Int. J.

of Human Resource Management 12:6 September 2001 1062–1084

Creating new business through strategic

community management: case study of a
multimedia business

Mitsuru Kodama

Abstract For the last few years, the videoconferencing system and multi-point
connection service market represented by multimedia technology have enjoyed strong
growth in Japan. Behind the recent upturn in this market was the strategic alliance of
NTT, Japan’s largest telecommunications carrier, and PictureTel of the US, followed by
the birth of business communities centred around or outside NTT, thus intensively
creating and boosting a new market referred to as interactive video communication.
This article reviews the challenges that faced NTT, one of the big businesses in Japan,
followed by PictureTel and other players within and outside NTT, all of which were lined
up to create various strategic business communities. The article gives careful considera-
tion to the measures taken by these players who achieved success in such a way as to
alter employee consciousness, vitalize organizational morale, entrench the new NTT
‘Phoenix’ brand (videoconferencing system) in the Japanese market and create an
emergent new video multi-point connection network service market. And it was under the
innovative leadership of community leaders that communities’ core competencies were
elevated, and innovation of the multimedia business achieved, as a function of the
creation and harmonization of new value outlooks within the business community, inside
as well as outside the companies.

Keywords Innovation; community; leadership; competence; IT.

Introduction
It is a truism that large, established companies must continually evolve by engaging in
various forms of innovation. Particularly in light of the advent of the knowledge
society, businesses are faced with a large transition from focusing solely on developing
products and services to also strategically innovating to improve their business
processes.
Innovation is a process that can occur in the course of carrying out various business
activities, such as product and service development, marketing, manufacturing, sales,
distribution and after-sales services. It occurs not only in the course of improving and
expanding existing ventures, but also while creating new businesses and ventures
(Kanter et al., 1997).
This article will describe strategic community management for large established
companies, implemented through the creation of various strategic business communities
(hereafter strategic community creation).

Mitsuru Kodama, Community Laboratory, 6-2-21 Schin Machi Hoya Shi, Tokyo 202 0023,
Japan (e-mail: m-kodama@mbe.sphere.ne.jp).
The International Journal of Human Resource Management
ISSN 0958-5192 print/ISSN 1466-4399 online © 2001 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/09585190110063624
 Kodama: Creating new business through strategic community management 1063
The key to strategic community creation is an exceptional leader in the company
(referred to in this article as a community leader) with the heart of an in-house
enterprise intra-preneuring promoter (e.g. Bechard et al., 1996), who uses his
innovative leadership to create strategic communities, both within and outside the
company, and to promote strategic businesses. The community leader creates strategic
communities, applying such methods as forming in-house business communities,
entering strategic partnerships with other businesses, and outsourcing strategically; last,
but not least, he forges interactive business communities, sometimes with customers.
The community leader sees to it that this collection of strategic communities works
together organically, manages it comprehensively and, in so doing, gives rise to
business innovations that are well suited to large companies.
The article will take up, as model case of the use of strategic community management
in business, the expansion of Japan’s multimedia communication market achieved by
Nippon and Telegraph and Telephone, Inc. (hereafter, NTT), Japan’s largest tele-
communications carrier, over roughly the past four years. The article will explain how
NTT cultivated this new multimedia market, which was spawned from its creation of
business communities (both internal and external) using strategic outsourcing and
various strategic partnerships with business in other industries.

NTT’s multimedia business (a case study)1

Expansion of the videoconferencing and multi-point connection service market in

Japan

During the 1994 New Year’s holidays, the then-president of NTT made the following
announcement: ‘NTT is going to transform itself from a telephone company into a
multimedia company!’ It was a time of great change, as NTT, with its forty-eight-year
history in the telephone-based network business, was facing a future of creating new,
multimedia-based businesses. Against this background, a small-scale multimedia
promotion organization was inaugurated within the structure of the NTT main ofŽ ce
staff.
At the time, NTT’s basic policy for promoting multimedia was to begin by utilizing
existing, currently usable network technology to offer multimedia services to its
customers. The policy NTT worked out was called ‘Multimedia for Today (Now-
ISDN)’. It utilized an ISDN2 multimedia network-compatible communications scheme
as a platform, and offered customers various application services based on this
platform.
NTT promoted the popularization of ISDN-based videoconferencing systems and
videophones, i.e. video communication terminals,3 the most typical application. At the
NTT of that time, the establishment of a new business in video applications, which were
almost unheard of in the Japanese market, was a large issue.
At Ž rst, three employees, including a manager, set to work drafting a plan for
establishing a market for ISDN-based video communication. Their vision was the
construction in Japan of a new video-communication-based video culture, from the
country’s telephone-based communication of the past. They were presented with
innumerable business problems, a sampling of which follows:

c The development of a low-cost, high-quality desktop video conferencing system for

the business market.
1064 The International Journal of Human Resource Management

c In promoting the video terminals that NTT was to develop, what sort of business
formation would facilitate sales, maintenance and after-sales service?
c How could the sales and technical skills of the company’s employees be heightened
to facilitate marketing, sales, installation, maintenance and after-sales service for
these new video terminals that NTT had never before handled?
c How was NTT to go about popularizing the video terminals it would produce?
c How was the company to go about bringing into existence and offering to customers
these new, video-terminal-based, video-network services (multi-point connection
service)?
At the time, moving forward with these products was a nearly impossible task for just
a few employees. But the motive force behind these video-based businesses turned out
to be community management based on the creation of strategic communities within
and outside the company that related to each individual business process, including
development, marketing, sales, maintenance and after-sales service.
In other words, a community leader in NTT headquarters’ Multimedia Promotion
Department demonstrated innovative leadership in utilizing the relationship of empathy
and resonance he had built with other leaders, both within and outside the company, to
create various business communities. He managed these several business community
groups simultaneously, and worked to promote video multimedia through the creation
of new businesses as shown in Figure 1.

Figure 1 Strategic community creation at NTT

 Kodama: Creating new business through strategic community management 1065
Systematically creating strategic communities
Various organizational methods have received attention for allowing large companies
somehow to achieve signiŽ cant strategic innovations (Markides, 1998). Their common
essence is the idea of a strategically minded innovator in a large company constructing
an organization distinct from the main company’s, in order to support strategic
innovation. This can be done by building an organization contained within, but separate
from, the main organization (Figure 2, Pattern 1) or by establishing a separate
subsidiary (Figure 2, Pattern 2), to give two examples. However, while these
organizational patterns are extremely effective for strategic innovation, there are always
problems. This is due to issues related to joining and achieving long-term harmony
between the cultures of the old and new organizations. Overcoming these problems
requires vigorous leadership from top management and a revolution in corporate
culture.
To promote the kind of strategic business innovation that leads to the long-term
development of such phenomena as continuous organizational invigoration and new
business creation, the important issue is not how to engage in strategic business
practices and operations using only the company’s internal resources (knowledge and
talent). Rather, the important issue is how to create strategic communities based on
collaboration (including virtual collaboration through IT-based networks) or various
external (human) resources, including customers, so as to develop innovative busi-
nesses, such as this case study (Kodama, 1999a).
In this subsection, the article will describe three points that comprise the important
elements of strategic community management shown in Figure 1. They differ from
the processes of strategic innovation-based management shown in Figure 2, Patterns 1
and 2.
Point 1 is: rather than investing new resources in various separate organizations that
will promote strategic businesses in a self-sufŽ cient manner, as per Patterns 1 and 2,
having an exceptional, ambitious community leader use his in-house network of

Figure 2 Forms of strategic innovation in large companies

1066 The International Journal of Human Resource Management
personal relationships to create a new, strategic community within the company, and in
so doing lay the foundation for moving forward with new, strategic businesses within
the existing organization. This allows the strategic community of the new business, with
its new corporate culture, to bring about a new strategic mind-set in the many
employees of the company’s other organization, who retain the old corporate culture.
In other words, it allows the new strategic community to play the role of a catalyst
that joins and harmonizes the new and old corporate cultures. (See Figure 1,
Community A.)
Point 2 is that the community leader obtain, through strategic outside partnerships
and outsourcing, the resources (knowledge and talent) needed to promote strategic
business creation externally, and that he make use of the relationship of empathy and
resonance he has built with leaders in other businesses to create an external strategic
community. A further important subject is the creation of business communities through
strategic partnerships with businesses in other industries, with the goal of Ž nding new
markets and expanding existing markets for products and services generated in the
strategic creation of new businesses. The community leader must discover and search
out key people in businesses in other industries, and then work with them to cultivate
and expand new markets. Strategic joint development, sales partnerships and out-
sourcing formed with businesses in other industries are examples. (See Figure 1,
Communities B1, B2, B3.)
Point 3 is for the community leader to use his innovative leadership to manage
several groups of strategic communities, of the two types described earlier, simultane-
ously and in a comprehensive manner. The community leader must also work to
facilitate the continuous sharing, creation and renewal of community competencies (in
this article, core competencies within strategic communities will be referred to as
community competencies) within each of these individual business communities
(Kodama, 1999b).
Accordingly, the ambitious community leader, who is primarily engaged in
promoting the creation of strategic businesses, and as such plays an important role, not
only has to rely on his own power continually and systematically to create strategic
communities, using the relationships of empathy and resonance he has built with leaders
within and outside of the corporate structure, including relationships with leaders in
other industries, but at the same time comprehensively to manage these multiple
strategic community groups(Kodama, 1999c).
The community leader perceives the confederation of these various, sometimes
customer-inclusive, strategic communities, located both within and outside the corpor-
ate organization, as a virtual corporation, and strategically promotes its businesses.

The creation of a strategic community with PictureTel Corporation of America

(Community B1 in Figure 1)

Developing a core engine for multimedia services

Joint development of Phoenix Multimedia Conferencing System, a world Ž rst In

February 1995, NTT agreed to form a strategic partnership with PictureTel Corporation
(headquartered in Boston in the USA), which had a track record of achievement in the
core multimedia Ž eld of video communications. The partnership’s purpose was the joint
development of a next-generation desktop videoconferencing system to be called
Phoenix (Nihon Keizai Shimbun, 1995). Many manufacturers in Japan and abroad were
 Kodama: Creating new business through strategic community management 1067
already selling ISDN-based videoconferencing systems, but, even for the time, product
prices were high, on the level of one million yen for a desktop model and several
million yen for a room-type videoconferencing system. Not only the unfamiliarity of
videoconferencing systems’ operation methods, but also these prices themselves, could
be counted as among the reasons videoconferencing had yet to take off.
For NTT, the objective of the strategic partnership with PictureTel was to ignite the
Japanese video-terminal market at a single stroke and at the same time to launch the
new videoconferencing system as a Ž gurative tractor to pull Now-ISDN. NTT’s target
unit sales price was set at under ¥200,000. This pricing brought major changes in the
desktop videoconferencing system market.
The key factor behind the success of this strategic alliance was the empathy and
resonance for the sense of value felt by the leaders of both NTT and PictureTel. The
corporate philosophy of PictureTel is ‘RedeŽ ne the Way the World Meets’.
NTT introduced the multimedia communication infrastructure referred to as ISDN,
which is readily available today for a wide range of customers and large number of
uses. It was intended for use in not only the business sector but also in the Ž elds of
education, medicine and welfare. In the telecommunications sector, the urgent need of
the world’s telecommunications carriers was transition or shift from a diminishing
returns-type business model centred on conventional analogue telephone trafŽ c to a
stepped-up return-type business model of non-telephone trafŽ c centred around digital
video and data. In the area of cyber businesses supported by multimedia which merge
networks, content and a variety of applications, there was a strong possibility of
creating new businesses triggered by diverse alliances concluded among companies and
organizations in different lines of business.
Alliance in the multimedia arena adopts a style wherein each organizational person
from alien corporate climates forms a community in which persons liaise and gel with
each other to fulŽ l their business. The leaders involved in this project are required to be
always innovative and to have a strategic concept and energy.

The creation of strategic communities within and outside NTT

Establishing an organization for business promotion

Strategic community creation within the company establishing an in-house sales

organization (Community A in Figure 1) The task confronting the community
leader of the Multimedia Promotion Department, which at that time had no sales
organization, was to create a business community to include the sales departments of
NTT branch ofŽ ces and branches throughout Japan, for the purpose of outsourcing the
marketing of the Phoenix. It was necessary to foster a deep understanding of and
feelings of empathy towards the Phoenix in the many NTT employees who had never
before handled video terminals.
A group of community members, mostly made up of community leaders, used
product explanation meetings, training meetings and other educational activities,
throughout the approximately six months leading up to release, to bring about a
revolution of employee consciousness as it related to popularizing multimedia
terminals. (NTT had trained approximately 1,000 employees in sales and technology by
the time the Phoenix went to market.)
Using straightforward instructional activities, a group of community members,
chie y community leaders, cultivated personnel in ofŽ ces through Japan who would
1068 The International Journal of Human Resource Management
act as key people. Thus, through activities to motivate employees to promote the
sales of these new products, a virtual business community was formed among NTT
headquarters’ Multimedia Promotion Department, NTT’s branch ofŽ ces and NTT
branches. The new corporate culture possessed by this new business community gave
rise to a new, innovative mind-set in other employees who were immersed in the old
corporate culture. As a result, this virtual business community has now expanded
greatly, and the Phoenix is positioned as the video multimedia product that represents
NTT.

Creation of strategic communities within the company and the establishment of a

service-front system (Community A in Figure 1) In response to various inquiries
arising from Phoenix users with regard to technical issues and network faults, one of the
major issues the community leader at the Multimedia Promotion Department had to
deal with was how to establish a sales system while at the same time creating a
strengthened complaints department backed by a nationwide network of service-front
desks.
At the time, the ISDN service centre or 113 service centres (forty front desks across
the country) were answering inquiries about technical problems with ISDN terminals
and ISDN lines and accepting troubleshooting requests. The community leader at NTT
headquarters Support Department and the Multimedia Promotion Department, which
exercised overall control over those nationwide ISDN service centres, formed an in-
house business alliance and began accepting Phoenix service-front applications at ISDN
services centres spread across the country.
At Ž rst, employees felt unrest and were embarrassed about the new technology and
products. To counter this, community leaders worked hard on improving employee
skills and conducted patient personnel training as part of on-the-job technical training or
nationwide brieŽ ngs intended for each ISDN service centre. The actions of these
community leaders also contributed to the creation of important in-house strategic
communities in line with the establishment of the sales network.

The creation of strategic communities outside the company

Enlarging extra-corporate sales channels and establishing a maintenance

organization (Communities B2 and B3 in Figure 1)

To boost sales through channels other than those funnelled from NTT sales departments
in branches and stores, NTT entered into sales tie-ups with Otsuka Shokai, a major SI
vendor, and LAOX, a PC and home appliance volume retailer, so as to accelerate the
expansion of sales channels. Outside agency agreements with about 100 companies
were successfully concluded before initiating sales of Phoenix. NTT entered partner-
ships with companies in its group to outsource maintenance and after-sales service
strategically. This was an example of strategic outsourcing within the NTT group for
the purpose of sharing and accumulating within it knowledge and expertise related to
the Phoenix. NTT utilized this outsourcing arrangement to offer its video-terminal
customers a high-quality service package that included maintenance and after-sales
service.
Through business community formation by means of extra-corporate sales-, main-
tenance- and after-sales-service-related strategic partnerships and outsourcing, NTT
built the foundation for a Ž rm Phoenix business formation.
 Kodama: Creating new business through strategic community management 1069
Support for inside and outside communities over the new video information
networks To support the strategic community groups both within and outside NTT
that were associated with sales, maintenance and after-sales services, the community
leader at NTT headquarters’ Multimedia Promotion Department introduced desktop-
type videoconferencing systems and groupware to interconnect the communities,
linking within and between them with ISDN and the Internet in the form of a new video
information system (referred to as the Phoenix Customer Service Network).
The goal was to provide high-quality customer services through a virtual community
that was created using the Phoenix Customer Service Network. SpeciŽ cally, the mode
of application was, Ž rst, the accumulation and sharing of sales and maintenance
information within and between each community, for example, sharing of customer
information or fault case information. In addition, customer needs and product and
system improvement requests were promptly collected, stored in a database and shared.
The second mode of application was to operate a sales/maintenance information
exchange and conduct nationwide virtual conferences. For example, information is
distributed between sales branches or to community members at multipoint video-
conferences that link ISDN service centres, and interactive exchange of information is
actively worked out so as to enhance the value of the information. The third mode of
application is personnel training intended as follow-up training, to be conducted
following product brieŽ ngs through remote training via the videoconferencing system,
or as part of mass training.
The introduction of the system allowed community competencies such as informa-
tion, knowledge and know-how within and between the communities to be efŽ ciently
accumulated and shared, and, at the same time, allowed the business cycle, comprising
multimedia sales, maintenance and after-sales service, to cycle smoothly in the form of
leadership support tools for the community leaders.
The determination to introduce these large video information network systems was
encouraged through prompt decision making by the community leader at the
Multimedia Promotion Department and innovative-type leadership.

Sales begin in Japan of world’s Ž rst multimedia conferencing system In March

1996, NTT began selling Phoenix, the world’s Ž rst Windows 95- and PCI local bus-
compatible, desktop-type multimedia conferencing system, with the hope that it would
be the killer application to make ‘Multimedia for Today (Now-ISDN)’ a reality (Nihon
Keizai Shimbun, 1996). Phoenix was truly a world Ž rst and a Ž rst in Japan among
multimedia products, in terms of both its cost and its functionality. Its amazingly low
cost of ¥198,000 redeŽ ned multimedia and established a videoconferencing market in
Japan in a single stroke.
Upon the sale date, the vice-president, then president of NTT (President Mr Miyazu)
presided over a Phoenix sales kick-off ceremony at LAOX’s ‘The Computer’ Shop in
Akihabara, home to Japan’s largest computer electronics shopping town (Nikkei Sangyo
Shimbun, 1996). The impetus to move the top leader of big business stemmed from
innovative leadership centred around the community leader at the Multimedia
Promotion Department in an approximately one-year endeavour extending from the
formation of tie-ups with PictureTel to the launch of sales. The community leader
created a group of strategic communities within and outside the main organization in
order to vitalize each organization within NTT and reform consciousness in an effort to
encourage community members to promote multimedia businesses. The Phoenix’s sales
for 1997 amounted to a 70 per cent share of the Japanese market for desktop
videoconferencing systems (Fuji Chimera Research Institute, 1998). (See Figure 3.)
1070 The International Journal of Human Resource Management

Figure 3 Phoenix vitalizes the Japanese videoconferencing market

Phoenix is currently positioned as a video multimedia product representing NTT.

Phoenix quickly evolved, in a succession of upgrades, from the initial NEC-PC98
model to a DOS/V model (Nihon Kogyo Shimbun, 1996) and NEC-PC98/DOS
integration models (Nikkei Sangyo Shimbun, 1997c). And the success of Phoenix, which
was formed as part of a strategic alliance with PictureTel, was achieved through the
introduction of a new product onto the market. That is, commercialization and sales of
room-type videoconferencing systems referred to as Phoenix WIDE (Nikkei Sangyo
Shimbun, 1997a) triggered radical price-cutting sales that swept the room-type
videoconferencing system market, having much the same impact as the original
Phoenix. At present, Phoenix WIDE has come to command an impressive 50 per cent
share of the room-type videoconferencing system market.

Results achieved by communities

Figure 4 shows activities by each community (A, B1, B2 and B3) in chronological
order.

Achievements by Community B1
Achievements by Community B1 are roughly divided into three. First, in order to create
a new video culture in Japan called video communications, it developed a new high-
quality, low-priced Phoenix videoconferencing system accepted by many customers. As
NTT and PictureTel were working out the details of the contract, the community
Kodama: Creating new business through strategic community management 1071

Figure 4 Activities by innovation communities

1072 The International Journal of Human Resource Management
successfully determined the technical speciŽ cations of the new product and made
decisions on the procurement contract terms within about Ž ve months. In the joint
development process after the contract was signed, NTT’s community members stayed
in the US for a long period to execute a development project by co-operating mutually
on various issues. Activities included technical discussions on creation of a prototype,
quality checks on software that has complex and various functions, localization into
Japanese and creation of technical manuals and user manuals. Needless to say,
information sharing and dispatches were actively performed via the latest communica-
tion tools at that time, including the Internet and TV conferencing. As a result, for the
Ž rst time anywhere in the world, Phoenix, a desktop-type multimedia conference
system, was born in Japan. The second achievement was commercialization of an
updated version of Phoenix (DOS/V model and PC98/DOS integration models) and a
new line-up of products (Phoenix WIDE). The third achievement was that a business
was established for a one to multiple location video communication service derived
from 1-to-1 video communications including the Phoenix videoconferencing system.
Details of this will be discussed later.

Achievements by Community A

Community A achieved the following Ž ve points. First, it established a sales structure

for the NTT Sales Department (branches) at about 200 locations nationwide. Core
community members at each branch promoted Phoenix sales in each area. Second, it
established a customer-service counter structure at the service-front centre at about Ž fty
locations nationwide. The centre at each area provided centralized customer services to
handle inquiries and troubleshooting, etc. Third, it provided training for new
technologies, sales know-how and skills to about 1,000 sales staff and service-front
staff (in the six months before NTT began selling Phoenix). For this training, a special
training facility was constructed in three months and staff were reinforced in their
ability to provide meticulous knowledge, know-how and skills training. Fourth, it
established a database of sales information, customer needs and technical information
through the Phoenix customer-service network that connects Tokyo and the service-
front centres that are the sales base in each area, and promoted sharing of information,
knowledge and know-how among communities using both Phoenix and the Internet.
Fifth, as a noteworthy achievement, the sales team successfully expanded sales
applications for Phoenix. That is, it developed new usage for videoconferencing by
attempting to sell the videoconferencing system not only for the usual corporate
meeting purposes but also for distance learning, telemedicine and the welfare Ž eld.
Details of this will be discussed later.

Achievements by Communities B2 and B3

NTT entered into a sales agent contract with about 100 outside sales companies
including large mass merchandisers and large sales companies, and NTT and sales
agent communities set up a product package called Phoenix1 PC1 ISDN to promote
sales to ordinary households using a discount method. In this all-in-one product, the
Phoenix board and software are preinstalled and necessary devices for ISDN line
connection are bundled. This type of product held great advantages for users because,
without special knowledge and skills, anybody could easily perform TV conferencing
by simply turning the power of the system ON and connecting it to an ISDN line. With
the Phoenix system installed in all-in-one package integrated with an ISDN line and
 Kodama: Creating new business through strategic community management 1073
strategic outsourcing to NTT group companies, technical know-how and skills were
handed down in order to promote customer services (installation and maintenance)
provided by all group companies.

Expanded usage of ‘Phoenix’ in education, medical and welfare Ž elds

The strategic alliance between NTT and PictureTel was a big trigger for the
dissemination of videoconferencing systems in Japan. Furthermore, as a contribution by
Phoenix in other Ž elds, the communities not only expanded the use of Phoenix in virtual
conferences in the corporate business Ž eld but also in the education, medical and
welfare Ž elds as well, and constructed new business models that used IT and
multimedia. According to Figure 5, ‘Forms of multimedia services in the education,
medical and welfare Ž elds’, about 35 per cent of the use is in these Ž elds. A typical
example in each will be discussed in the next section.

Language study (see Figure 5a)

With the onset of a true international era, the necessity and needs of language education
are rising. In June 1997, NTT and the Foreign Broadcasting Centre Corporation began
a ‘multimedia remote language education’ service, with corporate co-operation, which
connects the Foreign Broadcasting Centre with corporations and carries out language
training, using Phoenix systems (Nikkei Sangyo Shinbun, 1997b).
The Foreign Broadcasting Centre has been carrying out internationalized training
from 1978 with ‘Try It Yourself in English (TIY)’ in 350 major Japanese corporations
with the aim of ‘personnel training for the internationalization of Japanese
corporations’.
TIY does not have traditional class lessons; rather it is a system in which the foreign
teacher in charge provides instruction directly on a one-to-one basis while recording all
telephone conversations and report corrections on a ‘personal chart’ (class record), all
of which is on an individual level. As TIY does not have any time restrictions, it is ideal
for busy corporate personnel who do not have time to attend class lessons or an English
language school, and it supports interactive ‘multimedia remote language education’
that provides higher training effects through the combination of Phoenix and TIY. With
the launch of a Chinese language training multimedia remote language education
service predicted, the Foreign Broadcasting Centre will be able to offer more than only
English training.

Emergency medical services4 (see Figure 5b)

At the site of a medical emergency, a small delay in treatment may have life-threatening
consequences. Depending on the patient’s symptoms, supporting physicians may be
called in from other hospitals, and three or four physicians might handle the treatment
of a patient with complicated injuries. An information network by which information on
the patient’s condition can be exchanged via real-time video is effective for providing
the correct treatment. To accomplish this, the Tokyo Women’s Medical University has
built Phoenix that links the Tokyo Women’s Medical University’s Emergency Rescue
Centre to seven hospitals across Japan from which the centre dispatches physicians,
enabling centre physicians to provide support while viewing video of the conditions of
patients who have been brought to other hospitals.
 1074
The International Journal of Human Resource Management

Figure 5 Forms of multimedia services in the education, medical and welfare Ž elds
 Kodama: Creating new business through strategic community management 1075
Sign language support service (see Figure 5c)
‘Sign language support service’ is a service whereby sign language interpretation can be
performed by connecting to a sign language support centre through Phoenix and, using
both sound and the screen, it provides assistance in corporations, community
organizations, hospitals and department store counters, etc., should it be necessary to
speak in sign language.
Japan is one of the world’s aging societies, and, if elderly people who are hard of
hearing are included, there are said to be six million hearing-impaired people in Japan.
Any barriers that hinder the hearing impaired from being independent and involved in
society must be removed in order to have a society in which it is easy for people to live.
In the case of the hearing impaired, most conversation with the able hearing is written,
and it is not uncommon for people to be accompanied by a sign language interpreter
when the conversation is necessarily complicated.
It is on this point that Phoenix systems are convenient for many people, with the
hearing-impaired person speaking in sign language to the screen and the hearing-able
person conŽ rming the sign language interpretation by voice. The multimedia era is not
a simple boom: it is something that will help to solve each problem within individual
lifestyles, company activities and administrative services.
Test trials at hotels, banks, department stores, hospitals, police boxes and welfare
ofŽ ces within the Tokyo metropolitan area were begun in February 1997, and, at the
peak, there were between twenty and thirty people using the Phoenix system each day,
with reasons for use being from giving hearing-impaired people directions at police
boxes to inquiries regarding childbirth costs at hospitals (Mainichi Shimbun, 1997;
Nihon Keizai Shimbun, 1997b).
As explained above, universities, special schools, language schools, hospitals, social
welfare centres and other proŽ t and non-proŽ t organizations, such as local governments,
now became able to provide content and applications for the education, medical and
welfare information owned by each organization to end-user customers as multimedia
services using the ISDN digital network and the Phoenix videoconferencing system as
a multimedia communications platform. This was the birth of a totally new business
model.5

The creation of an NTT Phoenix-based video-network service market

Background
A diversity of emerging businesses in the multimedia arena have capitalized on the
Internet, ISDN and other information networks that have accompanied progress in IT
and multimedia technologies. This trend stems from the development of businesses
centred around large enterprises and accelerated by various strategic alliances between
heterogeneous businesses in the multimedia sector, and from the development of new
businesses promoted by venture companies that combine their core competencies.
The videoconferencing market has experienced explosive growth over the past six
years. With the advent in the last few years of so-called desktop-type videoconferencing
systems that run on PCs, videoconferencing is Ž nding its way into not only large
enterprises but also medium to small enterprises and other businesses. Recently,
videoconferencing systems have grown into a new and promising telecommunications
medium, transcending the conventional realm of ‘conferencing’ and evolving into such
high-tech implementations as data conferences and videoconferencing in LAN
environments or via the Internet (Kodama, 1999a).
1076 The International Journal of Human Resource Management
Unlike conventional point-to-point conferencing systems, currently available MCUs
(Multi-point Connection Units)6 allow videoconferencing to be conducted through the
linking of three or more locations at a time; however, due to the expense of MCUs and
the complexity of system operation, with the exception of some leading-edge
companies, multi-point videoconferencing systems have not enjoyed popular support.
Under such circumstances, international telecommunications carriers and system
vendors are endeavouring to launch ‘multi-point connection service’ businesses as a
means for the user to implement multi-point videoconferencing without the need to
purchase or otherwise acquire MCUs.

Current status of multi-point connection services around the world

In the US, the total number of large-to-small videoconferencing systems is expected to
top the three million mark by the year 2000 (Dataquest, 1997). This is similar to the
videoconferencing system situation in Japan, where they are expected to grow to an
impressive 400,000 units (Fuji Chimera Research Institute, 1998). The growth of multi-
point connection services and proprietary ownership of MCUs will also accelerate.
With regard to multi-point connection services, AT&T began providing services in
1994, followed by a number of other companies, including MCI and Sprint. Worldwide
service is also available outside the US market. In Europe, on the other hand,
telecommunications carriers are focusing their services on the domestic market, with
MCU connection fees averaging $50 to $60 per hour per terminal.
Based on such service trends worldwide, NTT and PictureTel immediately began
incubation after launching sales of Phoenix (in March 1996) in order to establish a new
video-network service business unique to Japan. A trial multi-point connection service
was provided to customers who purchased Phoenix, and various customer requests,
including quality, charge and services, were collected. Then, in July 1997, sixteen
months later, the communities established a joint venture company, NTT Phoenix
Network Communication Inc. (hereinafter referred to as NTT Phoenix),7 consisting of
inter-professional companies including NTT and PictureTel.

The advent of world’s largest multi-point connection service and its impressively low
charges
NTT Phoenix opened Ž fty-two access points across the country, permitting video-
conferences linking a maximum 1,000 terminals. Its nationwide  at rate of ¥40 for three
minutes per terminal (about $7 per hour) is unrivalled in the world.
Multi-point connection services permit discussion among multiple, variously located
participants, and, because they permit participants to see one another’s facial
expressions (i.e. emotions, etc.) on television monitors, they are drawing attention as the
ultimate tool for deepening communication, speeding and bringing efŽ ciency to
decision making and contributing to the curtailment of the various expenses involved in
business trips and holding conferences.
Regarding members’ use of the service, membership began expanding rapidly in
1998, with corporate users forming the core growth area, and momentum provided by
various company presidents’ use of the service for conveying beginning of the year
greetings during the 1998 New Year’s holiday. In addition to use for regular meetings
and internal communication at various companies, the service began to be used for non-
meeting applications such as seminar relay services, distance learning services, wedding
ceremony relay services and franchise store management. By March 1999, 1,000
corporate members were using the service, 70 per cent of users were from general
 Kodama: Creating new business through strategic community management 1077
companies unrelated to NTT and its corporate group, and the service’s usership, while
centred on the manufacturing and distribution industries, covered a wide spectrum of
industries. Not only did this multi-point connection service promote the expansion of
multi-point connection service videoconferencing, it also contributed signiŽ cantly to the
ISDN trafŽ c of parent company NTT. By March 1999, total usage time for the service
had reached nearly 25,000 hours, and interviews with customers were re ecting the
popularity of the service’s ease of use and low cost.
NTT Phoenix offered the various modes of use of the multi-point connection service
such as seminar relay service, large-scale multipoint meetings, distance learning,
telemedicine, wedding ceremony relay service and so on. NTT Phoenix went on to start
new services, central among which were a multi-point connection service to respond to
customer requests for more types of meetings and higher quality, and a service focused
on the delivery of various types of content using Video On Demand (VOD). As for
speciŽ c new services, it aggressively expanded its offerings to videoconferencing
system users to include a multi-split screen/high-speed multi-point connection, among
other things.

Discussion

Creation of strategic communities through innovative leadership by community

leaders
The key factor in NTT’s multimedia strategy to establish a video-communication-based
multimedia market such as a videoconferencing system and multi-point connection
service is business innovation through the creation of a wide variety of strategic
communities. The key points in successfully creating strategic communities are
achieving empathy and a harmony of values among all leaders (the community leaders
forming the core of the strategic partnership-based community) in both of the
community’s constituent organizations.
In these business cases, the organization leaders educated in a framework of Ž xed
decision making and organizational behaviour within the existing and disparate
organizational cultures were dependent on the harmonization of their value systems,
based on the vision of ‘universally providing an environment and opportunity for
multimedia-based video communications to a multitude of individuals’. This harmon-
ization of value systems was a new motivational force for inspiring community leaders
to establish video-based businesses.
The grounding of community leaders must include innovative leadership elements
based on strategic thinking and the ability to act. In other words, this refers to the
strategic thinking and action of the community leaders (seen in this business case) who
will build a new video culture based on multimedia network-based video communica-
tions, from a strategic viewpoint founded on long-term trends with a keen eye on long-
term prospects.
For business strategies in today’s bewildering business environment and techno-
logically revolutionary Ž elds at the leading edge, such as multimedia, it is especially
important for community leaders themselves to think, and to possess a dynamism and
subtlety in their strategic actions, as well as an enhanced business sense.

Formation of a value-harmonized platform in a strategic business community

If innovation is to be achieved based on the creation of a strategic business community,
it will become important to form an intra-community value-harmonized platform
1078 The International Journal of Human Resource Management
involving all the community members. What is here meant by ‘value’ corresponds to
the idea, thought and spirit of the entire community respecting the vision and concept
upheld by the community leader, with a view to business achievement by the
community.
What we have observed, through this case study, of the value harmonization process
may be summarized as follows: in order to have the value outlooks of all the
community members resonate, a shift becomes necessary from the existing set of values
(or old values) to a new set of values. A value-harmonized platform is created through
the four-tiered process of ‘sharing, contact-triggered inspiration, creation and reso-
nance’ of value outlooks (Figure 6).
The sharing of value outlooks, the Ž rst step, provides the stage for studying and
understanding the new value outlook (idea, thought and spirit respecting the vision and
concept introduced by the community leader) in the light of which the community
members have indicated the direction in which they feel the community should be
headed. In the case of strategic alliance with, or strategic outsourcing to, an outside
party, this Ž rst step will provide a stage also for the two partners to understand and
study each other’s corporate value outlook and management vision. Community
members study the difference between the existing value outlook and the new one
through constructive conversations with community leaders so to arrive at an
understanding of the essentials of the new value outlook.
For example, for a community member in Community A (in-house community) in
Figure 1, who has for many years been handling the staid, old market for analogue
telephone business which no longer promises proŽ tability for the future, the new
multimedia business dealing in digital applications, PCs, video-networking, etc., is a

Figure 6 Resonance process of value in community

 Kodama: Creating new business through strategic community management 1079
challenge – a major hurdle. He is deeply entrenched in a Ž xed value system under
which he, as a mere cogwheel in a giant corporate machine called NTT, is content to
attend uneventfully to his daily routine in exchange for a Ž xed pay (or could not care
less what went on in his workplace as long as he was paid), a value system which is in
a signiŽ cant way hampering him in all attempts he may make to acquire a new sales
style or new technical skills. But, following repeated, constructive conversations he has
had with his community leader, who speaks to him enthusiastically, he, the community
member, is beginning to show signs of opening up to studying and understanding the
new value system.
The second step, contact-triggered inspiration of a value outlook, provides the stage
for shaking out old values in favour of new ones advocated by the community leader,
a set of new, replacing values which will be touched off within the community.
Furthermore, in cases of strategic tie-ups or strategic outsourcing, there is a stage at
which the sense of value on both sides is induced and touched off in order to fuse the
sense of corporate values and management visions of the two sides. One of the triggers
that is an important process in this touching off is to induce risk awareness. In the in-
house Community A, the community leader induced solicitation of the need to establish
a new multimedia business in order to survive in the IT and multimedia world of the
future. The important thing is that the innovative leadership of the community leader
gradually destroys the old values by bringing about risk awareness.
The third step, which has to do with value outlook creation, provides the stage for the
creation of new value outlooks within a community rooted in new value outlooks
introduced by community leaders. In an in-house Community A, it would be an intra-
community setting for new value creation where community members would indi-
vidually engage in self-improvement as they endeavoured to reach the new objectives
of a new multimedia business. It would also be at this stage that challenging objectives,
such as an organized acquisition of new sales skills and technical skills, are set.
And the last step, the stage for the resonance of value outlooks, is where the mental
vectors of idea, thought and spirit of the entirety of community members resonate with
a view to the values newly created within the community towards the formation of a
sense of unity. A value-harmonized platform will thereby form itself within the
community. And within the in-house Community A at this stage, the community
members would individually acquire new knowledge, skills and know-how and at the
same time individually improve their competence while gaining cognizance of their
‘un agging courage’ and their ‘own selves’ with respect to the new multimedia
business.
The value harmonization process in the communities illustrated in Figure 1 may be
more speciŽ cally described as in Figure 7. For the community members, value
harmonization within the in-house Community A is in fact little less than a ‘Ž ght
against habit’ too. On the other hand, with extra-company communities (B1, B2, B3),
it becomes important for the community leaders to locate and identify partners likely to
most beneŽ t both parties, to create new values to be shared with the extra-company
leaders through reciprocated in uences and fusion of the corporate value systems and
management visions of the two, and to ensure, in an organized manner, that resonance
occurs between the two systems. In either or any of the communities, a value-
harmonized platform will be created under the innovative leadership of community
leaders upholding new visions and concepts, enabling its eventual development into the
innovation process (sharing® creation® renewal) of community competence, discussed
below.
 1080
The International Journal of Human Resource Management

Figure 7 Resonance process of creating sense of value in communities

 Kodama: Creating new business through strategic community management 1081
Sharing, creation and renewal of community competence
The sharing, creation and renewal of the information, knowledge, innovation and
concepts comprising the various resources within the community (community compe-
tence) are also crucial factors for the formation of new ideas and innovations in
multimedia business.
Sharing, creation and renewal of the community competencies in the construction of
diverse strategic communities observed in the case study of NTT multimedia business
strategy can be arranged as shown in Figure 8.
Sharing of community competencies represents the steps to allow the core
competencies of both organizations to be spawned into new integrated core community
competencies, while deepening understanding between the leaders of both groups. For
example, in each of those steps, engineers at both groups thoroughly understand NTT-
cultivated technology and PictureTel video technology so as to gain new knowledge
and know-how. In addition, sales tie-ups in terms of heterogeneous business alliances
allow each player to deepen their understanding of the core competencies of other

Figure 8 The sharing, creation and renewal of community competencies

1082 The International Journal of Human Resource Management
players, and integrate and share the leading edge Ž eld of other players. What is more,
various customer information and user needs obtained through the Phoenix Customer
Service Network should also be the result of sharing of crucial community
competencies.
Creation of community competencies means the steps to create products and services
as a new core competency based on shared core competencies. Phoenix, which was
created from this sort of joint development effort, is the result of the creation of
community competencies. Moreover, a similar case is the marketing of a new Phoenix
product package, which is being bundled with PC and modem.
Renewal of community competencies represents the steps that are taken to allow new
products and services to Ž nd their way to market and to yield a major breakthrough
while, at the same time, creating even more high-quality customer value. Particularly
impressive are the new versions of products that were created through analysis of
customer feedback (commercialization and sales of new versions, from the original
NEC98 model to a DOS/V model, and integrated models), commercialization of next-
generation terminals (such as Phoenix WIDE) and the start of multi-point connection
service, and the marketing of higher-quality maintenance and after-sales services.
Commercialization of a series of service packages, from sales to maintenance and after-
sales services, makes it possible to provide customers with new value. It is important to
share, create and innovate community competencies in a steady manner within the
strategic community and to foster talented personnel (community members). In this
way, strategic communities will be able continuously to create and innovate new
businesses.

Conclusion

Critical to all of this is the active incorporation of such new business styles as strategic
partnerships, mergers and acquisitions, outsourcing, and virtual corporations, into
corporate management, and the application of strategic community management to
create a diversity of new businesses typiŽ ed by the Ž eld of multimedia.
As such, it is extremely important that community leaders in corporate organizations
apply their superior, innovative leadership and capacity for strategic co-operation to
form strategic communities, both within and outside their corporate organizations.
Towards such an end, it becomes important for the community leaders to assume
innovative leadership in creating a new value-harmonized platform in business
communities both within and outside their companies.
To achieve this, community leaders must work to achieve a harmony of philosophy
and vision with heterogeneous organizations both within and outside their companies.
They must demonstrate innovative leadership, while at the same time accumulating
superior community competencies through advanced organizational learning within the
strategic community, and facilitating the sharing, creation and renewal of these
community competencies among community members. This is the essence of strategic
community management.
A new, unprecedented image of leadership will be demanded of community leaders,
from both within and outside the corporate organization. In light of the advent of a
society based on multimedia and cyberspace, the techniques of fostering superior
community leaders who can shoulder the burden of business innovation for the twenty-
Ž rst century, leveraging the power of strategic partnerships to create business
communities, and in the process promoting new businesses, will be critical elements of
business organization.
 Kodama: Creating new business through strategic community management 1083
Notes
1 This case study relates to the video multimedia strategy NTT has pursued for the past four
years. It was created on the basis of an interview with NTT’s Mr A, who played a central role,
and on materials prepared for use outside the company.
2 A digital network service (Integrated Services Digital Network) established by the tele-
communications standardization sector of the International Telecommunications Union
(ITU-T). Additional information on ISDN is available at <http://www.alumni.caltech.edu /
~dank/isdn> and ITU-T recommendations are also available at <http://www.itu.ch/itudoc/itu-t/
tec/i.html>.
3 Video terminals based on videoconferencing systems and/or videophones standardized by the
ITU-T (see Trowt-Bayard and Wilcox, 1997).
4 Remote Medical Treatment via Videoconferencing System (broadcast by the Japan Broad-
casting Corporation (NHK) as part of its 7 p.m. news programme News Seven) on 12 December
1996.
5 New types of multimedia services based on interactive visual communication will spread
through video-based information networks using Phoenix systems within not just the education,
medical and welfare Ž elds but also various other business Ž elds as well. Also, through this
video-based information, networks will become an important multimedia communicatio n
platform for producing new virtual knowledge-based businesses. The details of the new service
are described in Kodama (1999d) and Kodama (2000).
6 A server that simultaneously connects multiple videoconferencing systems and includes a type
of conversion function that permits interactive video and voice communication .
7 To permit a number of videoconferencing system users to use the multi-point connectio n
service at reasonably low charges, Nippon Telegraph and Telephone, Inc. (NTT), Japan’s
largest telecommunications carrier, was at work studying the business planning for a multi-
point connection service in Japan to be implemented by a strategic alliance of heterogeneou s
companies set up among US PictureTel, a professional videoconferencing system maker,
Otsuka Shokai Co. Ltd, a major telecommunications system SI and sales company, Canon Sales
Co. Inc., NOVA Inc., a major language school, and NTT-TE and NTT-PC, both NTT group
companies. After mutual discussions about the speciŽ c business plan, a joint-venture-typ e
videoconferencing multi-point connection service company (NTT Phoenix Network Commu-
nication Inc.) was founded in July 1997 (Nihon Keizai Shimbun, 1997c). The following is an
outline of NTT Phoenix Network Communication Inc. Location: Tokyo; founded in: July 1997;
capital: ¥490,000,000; description of business: multi-point connection service, construction of
multimedia networks, outsourcing operations; employees: 13; controlling shares: NTT (44.3 per
cent), PictureTel (19.9 per cent), Otsuka Shokai (11 per cent), Canon Sales Inc. (5 per cent),
NOVA (19 per cent), NTT-TE (10 per cent), NTT-PC (1 per cent).

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