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トピックス -企業家倶楽部

2013年08月22日

Who will dominate (win) the information industry revolution?

Kigyoka Club June 2010 【Startups Saga Vol.1:English Version】


A country can be started by just one person, and it may also perish at the hands of just one person.
With the advent of one great man, a company is born, industries arise, and countries flourish.
Now, the information revolution, known as the third industrial revolution, has arrived.
Follow the battle for life of the modern age amongst the “Visionary Entrepreneurs” as they take on new challenges across the world with cause and vision.



Four Leaders Gather in New York in Early Spring

Early April in 2010, New York: Even in the still and chill of early spring, New Yorkers’ could feel signs of spring, and they walked with lighter steps compared to the times when “cold winds” blew during the financial crisis after Lehman’s fall. It was already 6PM. The face of business districts of New York had changed to become nightlife districts for people to enjoy their private time. As twilight drew on, 40 business men gathered at the headquarters of a major American communication company, Verizon Group, on West Street. Four business entrepreneurs showed up to the meeting each with 10 staff. England Vodafone CEO Vittorio Colao from the EU, China Mobile President Wang Jionzhou from China, Verizon Wireless CEO Lowell McAdam from the United States, and Softbank CEO Masayoshi Son from Japan. The four leaders planned to meet once every three months to exchange their views on cell phones.
“Joint Innovation Laboratory” (JIL)
In April 2008, Masayoshi Son called upon four companies to review the concept of next generation cell phones and to develop new services. Consequent to these efforts, JIL was established. The total number of users of the four participating companies is approximately 1 billion. China Mobile boasts of 530 million, England Vodafone 340 million, American Verizon Wireless 100 million, and Softbank 20 million. This is the world’s largest mobile telephone alliance.
If JIL is able to provide one common mobile platform and service, it would be possible to define and become the de facto standard for next generation cell phones and wireless technologies. Within Japan, NTT Docomo maintains 50% share of the market with 55 million users. However, because Softbank partners with major wireless companies in China, EU, and the US, it represents a much larger footprint in the global market than its competition including NTT Docomo and KDDI. This type of global strategy is a particular strength of Softbank and Masayoshi Son.
JIL was realized in April 2006 when Masayoshi called Arun Sarin, England Vodafone CEO at the time, during Softbank’s takeover of Vodafone Japan. After the agreement was reached, Masayoshi asked Wang Jionzhou of China Mobile, and Arun Sarin asked Lowell McAdam to participate in the establishment of joint development company.



Tug of War

When deciding the percentage of investment of each participating company, diamond fierce battle of tug o war occurred. The three leaders tried to put Masayoshi off balance by stating that “despite the fact that they represented each of the largest cell phone companies from the EU, China, and the US, what gave Japan’s third
largest cellular telephone company the right to participate?” It was a preemptive move towards Softbank to limit its percentage of investment.
However Masayoshi remained strong. “JIL isn’t just a company for the future vision of cell phones, it is a company that will open the way to future development of new mobile and internet technologies and act as a forum to discuss the whole concept of fusion in wireless and internet. Even if (NTT) Docomo joins in place of Softbank, the total number of users will only rise to 1.03 billion from 1.0 billion, which is within margin of error. When considering the future of the mobile internet, it is far more beneficial to partner with Softbank, which has a strong internet business.” Others began to think that “it seems that Masayoshi has a valid point.” The three leaders gave Masayoshi proposal full consideration.
Again, the three leaders tried to fend off Masayoshi By saying “the percentage of investment should be set according to number of users.” However, he quickly fought back saying “equal partner is fundamental in this kind of joint investment company. The valid percentage of investment should be 25% each. Or when considering the integration of mobile (wireless) and the internet, the mobile side 50% and internet side 50% may be another consideration. That is fine with Softbank.” Masayoshi’s adept negotiating skills led to an equal investment of 25% by each of the 4 companies.



By Day or by Night, JIL

Since JIL’s establishment in April 2008, Masayoshi has been absorbed in the reinforcement of cooperation within JIL. He wastes little time over smaller concerns within the Japanese market any more, and devotes a large portion of his time to JIL and the bigger picture both night and day. He had no hesitation in stating that “I have devoted more than half of my energy to JIL.”
He formulated a plan for JIL since Softbank took over Vodafone Japan, spending 2 trillion yen in March 2006. At a press conference for the acquisition of Vodafone Japan on March 17, 2006, Masayoshi revealed to the press that “Softbank agreed to co-develop a platform of cell phones with England Vodafone.” At the time, it seemed that having the press conference was a strategy to dodge criticism of having spent 2 trillion yen on M&A, but his activities had far deeper meaning.
On the first day of the meeting in New York, the four leaders and their staff had a convivial dinner to create a positive atmosphere between the respective parties. From morning until evening of the second day, 40 staff members were locked into a conference room and held discussions regarding the future of mobile internet.
Masayoshi said, “JIL is a long term project. With the passion, knowledge, and experiences of those involved over the next 5, 10, or maybe even 20 years, we will pursue ideal conditions for mobile internet. It is not in the interest of the industry or users to remain within the small frame work of the Japanese market. As of today, we have just entered the brainstorming phase based on our global experiences, knowledge and expertise, and it will be difficult to produce tangible results for general public within 2010. However, people will come to realize how JIL can open the path to a future for mobile internet sooner rather than later.” Masayoshi carefully structured his speech so as not to antagonize his competitors.
Although a meeting of the four leaders is held once every three to four months, video conferences and actual meetings are held on a weekly basis by responsible parties from their head offices (20-30 people in each company) to conduct exchanges of views with regards to specific next generation platforms and services.
While all is quiet at the moment, JIL could unveil some ground breaking developments into the mainstream during 2010.



Masayoshi’s Pre-Acquisition Speech

It is not an overstatement to say that Masayoshi put his life on the line to ensure the success of JIL. But at the time of the acquisition of Vodafone Japan four years ago, he had more things on his mind than just JIL. Vodafone Japan’s administrative organization, telecommunication lines, and management structure were weak in comparison to its rival Docomo and KDDI. In particular, Vodafone’s weak telecommunication lines stood out. He had to fortify base stations immediately to dispel the reputation of “Vodafone’s weak cell phone reception.”
Furthermore, in October 2006, phone number portability was expected to go into effect. With the implementation of portability, users can easily switch to new wireless phone carriers without changing their cell phone numbers. Mobile industry officials expected Softbank to lose users to Docomo and KDDI when portability became effective.
Masayoshi himself was well aware of Softbank Mobile’s weakness. Therefore, he implemented prompt actions. On April 4, 18 days after the announcement of acquisition, he canceled a visit to an overseas trip and instead walked into Vodafone Japan headquarters in Atago, Tokyo to make a policy speech to 100 senior staff. This quick action was taken even before he formally signed the contract for acquisition of the company.
Masayoshi started talking to senior staff in a calm tone. “Everyone, how do you think cell phones will mutate in the future? I think future cell phones will see increased mobile internet functionality. A cell phone will enable users to always be connected to the internet. Eventually, mobile internet connections will surpass personal computers. And I believe that a new era when users will become increasingly dependent upon mobile handsets is inevitable.” Back then, iPhone, known as a smartphone, had not yet reached the Japanese market. But back then, Masayoshi was able to accurately paint a picture of the current smartphone era.
Masayoshi continued saying “incorporating the different backgrounds of Vodafone, which is strong in telecommunication, and Softbank, which is strong in internet, there is no doubt that we will become a future champion. Regardless of how long it takes, the alliance between Vodafone and Softbank will enable us to surpass Docomo and KDDI and become the best mobile internet company in Asia!”
Masayoshi’s 40 minute speech was passionate and persuasive. He could see the senior staff expressions turning from apathy to intense curiosity. In the evening of that same day, he went to Narita International Airport, probably to have a conversation with Steve Jobs, CEO of Apple, with regards to distribution rights of the iPhone. Docomo already took the lead in obtaining distribution rights for iPhone. However, Masayoshi was confident to turn the situation around with his great power of negotiation. Two years later in July 2008 and after intense negotiations, Softbank successfully obtained the distribution rights for iPhone and became the iPhone’s sole distributor within Japan. Long lines of customers formed in front of the Softbank store in Harajuku, Tokyo on the day it was released in Japan. Masayoshi himself showed up to greet and thank each and every customer. Sales managers of Softbank Mobile were impressed with “Masayoshi’s ability to come up with an accurate vision of the future.” At the time when purchases of iPhones were made from Apple, the sales manager made a suggestion regarding purchase of other conventional phones to Masayoshi. Masayoshi thundered out instantly, “that is a stupid comment! iPhone is the main actor in the mobile internet realm. It is different from ordinary phones. Personal computers were made and it brought in sales. While new models of normal cellular telephones see peak sales just three months of their introduction, the iPhone is different. Just
as personal computers, iPhone will continue to see sales grow, so follow its trend closely!” Just as Masayoshi predicted, iPhone’s unit sales increased and iPhone was driving force behind Softbank’s surge. One year later, the sales manager was remained impressed by Masayoshi’s ability to accurately see the future of the market and stated “it’s just as he predicted!”
His TV commercials also worked well. The “White Family Story” series of commercials, featuring a white dog as the main character, was comical and appealing to viewers. Of all different 9,000 brands advertising on TV, it was received favorably and rated number one for three consecutive years from 2007 to 2009. Subsequently, the iPhone contributed to a new record of net increases in the total number of users for 26 consecutive months from May 2007 to June 2009. In January 2009, the total user number of users exceeded 20 million, putting it within reach of the second placed KDDI with 31.5 million users.


Masayoshi’s Pre-Acquisition Speech

Masayoshi’s Passion Regarding New Products

Masayoshi’s passion regarding the acquisition of new users is intense. He would check the number of new users by his cellular telephone or personal computer three times a day, morning, noon, and night. Even on his days off or at the golf course, he checked his cell phone and to see the number of users. He was also enthusiastic about developing new mobile terminal models. One day, a major mobile device manufacturer gave a presentation for its new handset models at Softbank Headquarters. New models were lined up in front of Masayoshi, and the person responsible explained each feature of the phones one by one. There was an obvious change in his facial expression and after listening to the explanation for no more than 5 minutes. He expressed his anger By stating “there is no concept in your explanation! Go back and come up with a new presentation!” This new model presentation, which took 6 months to prepare, came to an end within just five minutes.
Masayoshi is not the only entrepreneur who pays meticulous attention to details with regards to new product development. Steve Jobs, former CEO of Apple and the person responsible for launching mega-hit products such as the iPod, iPhone, and iPad into the world, is another of these entrepreneurs. Despite having lost a dramatic amount of weight due to a hormone imbalance, he drove himself to work like a dog and occasionally expressed his dissatisfaction to managers around him. Even his second and third in charge were afraid of Steve’s outbursts. However at the same time, the respect he commanded from those around him was unwavering. His passion for work gained him the respect of his subordinates, which remained steadfast until the very end.
Steve Jobs looked in a mirror and thought every morning, “how many years have I got to live? Through work that can only be done by me, what can I leave to mankind?” Reflecting upon thoughts like these, he wasted no time, not even a minute, and spent all of his days developing various products using every last ounce of life left in his body. It was like making a hairpin curve at a speed of 800 kilometers per hour. With such high aspirations, can one achieve perfection before the end of one’s life? There is no greed for money, or hunger, or fame. Steve is the only man whom Bill Gates, founder of Microsoft, feels jealous of. Masayoshi fully understands Steve’s feelings and his visions. That is probably why Steve Jobs granted iPhone’s distribution rights to Softbank. Only true entrepreneurs can fully understand one another at the emotional level
For Masayoshi, it was unbearable for him to listen to a presentation of new models which had unclear development concepts. He is usually good-natured, but being this kind of person, he closed the meeting with clearly visible irritation.



Fully Repay Debts in 2014

It has been four years since the acquisition of Vodafone. In fiscal year March 2009 consolidated financial statements, sales and operating profit of 2.673 trillion yen and 359.1 billion yen were achieved respectively. Softbank has been able to record a sharp improvement in business results. In fiscal year March 2010, operating profit reached to 400 billion yen, and net interest-bearing debt of 1.7 trillion yen is expected to be paid off within 4-5 years.
Softbank has always been associated with large debts. Especially after the acquisition of Vodafone, approximately 2.4 trillion yen of net interest-bearing became a huge burden upon management. Softbank’s stock price also reflected this and during the global financial crisis after Lehman’s fall in September 2009, it dipped below 1,000 yen.
After that, Softbank took measures to announce earnings results early, and its stock price recovered. Currently (April 2010) it trades around 2,200 to 2,300 yen.
These challenging experiences enabled Masayoshi and his Company to become a front runner within the industry. When he first established his company in March 1981, he had huge aspirations. And in his twenties he was able to create a name for himself, and in his thirties he was able to raise large amounts of capital. He took on great challenge in his forties, and he is living out his dreams in his fifties. So everything turned out as he had planned, with the raising of 500 billion yen from his stock listing on the over-the-counter (Currently JASDAQ) market in his thirties, and his acquisitions of Ziff Davis (An American publishing company focused upon computers) and Comdex (An operating company for computer expositions).
And in his late forties, Masayoshi extended great efforts to acquire Vodafone with 2 trillion yen at the age of 48. In the last 4 years there have been some bumps and detours in his roadmap, but with operating profit of 400 billion yen Softbank has now grown into one of the world’s leading digital information companies. But as reflected by Bill Gates comments saying to Son, “you are the gambler-of-all-time,” Masayoshi may not be able to keep winning.
Masayoshi said “I feel the time is right. After fully paying off debts, I would like to hand over the business to my successor. That is the respectful thing to do for my successors.” Currently, net interest-bearing debt totals 1.7 trillion yen, and my plan is to “pay off this debt by 2012”. During this time, M&A investment in units of a few 10 billion yen may be possible, but “large scale investment of more than 1 trillion yen is not likely to happen” said Masayoshi.
Celebrating its 30th year in business in 2010, Son will work on business plans that cover the next three decades. He will present the full picture of his plans at the shareholders’ meeting at the end of June.
In recent days, Masayoshi tweeted on his twitter blog as follows:
“How many years do I have to live… what can I do in the time left in my life. And I don’t want to feel ashamed for having been afraid to take opportunities to do great things.”
“After Ryoma escaped from the Tosa region of Japan, he was successful in achieving an alliance between Satsuma and Choshu within 5 years. And I have yet to do anything on Ryoma’s scale even after 30 years in business!”
Neither a businessman nor an entrepreneur, I merely want to become a person who contributed to changing the world! So now Masayoshi is confronting the final phase of his plan to realize the goals set out when he founded his company.



Information Industry Revolution Has Only Just Begun

The information revolution that initially lit Masayoshi’s fire began with the in appearance of the world’s first electronic computer in 1946. Since then, large host computers have developed into powerful personal computers And the internet blossomed in the era of information revolution. 65 years have already passed, but Masayoshi likened the information revolution to mountain climbing, and he believes “that the revolution has yet to reach to first part of the slope of the mountain.” Engines driving the information revolution are CPU (central processing units) bandwidth, IC chips storage capacity, and baud rates. According to Masayoshi, over the next 30 years these capabilities will increase by 500,000 to 1 million times. “Therefore, the next 30 years will entail a period of ever-increasing prosperity for Softbank.” The horizon of the information revolution remains far in the distance, and the stage it sets continues to grow to unfathomable proportions.
Masayoshi Son anticipated the advent of information revolution before anyone else, and he has promoted the revolution with greater passion than anyone. However, he is not the only supporter of the revolution. In the United States, Bill Gates, Steve Jobs, Larry Page and Sergey Brin of Google are all participants standing on the leading edge of the information revolution. Also in China, Jack Ma from Alibaba Group and Robin Li of Baidu Inc. have risen to become heroes of net ventures. At some point in time, these entrepreneurs may do battle with each other in Chinese net market. And the battle may become fierce given the view that “the conqueror of China, becomes conqueror of the world.”
This story was written about a battle of visionary entrepreneurs in the modern age circling the world to realize their objectives in the information revolution.
In March 1981, 24 year-old Masayoshi Son started his career as an entrepreneur in Zasshonokuma, Fukuoka. At that time, what were entrepreneurs of young and old doing?



What Were The Visionary Entrepreneurs in the Modern Age Were Doing in 1981?

Kazuo Inamori : the Founder of Kyocera (Japan Airlines CEO) 49 years old. Kyocera had been in business for 22 years and listed on New York Stock Exchange one year earlier. A hero of venture capital.

Makoto Iida : Secom Chief Executive Advisor. 47 years old. Founded Japan security preservation 19 years earlier and went public on the first section of the Tokyo Stock Exchange. Considered to be a hero of venture capital along with Mr. Inamori.

Naoto Otsuki : ONKYO Honorary Chairman. 40 years old. Four years later in 1985, he embarked jpon the reconstruction of Maruhachi industry (current Techono Eight) and became Heisei contractor.

Sachio Senmoto : CEO of eAccess. 38 years old. Japan Telephone and Telegraph Public Corporation (current NTT) Technology Investigation Division Manager. Three years later, co-founded Daini Denden (current KDDI) with Mr. Inamori.

Shigenobu Nagamori : President of Nidec Corporation. 36 years old. 8 years earlier founded Nidec Corporation. He built and developed the Mineyama factory in 1982 and successfully expanded business.

Tadashi Yanai : CEO, President of Fast Retailing. 32 years old. Ogoori Commercial (current Fast Retailing) Executive Director. 3 years later in 1984, entered casual wear retailing markets with Uniqlo brand.

Takeshi Hayashi : CEO of Asahi Solar. 31 years old. Founded Asahi Solar 2 years later in 1983.

Muneaki Masuda : President of Culture Convenience Club Company (CCC). 30 years old. Served as a store manager at Suzuya, a fashion expert, and a promotional director. 2 years after in 1983, established CCC and embarked upon the video rental chain store business.

Yoshitaka Kitao : CEO of SBI Holdings. Worked at Nomura Securities Co. in its overseas investment special advisory group. 30 years old. Became a managing director at Softbank 14 years later in 1995. He helped Masayoshi’s M&A strategy financially and sourced 500 billion yen from capital markets.

Hideo Sawada : CEO of H.I.S.. 30 years old. Founded H.I.S. one year earlier in 1980. Generated a buzz with distribution of discounted air tickets in the travel industry.

Toru Arakawa : Founder of ACCESS. 22 years old. Founded 2 years earlier in 1979. Grown rapidly with development of operating systems for electronic terminals with the exception of PC and OS for Docomo I-Mode. However, he died of pancreatic cancer on October 2009. President Kamada took over Arakawa’s dream.
Masatoshi Kumagai : CEO of GOM Internet. 17 years old. Dropped out of Kokugakuin High School. Founded Voice Media 10 years later in 1991.

Hiroshi Mikitani : CEO of Rakuten. 15 years old, a 9th grade junior high school student. 16 years later in 1997 founded HDM (current Rakuten.).



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