Report No.32
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Japan Entrepreneur Report No. 32 June 2005
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- Japan still hot--for now
- "Second coming" of Japan's ventures
- Fun facts to know and tell about entrepreneurship
- Bits and bytes
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Japan still hot--for now
Japan is hot overseas: Washoku cuisine and Harajuku fashion rages in New
York, award-winning anime films enchant audiences worldwide, Barnes &
Noble tables and my local library shelves groan with row after row of
translated manga comics.
But what about Japan as a location for new businesses? To many, Japan's
relationship to business seems like glam rock's relationship to music: so
1980s, long-finished and gone. China, of course, is the 21st century
business world's favorite superstar.
Despite China's cachet, though, Japan still has plenty of fire in its
belly, says Allen Miner (see "Second coming" below). And Tsurumi Yoshi
makes a strong case that Japanese-style capitalism offers the world more
than ever (see Bits and bytes).
Still, China is no passing fad. As Allen points out, white-hot
competition is pushing Japanese industry to the brink--and some players
are going over the edge. Fortunately, the government is responding with
measures encouraging entrepreneurship (see "Fun facts" below). The big
question is: Will it be enough?
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"Second coming" of Japan's ventures
Startup businesses in Japan today face opportunity on a scale unseen in a
half-century. The most promising ventures, though, aren't headline-
grabbing Internet companies like LiveDoor and Rakuten. LiveDoor fueled
its growth with financial expertise rather than technological prowess,
and Rakuten is basically an online retail-sales facilitator.
True technological innovation in the IT sector doesn't happen at Internet
companies. If Japan intends to become an IT superpower, investors, the
government, industry and the media need to start paying attention to real
IT ventures: those whose core business is technology development. Of all
Japan's new businesses, these IT ventures enjoy the most explosive growth
potential.
Today's environment resembles early postwar era
A third of Japan's listed companies--firms like Sony, Omron and Honda--
formed in the early 1950s. Japan's manufacturing infrastructure had been
decimated by the war, the dismantled zaibatsu conglomerates were
immobilized, and the nation urgently needed to rebuild industry. The U.S.
occupation authority drove economic and political reform at a fever pitch,
while automobile manufacturing and transistor technology poured in from
the United States. Social reform, technological innovation and strong
needs for entrepreneurship converged, sparking an unprecedented venture
boom.
These same three factors converged in the United States in the early
1980s. The U.S. had suffered from inflation for ten years, unemployment
had topped ten percent and the nation needed new industries. Improved
semiconductor technologies, the first personal computers and President
Reagan's broad deregulation measures combined to create a powerful wave
of innovation. That wave launched a host of world-leading IT players:
Microsoft, Apple Computer and Cisco Systems, to name just a few.
Today's Japan resembles the U.S. of the early 1980s. The nation needs
entrepreneurship as IT players like Sony and Fujitsu fail to generate
earnings, creating pressure to restructure. Problems erupt from industry
giants like Seibu Railways and Daiei. Add in Commercial Code revisions
and deregulation and you have a potent mix transforming the economy.
From a technology standpoint, too, Japan is witnessing a dramatic
transformation. The IT industry's center of gravity is shifting from
general-purpose computers to a new breed of digital consumer devices:
computers that don't look like computers.
Ten years ago big players dominated Japan's promising new technologies,
but today these giants are hard-pressed to survive. Ventures enjoy
unprecedented opportunity as these entrenched interests lose their grip.
Once again, three crucial factors--social reform, technological
innovation and the need for entrepreneurship--are aligned.
But Japan must look sharp if it wants to maintain worldwide leadership in
digital consumer electronics. Korean firms are starting to win out in
some sectors, and if Japanese companies fail to stay vigilant, Chinese
firms may beat them before long. Visit a high-volume U.S. electronics
retailer these days and you'll see rows and rows of thin-screen
televisions made by Samsung and LG Electronics. These products are
starting to overshadow Japanese competitors by offering consumers a
powerful blend of cost and quality. In the mobile phone arena, too, U.S.
newspapers report competitors overtaking Japan's manufacturers.
Hidden value in high technology
Even so, I'm confident Japan's IT ventures will turn the tide. Few people
realize it, but Japan has many outstanding ventures building highly cost-
competitive thin-screen televisions, developing new Internet search
technologies and creating semiconductors for leading-edge optical
communications applications.
In the five years since leaving Oracle I've invested some four billion
yen in Japanese information-technology startups. But Japan's venture
companies need even more investment and support. Ventures launched here
in the year 2000 should be among the world's leading companies twenty
years from now. We will all have missed a golden opportunity if that
fails to happen.
Allen Miner
President, SunBridge Corp.
SunBridge.com
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Fun facts to know and tell about entrepreneurship
Good news for company founders: A new law (the shinkaishaho) slated to go
into effect April 2006 will eliminate the difference between limited
liability firms (yugen kaisha) and joint stock corporations (kabushiki
kaisha). It will also abolish minimum capital requirements.
This year's wealthiest taxpayer list (chouja banzuke) offered good news
for salarymen: For the first time ever, a salaried employee (albeit a
fund manager), headed the list. Chart-topper Kihara Tatsuro, who paid
more than U.S. $34 million to the Japanese tax authorities, demonstrated
to ordinary citizens that the royal road to wealth is no longer the
exclusive province of company founders or presidents. Nevertheless,
entrepreneurs still dominate the list.
More schools than ever teach entrepreneurship in Japan today, begging an
age-old question: Can entrepreneurship actually be taught? Heck yes, I
say. Contrary to popular notions of entrepreneurship as devising grand
schemes aimed at burgeoning new markets, most people start businesses
based on the skills they already apply to everyday work problems. Maybe
that community college instructor can't teach you to be Bill Gates, but
she'll help you learn PHP. If you're lucky, she'll inspire you in the
process.
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Bits and bytes
"Thirty-one years ago, George W. Bush was my student at Harvard Business
School," writes Tsurumi Yoshi in an intriguing article titled
Dysfunctional Management Education and Damaged Capitalism in America.
Good reading for those interested in a Japanese approach to free
enterprise. Download the article in PDF format at
<http://www.timclark.net/tsurumi/>. Thanks to Shane Schvaneveldt for
passing this along.
Meet me at Temple University in Tokyo on July 20, where I'll discuss
opportunities in Japan's service sectors. Read details and see a map at
<http://www.tuj.ac.jp/newsite/main/news/specialevents/events_2005/20050720_icjs.html>.
Common sense is worth millions when outsiders apply world-standard
methodologies to Japan's rich-but-clueless service sectors. Read 15
stunning case studies in the new book Shinsei Bank's incoming CEO calls
"fascinating" and Merrill Lynch Japan's Chief Economist labels a "must
read." Free downloadable chapter at <http://199.239.235.234/sample/>.
Netyear Group President Ishiguro Fujiyo, an accomplished entrepreneur,
author and teacher will speak July 5 at the monthly Entrepreneur
Association of Tokyo get-together. See <www.ea-tokyo.com> for details.
Tim Clark
Senior Fellow (non-resident)
SunBridge Corp.
Voice (U.S.) 503.235.4419
Fax (U.S.) 503.235.4429
clark at sunbridge.com
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