCoMo, has proved a disappointment.

These days some of the main applications in corporate database access in Japan focus on the productivity of maintenance engineers. Getting the right expertise to a site where a computer, copier or power system needs fixing is a complex and expensive business. Others are tackling progress monitoring on construction sites, others yet (some of the most prominent) on sales force automation. Phones have advantages in cost, battery life and weight over PCs for these high-mobility applications.

When an IT market is driven by consumer empowerment it can take a radically different shape than one that's led by suppliers. When it comes to Japanese mobile technology, it may lead to a new balance of creativity between customer and supplier, and even the emergence of a new generation of suppliers.

What lessons can we learn from Japan? We don't yet know whether their new paradigm has relevance for us. My firm, the Executive Learning Alliance, is planning executive tours to Japan to let western managers see and judge for themselves. Is this the future for all of us? Watch this space.

David Butler was formerly chairman of Butler Cox Plc and is now chairman of the Executive Learning Alliance, a company that tracks developments in emerging markets. He can be contacted by emailing editorial@silicon.com.