AMR (Field study)
When I follow up on Son’s life progress, I would use three key ideas to explain his management style and philosophy as follows.
(1) A strong belief that the personal computers may change the world
Since he saw the picture of the Intel 8080 chip when he was seventeen years old, he has believed that personal computers may revolutionize the way people work and live. His basic belief reminds me of Steve Jobs. Son has repeatedly said on various occasions, “I would change the people’s lifestyle by improving the infrastructure of our society.” Some people question him by stating that he just invests money in companies like gamblers do and does not produce anything. To these criticisms, Son responses as follows: “I highly respect the businesses which have plants to produce something real. However, in the recent two hundred years, was there any Japanese business person who invented the new infrastructure to improve the people’s lifestyle and led the world? There have been a lot of excellent Japanese companies which improved the quality of cars and electric appliances that were invented in Europe and the United States. But they were just imitations of these countries and not Japanese original. I am changing the framework of our society by building the infrastructure like roads, water line and electric power.”
He has overcome the various difficulties that Softbank ever faced. I think that he could successfully recover from these crises because he always acted on the basis of his belief that he could improve the way of people’s lives. He has consistently placed first priority on his customers. For example, when Softbank started the new broadband service called Yahoo! BB, NTT, the telecommunication giant in Japan, interfered with Softbank in various ways. NTT owns the basic telecommunication networks in Japan on which other network service companies have to rely. However, NTT was reluctant to provide space at telephone exchange stations for Softbank so that it can set its equipments necessary to do business. NTT used delay tactics based on its advantage. Also, NTT was so bureaucratic that it did not accept an application form which included one typo and delayed the service due to the error. Encountered with these difficulties, Softbank was forced to lose some customers that had to wait for the connection for a long time. Son decided to fight with NTT by enhancing its customer service including free 24 hours service desks on telephone. Also, he continuously dropped its price to acquire new customers. When the 911 disaster occurred in the U.S., Softbank lacked the essential equipments from the U.S. companies. At that time, all the employees including Son himself worked until midnight to assure service quality.
In January of 2004, Son got a phone call from the National Police Agency. The man who stole the Softbank’s customer database with personal information of 4.52 million subscribers was arrested. The news immediately spread throughout Japan. To compensate the trouble, Son decided to send money orders of $5 to all of the customers including the customers whose information were not stolen although one American board member insisted that such a treatment was unprecedented in the U.S. because it might encourage criminals. The action cost $40 million to Softbank but it showed that Son’s highest priority is his customers.
Another example of Son’s belief would be the decision that Softbank would offer the broadband infrastructure for free upon request to public entities such as schools and libraries. It has got 93 requests and provided services for 33 entities as of 2003.
(2) In-depth strategy and daring actions
Investigating the way Son does business, I found that he has not simply dealt with the new business ideas with high potential but contemplated among various alternatives and planned the multiple businesses simultaneously to enjoy synergy effects. Also, his common strategy would be to quickly become a major player in a field by owning the infrastructure with intense investments in a short period. He seems to take risks of failures rather than doing nothing, and he does something right away once he believes that it is worthwhile.
First, as the name of the company indicates, he selected a software distribution as a niche market. Softbank Japan was founded with a capital of $100,000 in September of 1981. His first move was to run a booth at the Electronics Show, one of the largest exhibitions about computers. Only one month after he launched Softbank, he spent 80% of the capital, $80,000, to assure a huge booth which is as large as that of Matsushita and Sony. Then, he visited many software companies to exhibit their software at his booth for free and succeeded to begin a lot of contracts with major software houses although nobody had heard of Softbank at that time. However, during the exhibition, he could actually realize only a few contracts with software retailers (worth of $3,000) because most of the software houses directly closed contracts with software retailers who visited Softbank’s booth, bypassing Softbank. In spite of the failure to make successful contracts during the exhibition, his bold action paid off later because Softbank impressed both software developers and software retailers with the big event and because Son developed a priceless network with key players in the market.
Second, he also moved to the publishing business soon after his success in the software distribution market. He published several unique magazines which specialized in each model of the various personal computers. At that time, all of the computer magazines dealt with overall topics about personal computers and there were no magazines focusing on the specific model such as NEC’s PC series and Fujitsu’s FM series. This niche strategy made a great success and Softbank instantly became one of the major publishers in the personal computer market. Son intentionally expected the synergy effect between the software distribution business and the publishing business. Owning the popular magazines allowed Softbank to influence PC manufacturers, software houses and software retailers. As I mentioned before, he acquired Ziff-Davis and Comdex, which also enhanced the synergy effect.
Third, Son also invested in both a stock market and a commercial bank. One of his basic strategies was to acquire various internet ventures and grow rapidly by taking advantage of Softbank’s high stock price. To achieve this strategy more effectively, he established NASDAQ Japan with the support of NASDAQ in June of 1999 and also invested in Nippon Credit Bank, one of the largest banks in Japan, to restore financial confidence in September of 2000. Controlling both a bank and a stock market, Softbank got the infrastructure to incubate the start-up companies and have them go public.
Finally, Softbank has focused on developing the broadband infrastructure as its main business since it started Yahoo! BB in 2001. Intensively investing in acquiring new customers and enhancing customer services, Softbank rapidly grew and gained the largest share in the broadband market by beating the toughest rival, NTT. Due to the severe competition among broadband carriers ignited by the aggressive expansion of Yahoo! BB, the number of broadband lines in Japan exceeded that in Korea although the adoption rate of broadband in Korea is still the highest in the world. The average speed of the Japanese broadband is the fastest, which is about three times as fast as in Korea and ten times as fast as in the U.S. Also, the average price of the service is the lowest in the world. For example, Yahoo! BB provides 8Mbps broadband service for $30/month and 50Mbps for $40/month while I pay $40/month for Verizon’s 1Mbps DSL service. These facts obviously shows that Softbank made Japan the most advanced country in the broadband infrastructure in the world.
Son has always set high goals and certainly achieved them with carefully contemplated strategies and bold actions. When Bill Gates published his first book, The Road Ahead, he sent one copy to Son with his message saying, “You are a RISKTAKER as much as I am.” Son really appreciated the expression because he thought that it was the best verbal praise for him.
(3) Pursuing of fairness
It seems to me that he has consistently pursued the fairness in his life. In other words, he always hates unfairness and fights with it. There are some episodes which back up the philosophy as follows.
First, the very reason he decided to come to the U.S. was to study in an open environment regardless of the nationality. He had felt discriminated because of his nationality and believed that the only way to overcome it would be to succeed in the U.S. and then go back to Japan. Also, the event that he asked to use a dictionary in the examination and extend the time limit shows his strong attitude towards the sense of fairness.
Second, this is an example about how to close a joint venture. In 1989, Son asked major Japanese electric-appliance makers to invest in Japan Businessland when he established the joint venture with David Norman, the founder and CEO of Businessland. However, the partner company, Businessland, was suddenly acquired by JWP in the next year, which forced Japan Businessland to be dissolved. When Son heard the news, he immediately asked David Norman to return all the investments the partner companies paid for the joint venture. Although the contract did not include the condition that Businessland must return the investments it received when the joint venture is dissolved, Son would never bring trouble to his partner companies which trusted him. Moved by Son’s sincere passions, David finally agreed to pay back all the investments to the initial investors. Also, Son assumed all the accumulated deficit of the joint venture. It cost over $2 million to Softbank, however, he could get more than that money. Through this accident, he deepened the relationships with the partner companies and created further trust with them because all the executives in those companies never thought that the investments would come back in such a situation.
Third, his biggest battle was against NTT group. In the broadband market, Softbank defeated NTT by achieving almost 50% market share. The next battlefield was the telephone line and cell phone markets where the NTT group has historically dominated the markets. In March of 2004, Son acquired Japan Telecom Co Ltd., the third largest telecommunication company in Japan, with $3.4 billion. The acquisition gave Softbank a large and precious new customer base, especially the business users which Softbank needed to gain in order to expand its business. With Japan Telecom, Son started to lower the charge for phone calls to grab the customers from NTT group. In June of 2004, Softbank obtained the qualification of the experiment in using the third generation mobile phone standard, TD-CDMA, and started substantive tests. In October of 2004, it acquired Cable & Wireless IDC with $140 million.
Finally, another enemy for him was the government. He said, “In the U.S., the government has regulated the dominant players to give an opportunity to the new comers. In Japan, however, the government has regulated to avoid new comers and protect the existing players.” He has advocated that the price of cell phone service is too high in Japan due to the lack of free competitions among carriers, which resulted from the fact that the government allocated the bandwidth only to the existing carriers and avoided new entrants. In September of 2004, Son published an advocacy advertisement on a full page of the major newspapers, which stated that the government should allow Softbank to enter the cell phone business so that it can encourage free competition, lower the price and enhance the service level. In the next month, Son filed a suit with the Ministry of Public Management, Home Affairs, Posts and Telecommunications against the decision of the ministry which allocated the new bandwidth for cell phone service only to the existing carriers. Although he lost the case, he carried the public opinion. After the lawsuit, he changed the requested bandwidth from 800MHz to 1.7GHz and finally succeeded to take the license of doing business based on the W-CDMA standard from the ministry in 2005. Son stated that Softbank would start its cell phone service by December of 2007.
Son came to the U.S. alone when he was 17, launched his own venture at 21, and became the 8th richest person in the world with $19 billion, according to a 2000 Forbes article. He has steadily realized the life plan that he set when he was a UCB student. As a fan of him and a stockholder, I would keep my eyes on every step he makes to improve our lifestyle on the basis of the telecommunication technology.