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The global stage January 5, 2006

Posted by fukumimi in IT, Japan, VC.
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Japan is a small overpopulated island nation of approx. 127million inhabitants. Its population has cost competitive access to fixed-line and wireless broadband connectivity surpassing most other nations on the planet.

Fixed-line ADSL access is now available for the majority of the population at speeds of between 8 and 50Mbps (downlink) for $30-40/month, and 100Mbps FTTH for as low as $50/month.

Data services delivered to wireless devices (mobile phones) as a successful business model first took off in Japan with the sucess of NTT DoCoMo’s i-mode service. Product innovations and the structure of the market in the mobile phone industry led to Japan also being the first market to embrace ringtones and camera/videocamera phones.

Yet for some reason IT innovations coming out of Japan and competing visibly on the global stage have been far too few and far between.

There are several local companies which have IPO’d in Japan servicing the mobile phone content market, originally providing format optimized webpage content, many have embraced ringtones (and now streaming/downloading of audio files) and video (either packet streaming over the cellphone network or using terrestrial digital TV broadcasting) is picking up and will be big themes for 2006.

There are three technologies that spring to mind as models of different types of technology export from Japan.


1. i-mode (NTT DoCoMo)

i-mode as a framework for delivering web content optimized for small form factor, low bandwidth devices is finally beginning to see some traction with regards to overseas adoption. DoCoMo has pursued a strategy of investing in local carriers to cement relationships to push adoption of the i-mode framework. DoCoMo is large enough and has enough financial and political clout to pursue this method of evangelising its technology. i-mode services are now available in many European countries (e.g. Germany, France, Netherlands, Belgium, Spain, Ireland, UK, Greece) and in other parts of the world (Australia, Taiwan).

2. web browsers for mobile phones (ACCESS)

ACCESS (which made the headlines last year for its purchase of PalmSource) has achieved great success in getting its browser technology installed in the majority of mobile phones sold in Japan. On the back of this sucess, it has expanded overseas and is a leading provider of browser technology to phone handset manufacturers globally. ACCESS’s phenomenal growth in the late 90’s cannot be separated from its cooperation with DoCoMo since the early stages of i-mode development. ACCESS has expanded its customer base to cover all major Japanese carriers, and multiple overseas customers.
The explosive adoption of i-mode led to ACCESS transforming from a relatively unknown software house developing not-so-sexy things like embedded software to being perceived as a leading light of the Japanese software industry. Indeed, it may not be an overstatement to say that ACCESS is the only Japanese software company to have achieved global status (excluding games companies).

3. Ruby (developed by Yukihiro Matsumoto, a.k.a Matz)

Ruby, an object oriented scripting language, has become a language of choice in the “Web 2.0”. It’s developer works at a small oddball outfit called the Network Applied Communications Laboratory (or NaCl, for short) which has its headquarters in Matsue City (pop. 194,871) , the prefectural capital of Shimane Prefecture, about 370km west of Osaka.

NaCl undertakes software development, consulting and system maintenance work, and encourages its employees to work on open source projects. Besides Ruby, NaCl employees have developed WEBrick (http server written in Ruby and often used in Ruby on Rails implementations), and MONTSUQI (an OLTP monitor, competes (at least theoretically) with BEA’s Tuxedo – the name is a play on words, montsuki is a piece of traditional Japanese men’s formalware, get it?)

The 3 examples above cover the whole range of “enterprise” scales from 1 person to a multi-billion dollar enterprise originally operating in a virtual monopoly (and we have still only have a virtual duopoly now) in its protected home market.
Looking at the whole internet space which has been led by pioneers in the US (and Europe then being copied elsewhere, including Japan), is there anything that has been uniquely innovated in Japan? Or is it just localised rehashing of ideas which have been created overseas? (Sure seems that way. Nothing wrong with building on ideas created by others per se, often first movers may not be able to translate their technical advantage into a business advantage, especially in overseas locales and fast second movers will exploit this hole. It has always been thus. But from a intellectual property perspective (philosophically, not legally), one might wonder if some “copycat” businesses have been a bit too successful to capitalise on others’ ideas)

So there are examples of Japanese IT technology making it on the global stage, just not very many which are readily visible to the world wide community.

Why aren’t there many more examples of innovative businesses (in the IT sector) being born in Japan and going on to dominating their respective niches globally?

This is a question that I hope to tackle in a piecemeal fashion over time.

My job requires me to keep an eye out for truly innovative ideas being born in Japan. As a venture capitalist I look forward to the day I can cheerlead innovative home-grown businesses to promote their sucess on a global level.

And this space is my personal space where I hope to share information regarding ideas and businesses I do find. I hope I will be busy writing new posts regularly.

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