Effect of Service Platform on Innovation Trajectories of Value Network Players;

The Case of Japanese Mobile Music Services

Takayuki OTSUKA

Advisor: Prof. Kumiko MIYAZAKI Ph.D.Graduate School of Innovation Management

Tokyo Institute of Technology 1

TUUH-Tokyo TechResearch ForumMonday, Sep/23/2013

0. Background

Industrial Product : Motor Car Export

2

Technology Innovation

Product Innovation

Trade/ Productionat Outside ofOriginal Country

Tangible Asset: Products/ Schematic /Parts/Production Process Guidance

Every Player Get

Merits

0. Background

Tracing Trajectory of Service innovation / Export

3

Service AA+B

Service AAA+BB+C

Technology Innovation

Service Innovation

Service @ Global

AA+BService Expandto Outside ofOriginal Country

Lots of Intangible Asset: Service Offering / Mechanism / Contents Supplier/ Contents to be fit Local

Service A

Internet

Internet

Non-Internet Internet

Does Every Player Get

Merits?

4

RQ

What is the connection between Environment for Contentious

Innovation and Value Network Structure and Players?

How and what Innovation merit was lost of Japanese Mobile Phone

Maker?

Hypothesis:

• Original success is supported by Value Network which has been

providing Contentious Innovation Merit.

• Continuous Innovation won’t be occurred at Different New Place than

Original Success was realized without creation of Optimized Value

Network which fit to the New Place.

Today’s Topic

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Japanese Mobile Internet Services : Music Service

Technology Innovation

Service Innovation

Music ServicePlatform

AA+B

Internet

Music Service Platform

ANon-Internet

Music Service Platform

AAA+BB+C

Internet

Effect of Service Platform on Innovation Trajectories of Value Network Players; The Case of Japanese Mobile Internet Services

Value Network Players

Value Network PlayersValue Network Players

Service Platform : Where Service is offered

What happened to Japanese Players ?

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Fig. 1 Japanese Mobile Service subscriber, the penetration ration of service subscriber against population and 3G coverage of the device in use

Service Evolutions Technology Evolutions

1979 Voice Service for Auto Mobile 1979 Analogue (1G)

1989 New Mobile Operator Entrant

1993 Digital (2G)

1999 Mobile Internet Services

2001 UMTS/W-CDMA(3G)

2010 LTE High Speed Data Service 2010 LTE (3.9G)

Table1 : JAPANESE MOBILE SERVICE AND TECHNOLOGY EVOLUTION

1996: The first Music Service1999: i-mode / NTT docomo(DCM)

Mobile Internet to the pocketMusic over i-mode

2008: Smart Phone / iPhoneMobile exceeded PC for InternetAccess

Music over Internet

II. Japanese Mobile Market

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Fig. 2 Device shipment market share by manufactures in Japan Fig. 3 Changes of Device shipment market share by manufactures in Japan

2008-2012

II. Japanese Mobile Market

2008: Smart Phone emerged rapidly

2008-2012Japanese Players lost Share

Japanese Mobile Internet Services : Music Service

Technology Innovation

Service Innovation

Music ServicePlatform

AA+B

Internet

Music Service Platform

ANon-Internet

Music Service Platform

AAA+BB+C

Internet

Value Network Players

Value Network PlayersValue Network Players

Service Platform : Where Service is offered

What was happened to Japanese Players ?

Today’s Topic

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Effect of Service Platform on Innovation Trajectories of Value Network Players; The Case of Japanese Mobile Internet Services

Objective

Why Japanese players lost competitiveness

• Publication• Interview

Value Network Analysis

(VNA)

II. Methodology

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Analysis Fit to the Case of

Value Network

• Internet based service can be better analyzed (Funk/ Li and Whalley / Peppard and Rylander / Weiner, Nohira, Hichman and Smite)

• Many divergent mutual interactions between the company and customer are more important than the activity of the company’s internal process.

Value Chain

• Strategic Study of Industries (Porter)

• Flow of value creation from material to be processed and produced for distribution

II. Methodology : VNA

Step1 • Define Network Objective

Step2• Identify Players

Step3• Define Role and Value of Players

Step4• Define Connection between Players and Mapping in Chart

Step5• Analyze Connection and Its background Reason

• Identify Exchangebetween Players Tangible Asset Intangible Asset

II. Methodology : VNA

Music Service

PLAYERC

PLAYERD

PLAYERB

PLAYERG

PLAYERE From

ExternalVN-Z

fromExternal

VN-Y

fromExternal

VN-X

PLAYERA

PLAYERF

Step1 • Define Network ObjectiveStep2

• Identify PlayersStep3

• Define Role and Value of PlayersStep4

• Define Connection between Players and Mapping in Chart

• Identify Exchange between Players

Tangible Asset Intangible Asset

Step5• Analyze Connection and Its background Reason

III. Case Evidence: Value Network Analysis Results

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1996199920081999

1996

2008

• Ringtone Customization : Denso 1996

• Technology Innovation happened among Handset Makers

• Stimulate other industries >>>> Music became Service

• Music Industry

• Ad-Agencies

• Publishers 13

III. Case Evidence: Music Service for Mobile Phones

A) Music Service before i-mode -19961. Hinting the first Music Service for Mobile Phone

• Ringtone : Single Beep

• Ringtone was Pre-installed

• Competitive Egde

• # of Hit Songs

• Songs were NOT latest because of Design-Production lead time (Lead Time : 6 Months +)

IDO D319 by Denso/1996

(C)JDP/GOOD DESIGN AWARD/ http://www.g-mark.org

2. Ringtone Music Data Distribution by Paper Media• The first Music service for Mobile was not via Over-The-Air but PAPER

• Song input specification was fragmented since no Standard

• Manufactures driven Standard-Silos with Magazine Publishers

• Service Innovation involving Technology Innovation

• Cross Industry : Hand Set Makers and Magazine Publisher

• Utilized Market Feedback for improving service quality and usability

14Fig. 3 Ringtone song magazines and an instruction page

IDO D319 by Denso/1996(C)JDP/GOOD DESIGN AWARD/ http://www.g-mark.org

III. Case Evidence: Music Service for Mobile Phones

A) Music Service before i-mode 1996-

III. Case Evidence: Music Service for Mobile Phones

3. Value Network Analysis of Ringtone Music Distribution by Paper media

15Fig.4. Value Network of Music Data Distribution by Paper

Exchange of Tangible asset

Exchange of Intangible asset

• Makers were Suppliers of DCM

• Publishers were major service provider of Ringtone music data (printed)

• Music Consulting Firm provided know-how

• Music Publishing Rights were managed by Society (JASRAC), Fee was Post-Pay.

• No strong control from DCM and Music VN

A) Music Service before i-mode 1996-

3. Value Network Analysis of Synthetic Audio Music Ringtone Service over i-mode

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• DCM was driving specification

• Device / Chip / Contents tools

• Service Quality

• Music became less-competitive category due to Equalization (Faith)

Exchange of Tangible asset

Exchange of Intangible asset

Fig.8. Value Network of Synthetic Music Ringtone Service over i-mode

III. Case Evidence: Music Service for Mobile Phones

B) Music Service over i-mode Synthetic Audio Music Ringtone1999-

3. Value Network Analysis of Synthetic Audio Music Ringtone Service over i-mode

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• DCM was driving specification

• Device / Chip / Contents tools

• Service Quality

• Music became less-competitive category due to Equalization (Faith)

Exchange of Tangible asset

Exchange of Intangible asset

Fig.8. Value Network of Synthetic Music Ringtone Service over i-mode

III. Case Evidence: Music Service for Mobile Phones

B) Music Service over i-mode Synthetic Audio Music Ringtone1999-

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MusicalScore

PC SW Tool

MusicalKey Board

DigitizeOriginal File Format

SMF

RingtoneConvert

DCM Ringtone Tool

Temporary Mfi FilesPolyphony x Chip x Device

4163264

128

RohmYamahaFuetrekOthers

Total 100 + Devicespecific

Files

Test & Optimization

Test Devicex

Art of Technique

Final Packaging

Adding

Meta DataCopyrights

DRM

Faith established Equalization Procee

III. Case Evidence: Music Service for Mobile Phones

B) Music Service over i-mode Synthetic Audio Music Ringtone1999-

Fig.7. Music Ringtone Data Creation Process

3. Value Network Analysis of Synthetic Audio Music Ringtone Service over i-mode

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• DCM drove specification

• Device / Chip / Contents tools

• Service Quality

• Music became less-competitive category due to Equalization (Faith) 100 data for 1 Song

• Limited room to compete in Features and Quality : High Tech but Commoditized

• User behavior information was fully utilized by DCM which brought Service Innovation

• Limited User data to Makers to help Product Innovation cycle

Exchange of Tangible asset

Exchange of Intangible asset

Fig.8. Value Network of Synthetic Music Ringtone Service over i-mode

III. Case Evidence: Music Service for Mobile Phones

B) Music Service over i-mode Synthetic Audio Music Ringtone1999-

III. Case Evidence: Music Service for Mobile Phones

• Value Network Analysis of Full Music Song Service over i-mode and Internet

20Fig.9. Value Network of Full Music Song Service

• Music Service Platform became quite similar because of higher data speeds and Player Capability between PC and Mobile

• Weaken DCM’s control on Spec of Device and Service along with emergence of Smart Phone

• Getting influence from Music VN and Music Service Platform is communized

• Again,

• Device Music Feature become competitive field

Exchange of Tangible asset

Exchange of Intangible asset

C) Full Music Song service 2008-

III. Case Evidence: Music Service for Mobile PhonesE) Losing Competence

WHO LOST COMPETENCE• Publisher : 1999 ⇒

• Overseas Handset Makers : 1999⇒2007 (i-mode Spec. : Challenge to Enter Market )

• Japanese Handset Makers : 1999⇒ (i-mode Spec. : Controlled Commoditization )

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Pre-i-mode/ Paper1996-1998

i-mode / Synthetic1999-

Full Music /non-DCM2008-

DCM Control for SVCS none STRONG Weak

Environment to occur Innovation

Yes/ FreelyNo/ Limited in Freedom

of developmentLimited/ Fully

Marketing by Maker Available Limited Limited/ Fully

Oversea Marketing of J-Maker

Not Available (2G)Available(3G)

w/ DCMLess Experience

No Brand awareness

Global CompetitorsIn Japan

Good-Weaker(2G)

Weak(i-mode)

Strong

IV. Discussion and ConclusionHow Japanese Mobile Handset Manufactures Lost Competence

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• DCM VN worked only where valid VN Players exist

• J-Makers didn’t gain merit

• Same component to limit Innovation (Good Procure though): Forced Commoditization

• Product didn’t fit to the Market outside Japan• User Profile• Culture

• High spec Device was too expensive

• Who pays Service fee?

Axial Root : Major PlayersFibrous Roots : who own know-how, to water which contains Local Trend

DCM VN didn’t created well at Outside Japan

• Lost Marketing discipline

• Lost Brand• Lost Business

Resource Competence

Dilemma : Service Platform and Players

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Good Service Platform• Same Higher and Stable Quality • More Users• Stable Procurement• Less Fragmentation

Music Service Platform Owner’s Action Platform Player’s Damage

Quality Realized Dominant DesignSame Performance Player• Specified HW• Equalization of Contents

Less Competitive Field

More User Attractive New Service which require High Tech

Higher cost, Less Adoptability to Global Market

Stable Procurement Multi Sources Fewer Volume

Less Fragmentation Control Design and Changes Less Field of DifferentiationLost Merit of Innovation

Commoditized

Time Machine Effect of Service Platform-Service Platform pursued Commoditization-

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Device MakerCompetitive Value

Service PlatformOperation Efficiency

T1 T2

Service Platform gained merit by shortening Time to Commoditized

Device Maker lost Innovation Merit by being shortened technology Life

V. Limitation and Direction for Future Research

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Lack of success case analysis of both J- Mobile Operators and Makers

• Same Brand Maker succeeded in Audio and Visual. E.g, Panasonic, Sony, Sharp etc

• J- Car Makers keeping one of leading position outside Japan

Success Case vs Failure Case Comparison

• Difference of Service Platform and Service Value Network

• Perspective : Interaction, involvement, leadership

• Global Makers, Apple and Samsung, are building remarkable growth in global as well as in Japan

True Success Reason Investigation of Other J-Industry Players Outside J.

• Consumer Electronics, Analogue and Digital Still Camera, Car and Motor Cycle

Other than Music but with Traceable Trajectory

• Book, Magazine, News Paper : Paper , PC Internet, Mobile Internet to e-book

• Gaming: Arcade, Home to Mobile, Solid to Network

Measurement of Damage

• Activity of Publication of technology study and Patents filed

Thank you!

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Q&A

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Back Up

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