SoftBank: Beyond telecommunications

Background

From its humble beginning as a Japanese distributor of packaged software in 1981, SoftBank has successfully become not only one of the largest telecommunications service provider in Japan but also a highly reputable investor of the next leading ideas within the technology sector. Masayoshi Son, SoftBank’s founder and CEO, has been leading the group with a unique set of visions and has made a series of successful investments and acquisitions in order to take a step closer to achieving that goal. Latest key subsidiaries under the SoftBank Group, attached below for reference [1], show the scale of SoftBank’s business across different regions and verticals within the technology industry.

Business model

“People usually compare the computer to the head of the human being. I would say that hardware is the bone of the head, the skull. The semiconductor is the brain within the head. The software is the wisdom. And data is the knowledge…I want to be number one in the business of supplying wisdom and knowledge all over Japan.” [2]

From Masayoshi Son’s quote above taken from an HBR article published in 1992, it is apparent that he has always been focused on understanding the essence of a business and being able to thrive long-term. In fact, SoftBank’s business model has never explicitly stated anything about the telecommunications business per se, but rather maintained broad and flexible principles.

According to “SoftBank’s Next 30-Year Vision” announced on June 25, 2010 [3][4]:

Information Revolution – Happiness for everyone

• SoftBank works to comfort people in their sorrow
• SoftBank works to increase people’s joy
• SoftBank’s commitment to the future is to achieve information revolution leading to people’s happiness

 

Design corporate DNA leading SoftBank’s growth in the next 300 years

• Develop over the long-term by forming partnerships with the most superior companies at the time in the information industry
• SoftBank does not limit ourself to one particular technology nor one business model

Strategic synergy group [5]

• Centered on the Internet and mobile fields and expanding it on a global scale
• Self-evolution and self-multiplication

Successors for the next generation

• SoftBank Academia started on July 28, 2010 to discover and train successors for the next generation of the SoftBank Group

Operating model

Success of mobile internet business [6]

SoftBank acquired Vodafone’s Japanese subsidiary in 2006 when the market was already dominated by the two leading players: NTT Docomo and KDDI. Masayoshi Son, foreseeing that mobile internet will outpace the rest of the existing portfolio of services such as fixed-line and broadband, made a bold move into what seemed to be at that time a guaranteed failure. However, just a year after the acquisition SoftBank secured the largest share of market net adds.

• Synergies with existing business: utilized infrastructure, brand and customer base from fixed-line and broadband business to offer competitive and differentiated price and marketing
• 3G focus: SoftBank rightly believed that data services will become increasingly important even when its competitors were still focused on competing in the voice services. SoftBank expanded and upgraded its 3G network much faster than any other, and offered bundled, cost effective tariff strategy
• Introduction of iPhone: SoftBank was the first operator in Japan to offer iPhone, and it gave SoftBank a three-year head-start which was very important in establishing an Apple friendly user base

Effective use of capital combined with industry insights

• Maintains a strategic interest in Yahoo Japan even after its highly profitable IPO
• Acquired Gungho and Supercell as part of SoftBank’s strategic focus on mobile
• Invested in Alibaba when it was still a small startup, which turned out to be a huge success
• Pursued other numerous investments and acquisitions around the world, looking for the next big opportunity (e.g. multiple taxi-hailing apps in different countries)
• Announced sale of Pepper, a personal robot designed to read and have emotions

Overseas expansion

• Recently acquired Sprint in order to expand into the U.S. market
• One of very few Japanese companies that offer fully-translated English websites and services

Conclusion

SoftBank’s flexible, broad, yet visionary business model is complemented by its nimble operating model that supports Masayoshi Son (and his management team) to make bold moves into identifying the next opportunity for SoftBank to thrive in the long run. Although its past success does not guarantee its future success, well-aligned business and operating models will allow for timely modifications to its strategic roadmap even if it were to face difficulties or challenges in the future.

 

Sources:

1. http://www.softbank.jp/en/corp/irinfo/about/outline/
2. https://hbr.org/1992/01/japanese-style-entrepreneurship-an-interview-with-softbanks-ceo-masayoshi-son
3. http://cdn.softbank.jp/en/corp/set/data/irinfo/presentations/vod/2010/pdf/press_20100625_01.pdf
4. http://www.softbank.jp/en/corp/about/philosophy/vision/
5. http://www.softbank.jp/annual-reports/2014/en/group/
6. http://www1.huawei.com/en/about-huawei/publications/communicate/hw-079384.htm