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.