March 23, 2017 10:00 am JST
Inside SoftBank

How Yahoo Japan cured its 'big-company disease'

The rebel who saw the promise of mobile and didn't want to waste it

TAKASHI SUGIMOTO, Nikkei staff writer

TOKYO -- The younger brother, by 15 years, of SoftBank Group CEO Masayoshi Son was recalling the first time he met Jerry Yang, co-founder of Yahoo Inc. of the U.S. The encounter came in 1996, and "the event changed my life completely," Taizo Son said.

Taizo entered the University of Tokyo after twice failing his entrance exam. Not yet knowing his calling, he kept busy playing music with a student band. At the end of his junior year, when he was preparing himself for corporate Japan's hiring season, he heard of his brother's plan to bring Yahoo to Japan in partnership with Yang.

Yang was his hero, so Taizo asked Masayoshi to involve his younger brother in the plan, even though he was still a student. That led him to work for three months in a SoftBank warehouse, where he also slept -- in a camping tent. It was there he met Yang, who was wearing a T-shirt and sandals in mid-winter.

Talking about a full-scale search service that was still missing from Japan, Yang said Yahoo's mission was to drop apples in front of future Newtons.

Yahoo Japan Corp., born of the hard work of the brothers Son, grew rapidly as a SoftBank subsidiary. In the 2000s, it was bringing in steady income, helping out while the parent company was struggling from the bursting of the Internet bubble and huge losses in its broadband operations.

In 2007, a wave of Internet-related innovation spread from Silicon Valley. After Steve Jobs announced that "Apple is going to reinvent the phone," a new mobile era dawned. Suddenly, hundreds of millions of people could carry the internet in their pockets.

Stay where I can see you

"Our management higher-ups don't understand anything," a frustrated Shin Murakami said. Murakami was developing mobile technology at Yahoo Japan. Wearing long permed hair, he didn't much look like a division head.

He stressed to his manager repeatedly that the time was right for mobile communications, i.e. smartphones. The manager cold-shouldered the idea, saying things like, "Who would use the internet on such a small screen?" Murakami argued how urgent it was to create content for such devices, but to no avail.

"Enough of this," he eventually told himself and handed in his resignation. Wanting badly to speak with then-president Masahiro Inoue, Murakami waited for him at the elevator at closing time. Inoue asked Murakami to join him for dinner. Hearing about Murakami's plan to leave Yahoo and start a mobile venture, Inoue snapped, "Yahoo has more than 1,000 employees, we have to fight in a way only a firm of that scale can."

Murakami snapped back, "Are you serious? Instagram changed the world with about five people. This is the age of mobile communications." The argument went nowhere, and the two parted ways in April 2011. Murakami was 34.

As he was leaving Yahoo, the head of the parent firm called Murakami over for a chat. "Stay where I can see you," Masayoshi Son told him.

I blew it!

Murakami knew just what Son meant. The SoftBank CEO was planning to discuss Yahoo with his in-house study group. Changes could be afoot.

Although Murakami had left Yahoo, he couldn't leave it alone. He would visit with former colleagues he thought of as underground mobile partisans. "I'll tell Mr. Son about all your aspirations," he promised.

The opportunity came on the evening of Oct. 26, 2011. With Son, Inoue and other SoftBank executives in the room, Murakami stood at a podium before a large screen. On it appeared a picture of a black woman and one Japanese word, "MOTTAINAI," a term that expresses a sense of loss when anything is wasted. The face was that of Wangari Maathai of Kenya, noted for her mottainai campaign to eliminate waste.

Murakami spoke: "Mottainai. What is being wasted is Yahoo's management system." This chilled the atmosphere. Son watched unaffected, his arms crossed.

"Yahoo is the top Internet company in Japan," Murakami continued. "But it fails to make the most of its excellent people."

Murakami declared that Yahoo Japan had big-company disease, then went on to his core issue -- the delay in shifting to mobile. He openly and repeatedly criticized the company, not holding anything back.

The effect of the presentation was unprecedented: It left Son speechless.

"I blew it!" Murakami thought.

Hacking your college's website

Despite Murakami's fears, Son was already stealthily acting in his favor. He had Fuminori Aono, who managed group companies, do some background research. Concluding that Murakami was right, Aono called and said, "Listen, Murakami. Whatever may happen soon, don't hide away."

About three months later, Murakami heard from an old college chum, Kentaro Kawabe, president of GyaO Corp., a Yahoo subsidiary.

Meeting at a cafe in Roppongi, Kawabe told Murakami, "Listen, Shin. Go back to Yahoo."

"What are you talking about?" he asked. "It's too late."

"Between you and me, Yahoo will completely reshuffle its management. Manabu Miyasaka will be president, and I'll be vice president and chief operating officer. Mr. Inoue will resign without becoming chairman."

"Are you serious?"

Later, the two met Miyasaka in a rented conference room. He would later push Yahoo forward under a new motto, "super-speed management."

Miyasaka told Murakami, "From now on, we'll shift everything to mobile. We need your help." He and Kawabe entrusted the pivot to the long-haired rebel. Murakami decided to return to Yahoo as chief mobile officer.

Murakami immediately gathered his unhappy employees, including engineers he knew were texting one another with their workplace complaints, just as he himself used to do. He also brought the underground hackers over to his side. Identifying them was easy. When he was a college student, he once took pleasure in hacking his university's website -- something he confessed to only because "the statute of limitations has run out."

A threat to the parent

As a third-grader in an elementary school, Murakami was a radio enthusiast who would frequent Tokyo's Akihabara electronics district. When the boy received his ham-radio license in the fifth grade, he mounted a radio and antenna onto his bicycle. Riding his mobile radio station along the banks of the Edo River, he won notoriety among radio enthusiasts. To be able to make connections with anyone, anywhere at any time made for a joyous boyhood -- and turned on Murakami to the promise of mobile communications.

With his new portfolio, Murakami started working to radically change Yahoo to embrace the smartphone. The results led to a new business: Y!mobile, the company's budget mobile brand.

Just before Christmas 2013, Murakami pitched Son an idea for the service. "What about 1,980 yen per one gigabyte?" he asked.

"We should think deeply about it," Son replied before eventually greenlighting what would become Y!mobile.

That cut-rate service designed by a long-haired rebel has grown into a market heavyweight that could even threaten SoftBank, its parent.

SoftBank Group Corp.

Japan

Market(Ticker): TKS(9984)
Sector:
Industry:
Technology Services
Information Technology Services
Market cap(USD): 83,029.33M
Shares: 1,100.66M

Yahoo Japan Corp.

Japan

Market(Ticker): TKS(4689)
Sector:
Industry:
Technology Services
Internet Software/Services
Market cap(USD): 24,316.01M
Shares: 5,695.57M

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