The Strategic Community-Based Firm

With the advances in Information Technology (IT) recently in a knowledge-based society, there is a growing need to merge different technologies, to develop products and services that span different industries, and to build business models. In the past, innovations in technology have developed through the deep pursuit of specialized knowledge. Now, there are numerous cases in which the technology of one field had to be merged with the technology of another field in order to develop new products based on new ideas.

To establish and maintain competitive advantage, it is important for companies to have a process of accessing, sharing, and integrating knowledge in diverse areas concerning technology, business processes, and others that is spread out both within and outside the company.

This chapter describes SC management that can be implemented by large established companies through the creation of a variety of strategic business communities. The author focuses in particular on the case of NTT DoCoMo, Inc., Japan’s largest mobile telecommunications carrier, which has utilized SC management principles in their efforts to cultivate and expand the mobile Internet market in Japan over roughly the past seven years.

This chapter presents a case study of how a large, traditional corporation simultaneously created new service markets and established a dominant position in the competitive fields of digital communications in Japan. The corporation accepted a new organizational body imbued with an entrepreneurial spirit supported by different types of personnel and then continuously promoted entrepreneurial strategies based on time pacing. At the same time, with the aim to implement strategic innovation, the company integrated the above strategies with deliberate strategies based on event-based pacing practiced by the existing organizational bodies. This chapter uses a case study to discuss factors for success and the problems encountered in the course of achieving strategic innovation in the communications field, specifically in the creation of new markets, through the deliberate and strategic maintenance and subsequent integration of paradoxical organizations and strategies under a single corporate umbrella.

NTT, Japan’s largest telecommunications carrier, is currently facing a major period of transformation. As in other regions of the world, an optical-fiber infrastructure for broadband is being constructed at a rapid pace in Japan, and new products and services need to be created to generate customer value in this environment. NTT urgently needs to create new services that can compensate for the declining income from telephone services, once its largest source of profits, due to the growing penetration of IP telephone services. Meanwhile, in 2003, NTT Group member NTT DoCoMo and others introduced a flat-rate data communications service as part of their 3G mobile phone service, as developing new services that could differentiate themselves from competitors (KDDI’s au and Vodafone) became an issue as urgent as broadband was on fixed communication networks.

Hi-tech markets in such fields as system LSI technology led by Japanese semiconductor manufacturers and digital household appliances led by Canon, Matsushita, Sharp and other companies have been rapidly emerging in recent years due to the strength of demand for digital products in Japan. Matsushita has been achieving new heights in profits and market share particularly with hi-tech products in which semiconductor, software, opto-electronics, broadband communications and other technologies have been integrated. Matsushita has captured global market share by adopting such revolutionary production reforms as cell production and speedy new product development through core technology black-boxing and flexible, modularized designs. (Matsushita holds the No. 1 position in global market share for DVD recorders.)

This chapter provides a new point of view regarding the knowledge management and leadership theory of NPD, a high-tech field requiring the merging and integration of different technologies. As in-depth case studies, the author examines the dynamism of the knowledge creation process in NPD at Fujitsu Ltd., a traditional Japanese telecommunications manufacturer, as it merges and integrates the different elements of broadband network technology, computer and software technology, and multimedia processing technology. In a short period of time, a strategic team at Fujitsu, consisting mainly of undisclosed cross-functional middle managers transcending Fujitsu’s business divisions, formed SCs inside and outside the company, including customers, and then formed a network that transcended the SCs’ boundaries. In this chapter, the author identifies four factors that are important in integrating the different bodies of knowledge that various SCs have. This chapter also points out that the dialectical leadership of community leaders that form the leadership-based SC produces synthesizing capabilities as networked SCs, and that these capabilities integrate the knowledge that is the core technology of each SC, build a new business model, and create new knowledge in the form of successful NPD.

Recently, markets in the hi-tech field such as system LSI are suddenly in the process of being started up by Japanese semiconductor manufacturers and firms such as Canon, Matsushita Electric and Sharp, who are large Japanese manufacturers in the digital consumer electronics field. The characteristic points about these companies lie in the accumulated know-how resulting from core technical strength, thorough-going cost reductions and quality improvements due to production reforms. In the United States, on the other hand, the dynamic growth of dot-corn companies such as Intel, Microsoft and Dell and traditional American companies such as IBM and GE is eye-catching, though the characteristic points about these rapidly growing companies are that they are simultaneously pressing for and attaining inconsistencies in economies of scale, economies of scope, and economies of speed in their individual industries. Together with the development of ICT, when transaction costs and interaction costs are lowered, it becomes difficult to pursue three different economies at the same time, and the company is forced to specialize its business domain by ‘concentration and selection’ (Hagel and Singer, 1999). This is the proper argument for implementing strategy under established conditions.

This section discusses a new, practical viewpoint that was exhibited during the process of radical change within DoCoMo, as discussed in Chapter 3 and NTT in Chapter 4. Future research themes include whether or not the practical aspect of discontinuous transformation of these cases can be applied to other large corporations. It goes without saying that the actual discontinuous transformation method used by a specific large corporation depends on the environment, business type or form, and the existing organizational culture, as well as the value systems exhibited by top management, the leadership style, and so on. Based on the new perspectives obtained from the case studies, the following points are noteworthy in terms of the impact of innovation at other large companies as well.