The future at your fingertip

DoCoMo's i-mode phone has done for the internet what the Walkman did for hi-fi. The hand-held fashion accessory of the moment is used by 10 million and profits are booming. And the woman behind it puts it all down to changing the furniture and putting beer in the boardroom

By Timothy Stoker

4 October 2000

One of Mari Matsunaga's first decisions as senior manager at NTT DoCoMo, Japan's largest mobile phone operator, was to change the office furnishings. Out with that big, boardroom-style table. In with squishy sofas and a refrigerator stocked with cans of lager. "What stiff-as-a-rod DoCoMo needed was a place where people could make themselves at home and get the alpha waves flowing," she says. "You can't do that in an ordinary meeting room."

Trust a woman to pay attention to office decor. DoCoMo did, and nobody in the company has looked back. Three years after Ms Matsunaga overhauled the conference room – and a few other aspects of the telecom giant's corporate culture – DoCoMo has become a byword for all that is cutting edge in Japan's New Economy.

Thanks to Ms Matsunaga, a self-confessed technophobe with a background in journalism and marketing, DoCoMo has established itself as the runaway world leader in the field of wireless Web access. Her brainchild, the revolutionary i-mode service, which allows users to surf the internet cheaply and quickly on their cell phones, is the business success story of the new millennium. Since its launch 18 months ago, the service has snagged more than 10 million subscribers, with 800,000 newcomers signing up each month.

That amounts to more than 10 million Japanese using their DoCoMo cell phones to send e-mails, transfer funds between bank accounts, book plane tickets and play interactive games. Trendy teenagers wouldn't be seen dead without i-mode, the essential i-generation fashion accessory. They use it to check out online horoscopes, download melodies and swap photographs of their favourite pop stars. Investors rely on it to keep tabs on the stock market and get the latest financial news.

The woman who dreamed it all up is now something of a celebrity in Japan. Nikkei Woman magazine voted Ms Matsunaga Woman of the Year 2000, and a book she wrote about her experiences at DoCoMo, The i-mode Affair: The Making of the Mega Commercial Hit of the Century, has become a hot seller.

"She's an inspiration," says Reiko Matsuura, a spokeswoman for Bit Valley Association, an organisation of entrepreneurs and venture capitalists set up to foster internet start-ups in central Tokyo. "What she's done has changed everything. It's more than a boom; i-mode has brought about a complete social change."

The story of Ms Matsunaga's role in putting the internet in people's pockets is a parable, of sorts, for a society in the throes of sweeping transformations. It is about the triumph of New Japan over Japan Inc, of concept and creativity over technocratic intransigence. It is about individuality and initiative in a country that has long placed a premium on group identity.

"Japan's traditional system of seniority and hierarchy is breaking down, but the men at its core are still bound up by the system," says Ms Matsunaga, who is 45. "There's no room for flexibility. The way things are changing now, flexibility is crucial. It's like a building: in an earthquake-prone country like Japan, you want to have a flexible structure, otherwise it's going to come crashing down.

"For me, i-mode is a declaration of independence. It's 'I' mode, not company mode. That's the message I wanted to deliver: this is me in individual mode. Japan's system of lifetime employment, which always meant you had to live your life for the company, is crumbling. The 'i' in i-mode is about the internet and information, but it's also about identity."

Ms Matsunaga was in her sunny new office in Tokyo's fashionable Minami-Aoyama district. These days, she rarely gives interviews. For one thing, she no longer works for DoCoMo, although she remains on call as a consultant. She left the company in April to become editor-in-chief of a new net venture called eWoman, a "community site" aimed at giving women in Japan more clout as consumers and entrepreneurs. With the clock ticking toward launch day, she and her staff have been working like dervishes.

This is a giant personality trapped in a diminutive body. Ms Matsunaga has a loud, infectious laugh, and, unlike many of the Japanese, underscores her words with dramatic arm gestures. She is the sort of boss for whom you could imagine employees lying in front of tanks. You also get the feeling she would expect nothing less. For someone who pioneered the world's most advanced wireless Web service, she was slow to jump on the hi-tech bandwagon. When she joined DoCoMo in 1997, as general manager of the company's Gateway Business Planning Department, she didn't even own a mobile phone.

She still describes herself as an "analogue person", and is proud to have learned to write short e-mail messages on her i-mode using just one hand. "They used to call me Two-Letter Mari," she says. "Now I'm Five-Word Mari. There was no shortage of people with technology backgrounds at DoCoMo. In me, they were looking for somebody different, someone with a feel for content and information, someone with business sense."

They came to the right person. After graduating in 1977 from Tokyo's Meiji University with a degree in French literature, Ms Matsunaga joined Recruit, a Tokyo-based publisher of job information. Over the next two decades, she made a name for herself as an editor-in-chief extraordinaire, turning unglamorous job-search magazines into some of the hottest titles on kiosk shelves. Her biggest triumph was Travaille, a monthly rag designed to help women switch career paths, a fairly radical concept at the time.

In July 1997, Ms Matsunaga had a call from Keiichi Enoki, an NTT electrical engineer who had been charged by DoCoMo's then President Koji Ohboshi with expanding operations into so-called data communications. Mr Enoki had decided to do the unthinkable: recruit new blood from outside the company. Aware of her well-deserved reputation as a marketing whiz, he asked her to leave Recruit and bring to DoCoMo much-needed creativity.

Flashback to 1992, when Nippon Telegraph and Telephone, Japan's telecom monopoly, was partly broken up in deregulation. NTT Mobile Communications Network was the company spun off to take over sales and operations of wireless communications. (The corporation would later change its name to NTT DoCoMo, a play on the Japanese word for "anywhere".)

At the time, cell phones were a far cry from today's must-have items. They were clunky, unreliable and expensive. But after the Ministry of Posts and Telecommunications liberalised the mobile phone market in 1994, pressure from Japanese competitors like DDI Corp and IDO Corp drove down prices and spurred technological advances. Many boffins at NTT had considered transfer to DoCoMo as the corporate equivalent of being sent to Coventry. The climate there was hardly conducive to visionary thinking.

Ms Matsunaga did her best to change that. Thumbing her nose at the deeply ingrained vertical relationships that characterise most Japanese companies, she encouraged seniors and subordinates alike to chip in ideas. Her role, she says, was to foster an environment in which fresh air could blow in from outside.

"People said to me, you must have experienced such culture shock, coming from Recruit to NTT DoCoMo, to which I'd answer, 'Yes, there was culture shock'. But Mr Enoki would say the biggest culture shock was for DoCoMo, not me," she says.

The task was to come up with a mobile data communications service that would do to the internet what the Sony Walkman did to the hi-fi. In Mr Enoki, Ms Matsunaga had an accomplice who could help translate her vision into nuts and bolts, or at least circuit boards and LCDs. They also brought in Takeshi Natsuno, an energetic young entrepreneur with a flair for marketing. The three spent a lot of time at "Club Mari", as her conference room was nicknamed, drinking beer and brainstorming ideas.

The result was a product that was at once dazzlingly simple and dastardly clever, a union of hardware, software and service at a price most people could afford. Within six months of going on sale in February 1999, i-mode had 2.23 million subscribers. By April 2000, DoCoMo was unable to keep up with demand (more than one million users signed up in March alone). In August, the number topped 10 million, a milestone reached 18 months earlier than DoCoMo had initially projected. DoCoMo shares have soared 55 per cent over the last year.

The beauty of i-mode is that, unlike other wireless Web services, users are always connected to the internet, provided their cell phones can pick up a signal. There is no logging on or dialling. What is more, it lets you access the Net at a tenth of the price of a regular mobile phone call, thanks to the so-called "packet communications" formula, in which data is transmitted in units priced at 0.3 yen (0.19 pence) per packet. In other words, you pay for nuggets of information, not time. For example, it costs 1 yen (0.64 pence) to send a typical e-mail message, 25 yen (16 pence) to transfer bank funds and 12 yen (7.7 pence) to read the news.

"In terms of technology, we just packaged together what was already there," Ms Matsunaga says. "From the start, the idea was to develop the information equivalent of a convenience store: anytime, anywhere, anything."

Kotaro Chiba, of Tokyo-based Cybird, one of DoCoMo's leading independent Web page providers, says only a computer dunce like Ms Matsunaga could have come up with something as ingenious as i-mode. "If it were entirely up to the engineers at DoCoMo, they probably would have been too hung up on the technology," he says. "What was revolutionary about Matsunaga's approach was that she made everybody forget about that and focus on content."

Content is what it is about. Users can call any of 600 official i-mode sites, or 20,000 unofficial ones, all formatted for the cell-phone screen. Because i-mode uses a compact version of html, the standard internet language, putting up Web pages is said to be a cinch.

Under i-mode's killer business model, DoCoMo cell phones also serve as portals for selected content providers, allowing them to microbill for their services. Say you want regular financial news updates from the Nikkei Shimbun, Japan's answer to the Financial Times. Nikkei charges subscribers 300 yen (£1.90) a month, which DoCoMo collects through its existing billing system. For this, it takes a 9 per cent cut.

"Matsunaga's role was really crucial in that she was the one who understood what kinds of information people will pay for," says Tim Clark, whose Tokyo-based e-business solutions provider Web Connection regularly surveys Japan's wireless Web market.

Her other key insight had to do with marketing. Mobile phone operators in Europe have tended to target executive types for their Web-access services, but i-mode has gone for the man – or more precisely, the woman – on the street.

It is hard to remember the last time a product came along that stood so succinctly for fashion, functionality and fun.

Significantly, the most common uses for i-mode are e-mail and entertainment. The most popular unofficial home pages are said to be matchmaking sites, but the top official sites are the ones that let users download ringer-melodies and screen savers.

Toymaker Bandai's "Doko- demo Kyarappa!" site has one million subscribers, giving users daily doses of animated characters for 100 yen (65 pence) a month.

In August, DoCoMo announced plans to work with Sony Computer Entertainment Inc, in a project combining i-mode with PlayStation.

Many people in Japan feel more at home with mobile phones than PCs. Three years ago, only 6.5 per cent of households were wired to the Web. That is now 20 per cent.

The cell-phone business has never looked better. In April, the number of mobile phone subscribers outnumbered fixed-line subscribers, 56.7 million to 55.6 million. Japan has 20 manufacturers of mobile phones, compared to just four in Europe and two in the United States.

So will i-mode conquer the planet? With the number of cell phone users worldwide expected to hit one billion by 2003, the folks at DoCoMo hope so. Under the company's new president and CEO, Keiji Tachikawa, the strategy appears to be one of forging global alliances rather than looking for takeovers.

In May, DoCoMo bought a 15 per cent stake in the cell phone subsidiary of Koninklijke KPN NV, the Dutch telecom giant. It also has a 19 per cent interest in Hong Kong's largest cell-phone carrier, Hutchinson Telecom.

In August, DoCoMo and America OnLine, the world's biggest internet service provider, agreed on a tie-up allowing i-mode users to access AOL accounts. But Toshihiro Maeta, CEO of Tokyo-based Mobile Telecommunications International, a leading provider of WAP (wireless application protocol) content for the wireless Web, believes i-mode has already missedthe boat.

"You have to look at the size of the market," he says. "Of course, the Japanese market is big. There are 30 million users of DoCoMo cell phones, 10 million of whom use i-mode. But there are 400 million potential WAP users in the world.

"In Japan, people using IDO and DDI cell phones for voice communications account for 15 million, with three million using WAP Web services now. Many carriers have chosen WAP as the gateway for their services, but haven't got off the ground yet. They will catch up. It will take three years."

In April, DoCoMo became the first Japanese carrier to apply for permission to begin operations of w-cdma (wideband code division multiple access) services next May. Adopted so far by Japan and Europe, the new 3G transmission standard promises to send data 200 times faster, making today's i-mode devices look somewhat primitive.

With transmission speeds reaching up to two megabits per second (i-mode clocks 9.6 kilobits), we're talking movies on your mobile and real-time video conferencing.

In this brave new world of wireless Web access, nobody knows whether DoCoMo will reign supreme, or becomes the Betamax of the cell-phone business. The fun is just beginning.

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