Our Mode Will Be I-Mode

Throughout the year, I am invited by companies and trade groups to speak with them about the future, specifically how new or evolving technologies will affect the food industry. In making predictions, all futurists share one methodology: They look to the present and identify trends that are likely to continue, and then they attempt to anticipate where or to what those trends will lead.

There has been much discussion in the media about wireless communications, and this column has been no exception. I've discussed third-generation wireless communications (called 3G), the concepts of Bluetooth, wide area networks, the issues and opportunities associated with computer translation of data to and from voice, and of course many of the promising applications that can be built on a wireless foundation. This month I want to take a realistic and conservative path and predict what we will see in wireless cellular communications.

Predicting the future embodies some degree of risk, a risk that increases as you move further out in time. However, with cellular communications we have an edge: The future is embodied in a single company, DoCoMo, which is Japan's leader in cellular communications with its service called "i-mode." The company was a spinoff from NTT, the Japanese national telephone service. The i-mode service was launched in 1999, and today it has 22.7 million subscribers, which represents 50 percent of the Japanese market. According to market research reports from Japan, the country has 81 percent of the world's mobile Internet customers, and that means that DoCoMo has almost 50 percent of the world market share. DoCoMo ranks 13 on the Fortune Global 500 list and has a market capitalization of $109 billion.

Doing all this in two years would be impressive growth for any company, but in the cellular field, with so many competitors, the growth is particularly amazing. The technology being used in the U.S. for cellular communications is referred to as second generation. The "i-mode" service is 2.5-generation service, which means it is digital, like our service, but faster and supports an "always-on" connection to the Internet.

The 3G service, which will be even faster, represents an international standard so your phone will work anywhere in the world where 3G service is available. Its features include always-on (the Internet) and a geographic identification of the user, i.e., where he is. This geographic capability will use either a GPS chip in the phone or triangulation using the locations of the cellular towers around each user.

Sliding Start-Up Dates

DoCoMo was expected to be the first company to implement a 3G system, with a start-up originally scheduled for May of this year. That has been delayed until the fall, but all other companies with 3G programs have also delayed their projects, so DoCoMo may still be the first to market. Clearly, the implementation of a 3G service is a very complicated project, and the pioneers get all the arrows and encounter enormous expense. The start-up dates for 3G service in the U.S. continue to slide as cellular carriers confront the costs of investing in new facilities to support the standard. The optimistic predictions are now for it to occur in 2005, a slippage of two to three years.

What has made DoCoMo so successful is the combination of its technology and its business strategy. Customers using the i-mode service are always connected to the Internet. They pay a fee that equates to $20 per month and then a small incremental charge for any data they download from the Internet. DoCoMo allows independent companies to offer their services through its network. If the services generate less than $10 a month in billing to any customer, DoCoMo will add the cost to the customer's phone bill.

As an example of how this works, one of the popular i-mode services is from a company called Dandai, which develops animated icons that can be downloaded to the customer's phone. The cost for this service is $1 per month and 10 cents for each new animated download. DoCoMo adds the charges to the customer's bill and takes a 9-percent commission for the service. Dandai earns $600,000 a month from customers who download its animated icons.

Today there are some 40,000 i-mode compatible Web sites around the world and more than 1,600 business partners that develop content. DoCoMo encourages any company that wants to become an i-mode business partner to develop and operate the service as an independent offering. In this way DoCoMo can evaluate each company's offering in an operating environment, and by tracking the number of consumers who are using the service DoCoMo can identify companies that warrant preferred-partner status. If an offering is similar to that of an existing partner, the standard for acceptance is that it must demonstrate an improvement over the existing site. In this way, the i-mode services are constantly improving.

When DoCoMo identifies a new service opportunity, it reaches out to find an appropriate partner. An example of this was the company's work with Zagat to bring its popular restaurant ratings to i-mode by providing Zagat with the technical expertise to develop an easy-to-use service. (In the U.S., Zagat offers a similar service through AvantGo for PDAs.)

Obviously, if an American cellular service could generate this kind of interest and growth from a similar strategy, it would have the potential to dominate the market. Recently, DoCoMo invested $9.8 billion in AT&T Wireless for a 16-percent share of that business. In other areas of the world, DoCoMo has made major investments in companies whose locations range from Brazil to the United Kingdom and the Netherlands. If AT&T Wireless capitalizes on the experiences of its new business partner, it could have an edge on its competition, particularly if it takes the "half-step" and implements a 2.5-generation service around the i-mode technology before moving to 3G.

Influencing the Hardware

In Japan DoCoMo has considerable influence over the manufacturers of cell phones to develop the technology that will enhance the service. An example of this is that color displays for cell phones are becoming the norm in Japan, while in the U.S. only one product has a color screen. AT&T Wireless will have to work closely with these companies if the hardware is to become available to match the service. The competition will surely respond, and as a result we can anticipate having a 2.5-generation service hit the U.S. market well before the expected arrival of 3G in 2005.

The U.S. does not need to develop 1,640 content providers to draw customers to upgrade their phones and participate in the i-mode service. For example, one good sports service could suffice for the timely delivery of sports scores, and if half a dozen major stockbrokers participate we would have more than enough coverage for business news.

Food Industry Potential

What opportunities will i-mode open for U.S. food retailers, wholesalers, and consumer packaged goods companies? Let's start with the internal operations area and then move to the consumer dimension.

Truck drivers will always be linked to the Internet and to the distribution center so that they can provide immediate documentation of deliveries. Shortages and returns will be processed with confirmations given to the store before the truck leaves. In an era when gasoline prices are of major concern, backhauls can be scheduled in real time, with dispatches given to the appropriate driver. If the truck has a GPS system, the stores can be notified of deviations in the delivery schedule as they become apparent, and changes in routing to accommodate retail needs can be directly communicated to the driver.

Field supervisors will receive their e-mail wherever they are. They also will have access to any store information in the corporate database. For example, they might access store sales by UPC from the in-store scanner while reviewing a reset with a department manager. If there are out-of-stocks, they could review the previous orders to see if the problem was caused by a failure to order and if the problem will be resolved by an order on its way to the store.

Phones will be available with scanners. If you're visiting a competitor's store and see a product you think your company should have, scan it and it will be sent to the appropriate buyer for review. If you're doing competitive price checks, then scan the product and key the price. Immediately the data will hit your corporate Internet site, where the UPC can be checked against authorized products and any relevant information can be displayed. If the product is not authorized, the site might prompt with a request for more information such as description, size, etc.

Within your stores, company-provided cell phones would alert store management when a delivery truck is nearby. As customers enter, if they are encouraged to identify themselves to the store, the manager can be provided an alert when a top-decile shopper arrives. This can make a major impression on those important customers.

Customers could opt in to services you offer, such as notification of new items, availability of seasonal products, this week's featured sale items, and even a saved shopping list. The list of possibilities could go on and on, but the key is that your customers must opt in. Today is the day to get your company to commit to a strategy of offering opt-in services delivered through your Web site or even by mail.

The Opt-in Standard

For me, Wegmans sets the standard for developing an opt-in customer relationship. Currently the chain offers 15 categories of information and services that its customers can select, ranging from news that would be of interest to diabetics to news of the latest catch in the seafood department. Wegmans is educating its customers and conditioning them to accept special communications from the company. When i-mode or 3G services allow those shoppers to accept this information on a cell phone or PDA, Wegmans will already have a customer base and a competitive edge.

The reality is that all the opportunities I've described will happen, but we don't know exactly when. However, they can all be viewed as part of a continuum that can start today. Develop wireless services for your employees and opt-in Web-based services for your customers, and let the evolution begin.

Technology editor Richard Shulman is president of Dix Hills, N.Y.-based Industry Systems Development Corp. He can be reached at ISD@worldnet.att.net.