Last week we live-blogged many of the sessions from the Japan New Economy Summit on disruptive innovation. Since then, we’ve had a chance to digest all the information, and our more in depth overview of the discussions is below. Admittedly it’s a little long, so we’ve made it available in ePub format which you can take for free.
The Japan New Economic Summit took place on April 16th in Tokyo, where business leaders from Japan and Silicon Valley came together to discuss innovation and entrepreneurship. While the word “disruption” was peppered though the event’s agenda, the most prominent themes of the event were slightly different. In a way, the day felt like a giant collaborative diagnosis, where some of the greatest innovators in the Internet space came together to find out what ails Japan.
Conversation continually returned to emphasize the importance of failure for entrepreneurs, as well as the ability to quickly recognize and rebound from that failure. Directly connected to this notion was a recurring discussion of risk, and Japan’s traditional aversion to it. And while these are not messages we haven’t heard before, it’s the first time that we have heard these ideas coming from such prominent business leaders in Japan and Silicon Valley.
Success is not a straight line
During the conference, a number of speakers mentioned a lack of agility that exists in companies in Japan, or a need to always plan for everything. Joichi Ito, the director of MIT’s Media Lab, drove this point home in the context of how internet technologies have drastically changed the rules of the game:
Everything was moving slow before and that’s when Japan was strong. … But after the internet, the rules that everyone anticipated [changed everything]. When there is a concentrated control, Japan excels. But with the internet, this has changed.
The notion of creative freedom is one that Joi promotes at MIT Media Lab, explaining that members of the lab are completely free to study what they want without his approval. He emphasized that “it’s not about profitability or outcomes, because if you know this in advance, then it’s not disruptive.” As many others noted during the conference, there should be a basic direction, but the minor details can be decided along the way.
While most traditional Japanese companies lack this sort of agility, recently we have seen one very notable exception. Line Corporation, headed up by Akira Morikawa, has developed its Line chat application with a decision-making strategy that I suspect involves a dart board of some kind. Since announcing back in the middle of 2012 that Line would be a platform for other services like games, coupons, and other things, the service’s user base has ballooned to 140 million around the world, and more than 45 million in its home market of Japan. He notes that at Line, their priority is not to innovate, but rather to provide customers with what they need as quickly as possible. Morikawa elaborated on his company’s improvisational philosophy in very simple terms:
Japanese people love plans. But I thought it would be good to not announce our strategy. Japanese companies love to announce strategies. We don’t. People get concerned because we don’t have any plans, but from that vagueness we can create a tension that in order to survive we have to do something.
But is this top-speed philosophy really sound? I’m sure that much of Line’s success to date is largely attributable to timing and luck. And I’m sure that their big ad spending hasn’t hurt either. But at the summit, there were a number of other success entrepreneurs – both foreign and domestic – who echoed this notion of working as fast as possible. George Kellerman, partner at 500 Startups, explained that it’s all about the accelerating speed of technological development. “You have to speed up,” he asserted. “If you don’t speed up you will lose.”
But Japanese corporate culture is notoriously slow, and it remains to be seen whether the messages expressed during this conference will leave any lasting impact. Programming legend Yukihiro “Matz” Matsumoto, the chairman of the Ruby Association, underscored that slow-moving corporate culture can often stand in the way of those who have true vision:
We are living in an era where it could take only one or two years to change the world. […] We should let these people move from the company working style, so we don’t impose an obstacle to those who want to change the world.
But when companies move at such a rapid pace, it’s critical to identify when corrections need to be made, so that you can change direction if you have to. Niklas Zennström, the CEO of Atomico and co-founder of Skype, expressed this sentiment in the conference’s opening session, saying that creating a disruptive service is seldom just simple execution of a business plan:
[M]any times, the road is just not a straight line and you need to iterate and fail fast. If something is not working, do a course correction and make another iteration. But as long as you have a long term vision you can be successful. If an idea doesn’t work out it doesn’t mean that you have failed.
Likewise former Google SVP Andy Rubin opened the conference by relating the early days of Android, when their product was pitches as a platform for digital cameras. But as everyone knows, Android had a far different fate in store, and their second VC presentation was Android for cell phones. It was this willingness to stray from the original plan that led to the company’s subsequent acquisition by Google. Andy added:
You have to be flexible, and if your business doesn’t work, you have to change. You have to make decisions quickly, and change direction instantly.
While most of the speakers appeared to agree that failing fast and making speedy corrections is an essential component to success, the Silicon Valley entrepreneurs have a much more forgiving environment in which to operate than their Japanese counterparts. Japan, of course, is typically far less accepting of failure, and this is a heavy burden that the nation’s entrepreneurs have to carry.
Safety and support
Imagine if people said to [aspiring] doctors “Oh my god, but what if you fail?!”
Pinterest CEO Ben Silbermann posed this hypothetical to the audience in the second morning session, saying that if you meet an entrepreneur trying to do something, you should do your best to support and encourage them. And as we heard from many of the speakers, one of the beautiful things about Silicon Valley is that it offers exactly this type of support.
Derek Collison, the founder and CEO of Apcera, put it best when he said that the valley is a unique environment “where you have more reasons to try something than not.”
In contrast, Domo’s Josh James spoke of how hard it was to build a Silicon Valley-like company when he was in Utah, and he figures Tokyo might be much the same. He reflected back on those difficult days:
The VCs [there] thought of themselves as better than the entrepreneurs. That made things very challenging, because it felt like they were taking advantage of you. Silicon Valley is great because everyone is respected and viewed the same.
Perhaps the most moving moment of the conference came when George Kellerman, partner at 500 Startups, asked all the entrepreneurs in the audience to stand up, so the audience could give them a round of applause in support. “These people are the future of Japan,” George declared, “you must really celebrate them!”
The symbolism of this exercise wasn’t lost on the Japanese audience, as these entrepreneurs are precisely the proverbial nails that stick out in Japanese society; the passionate risk-takers in a country where passion and risk are not exactly embraced when it comes to business. Speaking briefly with George after the conference, he told me that one of the event staffers was even in tears as he came off stage. Cool moment.
A call to action
But as beautiful this moment was, CyberAgent’s founder and president Susumu Fujita reminded us that the country’s entrepreneurs are going to need more than just warm fuzzies in order to thrive. Government, he says, will have to play a role as well:
[W]e need to see actions, such as changes in policies. Startups bring new ideas, new hires. […] The government should act upon their messages – so for example making an entrepreneurship center for Asia in Tokyo, or a place where engineers can be educated, or something like that.
The notion of an entrepreneurship center is an interesting one. There are are number of seed accelerators and incubators in the Tokyo area (we’ve mapped them here if you’d like an overview), but there isn’t really a prominent focal point to speak of. But I don’t think it would really take much to establish such a hub near Shibuya or Roppongi; some sort of special area that could attract both companies and entrepreneurs from at home and abroad. Joi Ito pointed to the example of Singapore, which is “very proactive in issuing visas to talented people” from other countries.
Get out of the way
In addition to helping out in this way, governors and lawmakers need to stop hindering promising new startups through regulations that protect legacy businesses. It’s truly a shame to hear about great services like Uber that can’t enter the market due to unneceessarily complex laws designed to protect the taxi industry. At the summit, Uber’s CEO Travis Kalanik lamented the obstacles he’s up against in bringing his luxury car service to Japan:
In Tokyo they fix the prices on private car services at 5540 yen. There are something like 90 different zones with different minimum fares, different rules. We are in cities all over the world and we haven’t seen anything like this. The government has essentially said that only rich people are able to get car service. […] These laws are set up to protect the taxis and your city is worse off because of it. In order for us to connect you to a car service through an app, we have to become a licensed travel guide. We have to hire certified travel guides. I don’t know why. They’re just trying to make it hard.
Rakuten CEO Hiroshi Mikitani also noted that there are a lot of regulations in place in Japan that have to be overcome when creating a disruptive internet business. But whether anyone in government will take action on the messages expressed during this conference remains to be seen. Prime Minister Shinzo Abe did swing by on the evening before the summit, and we hope that it wasn’t just a photo opportunity.
On the verge of a renaissance?
While this conference included much talk of the problems facing Japan, there were many more optimistic voices during the day as well. When it comes to the potential of Japan, perhaps no one was more complimentary than Evernote’s CEO Phil Libin. He explained a little about why he’s so positive:
I’m super optimistic about Japan, it’s why I’m here, it’s why we invested in Japan. Japan has a giant disconnect between how the country perceives itself and how outside Japan sees the country. Everyone outside Japan, everyone thinks Japan is a magical place. I come to Japan, and all the conversation is about ‘What’s wrong with Japan’ — and there’s a big mismatch between that and how the world sees it. When people talk about China, there’s some good and some bad, but when you go there, everyone is positive. For whatever reason, Japan is more negative about themselves than other people are.
I think Japan is on the verge of an entrepreneurial renaissance. You don’t need so much money to startup these days. The most important thing is attention to design and details, and Japan does that well. The boundaries to export to the rest of the world are lower than ever before, so I think Japan is on the verge of a major renaissance, and that’s why we’re here — we’re betting on it.
However, Phil did note that he thought people in Japan aren’t quite as willing to express their passion in business. And this is something that entrepreneurs need to do in order to get people to get behind them on their journey. He said with a smile that Japan should treat entrepreneurship with the same passion that it shows to food, fashion, and culture.
This sentiment, combined with George’s grand gesture of recognition to entrepreneurs in attendance, ended the summit on a high note. But as an observer, I was perhaps more impressed by something that Matz mentioned earlier in the day. When a Japanese panel was discussing how Japan can create disruptive innovation, he made what I thought was a very disruptive comment that threw the raison d’etre of the entire conversation into question:
Is it really necessary to have disruptive innovation from Japan? If we have innovation from Google that makes our lives better, isn’t that good? If we talk about globalization, why focus on having it from Japan. Is it loyalty?
Matz appears to see things through a truly global lens. And where everyone else sees borders, language obstacles, and a country falling behind, those things don’t even appear to register with him. I get the impression that he sees the internet as a great enabler, where a rising tide floats all boats regardless of location.
So maybe the true root of the problem is that many Japanese entrepreneurs and companies don’t really think on a global level, or see themselves as a part of a larger world community together on the web. Because if they did, maybe there wouldn’t be a problem at all.