Value Innovation at Docomo

...

NTT DoCoMo had different revenues resulting from the launch of the i-mode service, some of which stemmed directly from the service itself and some indirectly. For the direct revenue, access to the i-mode services cost a monthly fee of 300 Yen for each user. Additional 100-300 Yen were charged for each of the subscription-only sites if users wanted access to them, of which DoCoMo received a 9% commission fee from the sites. Some of the indirect revenues are harder to quantify but undoubtedly contributed a lot to the success [n]of DoCoMO. First of all, the company benefited from an increase in data usage by customers who used the services of i-mode. Furthermore, a joint venture with an advertisement agency generated additional income for DoCoMo. i-mode also helped to reduce the industry wide effect of declining revenues from voice services, as customers used to make phone calls after using i-mode - for example after looking for restaurants. Lastly, the widespread acceptance of i-mode by its users helped DoCoMo to hold on to their customers. The churn rate, which had risen by 71% to a high of 1.97% between 1995 and 1998, was continuously lowered until 2001 after the release of i-mode. For an exemplary estimation of some revenues in the year 2001, see exhibit 4.

Since the operating margin was mostly stable after i-modes release and the net income of DoCoMo steadily increased, it is also apparent that the costs for running i-mode were not exceeding the additional income that i-mode provided[o]. The biggest cost position was probably the original investment to develop the tool.

Furthermore, it can be argued that the launch of i-mode helped DoCoMo to survive in the industry in the first place. The industry struggled with declining revenues and increasing competition[p]. The perfect timing of i-mode, its accessibility for both developers and users and its innovativeness at the time created a first mover advantage for DoCoMo that competitors struggled to overcome, resulting in DoCoMo to be the only company to actually make money out of the mobile internet and enable the transition to the mobile era, while many of its former competitors don’t even exist anymore today.

---------------------------------------------------------------

Appendix

Exhibit 1 : i-mode’s value curve[q]

[pic 1]

Eliminate

None

Raise

Usage Costs

Acquisition costs

Usability

Content

Reduce

Complexity

Create

Interface[r]

---------------------------------------------------------------

Exhibit 2 : i-mode’s Business Model Canvas

[pic 2]

Exhibit 3 : Exemplary revenue stream estimation

[pic 3]