Blog Post

Why Japan blew its hardware and mobile edge

“The companies still have famous brand names, and tech analysts say they still produce some of the world’s highest-quality hardware devices. But they face a fundamental problem: It’s been years since they’ve turned out products that people feel they need to have…..Those who study the consumer electronics industry describe a decade of missteps and miscalculations. Japan’s giants concentrated on stand-alone devices like televisions and phones and computers, but devoted little thought to software and the ways their devices synced with one another.”

Photo of imode advert courtesy of Wikipedia

Over the weekend, The Washington Post in an excellent article highlighted the diverging fortunes of Apple (s aapl) and Samsung and Japanese consumer electronics companies. While Apple and Samsung have been ascendant, the land of the rising sun is becoming increasingly marginalized in the modern device business. In addition to Post’s reasons, here are some changes in the technological landscape that have played a big role in Japan’s challenges in the post-Internet world.

  1. Too big to fail:  Japanese companies have always believed in mass-scale diversification, an antiquated way of thinking in the increasingly specialized world. This is and will always remain a challenge to the large Japanese giants. Samsung, which is also a massive-scale conglomerate, has managed to grow because it has bet on future growth markets, global standards and at the same time has become a vertically integrated producer and supplier of electronic components. (Of course, Samsung has friends in high places in South Korea, which helps the company and its fortunes.)
  2. Wrong bets: Japan did well in the games-console business, but never realized that software would essentially commoditize that business. Not a surprise, since Japan has historically done well in standalone devices like televisions. The Japanese never really mastered the personal computer business, which in a sense was a good jumping-off platform for the current generation of devices and phones. They are essentially using PC-principles.
  3. Lack of connectedness: It is my belief that in addition to software platforms that can play host to apps and services, it is connectivity that actually helps make devices more intelligent. The more services on a device, the more you come back and use them. It is a lesson Sony learned the hard way from Microsoft, which launched the XBox online service for its gaming platform. It is also one of the reasons why niche devices such as Sonos are doing well in the market place.
  4. Closed & Internet don’t mix: To illustrate this argument, let me take you back to 1999 when NTT DoCoMo and its mobile platform was the envy of the world. Its i-mode data service, an app store concept where revenue was shared with the app developers and that also included a mobile payment system. The company was not only ahead of its time, it also inspired others around the world. Japan was the mobile leader. Of course, that was a long time ago. I-mode is now fading fast. Unfortunately, NTT DoCoMo failed to export this model overseas for the following reasons:
    • Its platform model was specific to Japan and wasn’t portable to rest of the world because it didn’t embrace the open Internet. NTT used proprietary protocols and proprietary handsets and that didn’t scale.
    • It failed to embrace the iPhone and Android.
    • Even though Japan has some of the finest broadband and mobile broadband infrastructure, the country hasn’t been able to translate the early lead into Internet products and services, mostly because of the same closed thinking that negated the early lead i-mode provided.

    We’ll be discussing connected gadgets, mobile interfaces and good design at our RoadMap conference on November 5th in San Francisco. Speakers include MINIMAL’s Scott Wilson, fuseproject founder Yves Behar, Nest CEO Tony Fadell, the CEO’s of Pinterest, Tumblr and Instagram, and many more.

32 Responses to “Why Japan blew its hardware and mobile edge”

  1. Om, as a follow up interview or discussion to this post you’ve written, it would be very interesting if you were to have a conversation with Joi Ito. I can think of no one better than Joi to comment on this (as you probably know, he’s the new Director of the MIT Media Lab and I’m sure you’re aware of his CV and his Japanese root)!

  2. Jan Joost Van de Hoef

    How did software commoditize the console industry??? If anything, that industry is LESS commoditized than in the early nineties. Then, lack of connectedness? XBOX live was about online gaming in its first iteration. Sony learned fast and followed them, and with this generation they’ve been on equal footing. Also, Nintendo ignored connectedness and reaped the rewards.

    • Jan

      Have you seen how Nintendo is doing and the growth of PlayStation in recent years. They opened up an opportunity to create different gaming experiences! And how fast is the console business growing?

  3. Gianfranco Chicco

    @Om, why don’t you join us as speaker at MLOVE Japan 14-16 november ( after your RoadMap conference – we’ll be discussing this and how mobile is disrupting several industries with International and Japanese speakers from companies like Nike, AKQA, Qualcomm, Dentsu, Hakuhodo, frog, Rakuten, and many others.

  4. Mr. Bee

    Nothing personal but most of this reads like gobbledy-gook. You contradict yourself even within the numbered paragraphs or throw two or three half ideas into each. You don’t explain any of your dire pronouncements, and you don’t back anything up. This “article” is closer to “a financial expert bragging in a bar after a few drinks” than it is any kind of insightful analysis.

  5. Hari Seldon

    Surely you mean to ask “how” rather than “why”?

    “Why” speaks to motive and volition, “how” is about what happened.
    e.g. why was he murdered? is different to how was he murdered?

  6. Sony is an example where the conglomerate model stifled innovation. The fact that the same company owned not only the media (music, movies) but also the digital devices upon which to play the media set the two divisions at odds with each other. In order to prevent illegal copies, arcane DRM systems were put onto Sony devices that limited their usefulness (remember “Magic Gate” anyone?)

    Unfortunately, this over-emphasis on limiting the flow of media continues to stifle Japan and it’s companies. As of today, downloading a movie or, even *watching* an illegally uploaded YouTube video carries a heavy fine or even jail sentence as Japan has passed the one of the world’s most draconian anti-piracy laws in the world.

    It’s hard to think why any internet-based media business or entrepreneur would want to stay in Japan under such laws.

  7. Taiyo Mikuni

    How about looking into the increasingly competitive wireless telecom market in Japan. As a native Japanese, I’ve fed up with the bashing by US and other foreign media of the Japanese former electronics giants. As for the wireless broadband services, most of you may not know, now I can get a iPhone 5 contract from either Softbank or KDDI that costs as little as (less than) US$ 60/month, with various subsidies in exchange for a 2-year term. With no initial cost for the handset (unlike the $200 in the case of US major carriers), we can get unlimited LTE-based data service with that little montly fee. Maybe the term is most consumer-friendly in the world.

    • I hate to break your bubble, but Japan is far from the most consumer friendly wireless market. It has the highest ARPU in the world, only comparable with US. It ties up people in two year contracts with short windows to change, and things like prepaid or flexible term contracts are virtually unheard of. Devices are always locked and you can’t get SIM-only plans. I’d rather say Japan is a conservative, lock-in and expensive telecom market. Try Sweden, Austria, Singapore, Hong Kong etc for a completely different experience.

  8. Software is the reason, and the same applies to all of the other Asian companies original software design from the ground up is a big problem (particularly at OS level) Sony in particular (was very
    bad with original software), Sony owning content (music-movies) didn’t help software or hardware
    development either, the content people never wanted to move ahead keeping things the same was their ultimate goal, the same can also applied to toll keepers in Asia as well as America (cable-cell phone companies) never wanted to move ahead either. Note Sony was more of a joint US-Japan
    problem Japanese tech American content, but Sony was the preeminent Japanese tech company
    of its time.

    One of the earlier posters said that Apple is behind (in the cloud) is laughable. Apple is by far the
    most complete tech company in the world OS software desktop and mobile, hardware design and engineering, database-store front, consumer software, App Store, Music store, the physical store front, the Apple stores most importantly close the deal with customer they lead the world, no one is doing it better certainly not Amazon, Google, or Microsoft at this time closing the deal. There are an awful lot of so called cloud companies that are very good at posing, but are not making money, I think the first step is to have a business plan that makes money with a profit anything else is just bullshit.

  9. brisance

    Historically, Japanese have been insular and always kept what they felt are their finest creations only to themselves. e.g. it took a foreigner (Carlos Ghosn) to get Nissan to ship the GTR worldwide. Few would argue it is the best performance car for its value right now. The Japanese also don’t take criticism very well. Culturally, Japanese pride is what is hindering their growth. Don’t get me wrong; I love Japan. But these are facts. If you look into their history, a lot of people decided to end their lives when the Emperor declared a ceasefire during WW2. They would rather die than to admit defeat.

  10. As I am a Japanese, I could point out another perspective on this topic. The reason why Japanese electric companies lost mobile market is that Japan is an ageing society, and many companies are targeting seniors than youth. That is why majority of Japanese electric companies did not invest more funds on mobile market.

  11. Say What

    Excuse me? Where can I get a waterproof, quad core terga 3 with LTE, temperature and humidity sensors, fingerprint scanner, infrared data transfer, fm radio and transmitter, 13MP camera? Japan. Where can I get the thinnest phone in the world (Apple fanboys… it’s a Fujitsu)? Japan. What country has broadcast television on their mobiles? Japan. Who has had mobile wallet that people actually use for years? Japan.

    Japan’s mobiles continue to stomp the ever lovin’ crap out of the rest of the world. When korean LG takes it’s new Optimus G to Japan, they’re waterproofing it, and only for that market. If they don’t, they know they don’t stand a chance against the local competition. I’m not sure what you consider “losing its edge” but it seems a rather strange opinion to me.

    • Ashwin Dwivedi

      If they’re really so good then why have Japanese devices failed to capture rest of the world? Don’t tell me its because they don’t want to..

      • andrew21

        sorry but….I have to say it. They actually didn’t want to (or need to) capture the rest of the world as the domestic Japanese was big enough (and protected enough) that they could make a great living just dominating at home. That may be changing now as the domestic market is shrinking and Japanese electronics manufacturers are seeing limited opportunities at home as global players are now more easily able to enter the Japanese market.

      • i think many smartphone can be equipped with the technology mantion above wether its japanese, korean or us brands smart/mobile phone. This special technology like sensors, fm receiver and transmitter,and others can be developed by US semi and sensor/mems companies not just japanese technology companies. Its just matter of need.

    • It’s not that simple. These cutting edge Japanese-only devices have been developed as a continuous response to millions and millions of Japanese customers leaving traditional devices for iPhones. The same paradigm that made iPhone successful elsewhere also works in Japan, and that hints that maximizing hardware features draws some customers, it is not on it’s own a measure of a device being desirable. In the end, all those hardware features are useless without good software and usability, and there is a lot of catching up to do there.

  12. Are we really in the post-internet world?

    I agree with the article overall except for the statement that Japan never really mastered the PC industry. I would have to disagree, with the exception of my thinkpad, I have only owned Sony and Toshiba devices. I accept that japan is horrible when it comes to software (used a few Japanese phones) but, they make fantastic hardware.

    I believe they may be able to get a big market share in the mobile space because of this. With android they don’t have to invest in software at all and thus can focus on making great devices. Out of all the new android phones I think the phones that Sony make are the 2nd best (Samsung is still better).

    IMO the reason why Japanese fims (and soon Korean firms) failed is because they grew too big. Sony. Toshiba and other firms ventured into too many areas and stretch themselves thin. Once software driven devices took hold they lacked the resources to invest in those areas and got left behind. Samsung is making the same mistake, currently they make everything from fridges to tv sets.

      • Thomas Krigsmakten

        First of all, Japanese isn’t a race. Second, the Japanese (short form label for their corporate culture) AREN’T good at device software. They’re exceedingly good at some forms of games however. Corporate software (devices and enterprise solutions) in Japan is painfully underdeveloped.

        An American Indian, are you Rich? :-)

  13. Denise Lee Yohn

    this is really interesting, om — i wonder if there is something inherent in japanese culture that has led its business leaders to these mis-steps? having a past of events like world war ii & the associated bombings, being an island (vs. connected to other land masses), and having very low immigrant population are all very strong cultural influences — hmmm
    – denise lee yohn

  14. “The more services on a device, the more you come back and use them.”
    I think it will be more like:
    The more personal adaptable services on a device, the more you come back and use them.

    Connectivity is a double edge sword, not done right and the Denver airport is where it closed 17 years ago. Just ask Apple. Having 3 Samsung devices I don’t think they get it either.

      • Yeah, I’m with amitil, what does Big Data have to do with Apple’s future success or not? Is Paul referring to the recent iOS maps uproar (given that maps do in fact require enormous amounts of data and Google has done a superb job managing map data)? If so, then I can see the point (its not really in Apple’s DNA to get it when it comes to data — case in point, as Steve Jobs said a few years ago, Apple didn’t compete with Google in the search business). That’s one thing Apple historically under Jobs deserves a lot of credit for which is that Apple (under Jobs) knew their own limits / knew their depths and knew their core competencies.