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This year’s Japan Business Strategy Forum hosted 12 leaders from companies of all sizes and from a number of fields within the ICT industry.  The panelists brought their unique experiences to the discussions, sharing with the audience the advantages of having a business in Japan, the challenges of getting it started, and responding to the differences between Japanese and US business styles.  Four main points were highlighted and are illustrated below.

1) US and Japanese companies enjoy a complimentary relationship in developing world-leading technology
2) The business environment has significantly improved
3) Differences in business styles benefit collaboration
4) Great business opportunities lie in areas other than Tokyo

1) US and Japanese companies enjoy a complimentary relationship in developing world-technology

The panelists all brought examples of how US and Japanese companies collaborate to mutually improve their businesses, but a few accounts stood out. GeoVector, a search technology company based in San Francisco, CA found Japan to be the market that was first ready for their technology.  “We studied whether to go to Korea or Japan—we’d pretty much given up on the United States,” said John Ellenby, the company’s president and CEO, commenting that the US mobile market was not yet ready for their technology. 

GeoVector therefore launched its technology in Japan with a major Japanese carrier and significantly improved the quality of their technology as a result.  “We are now getting back into…the United States with Japanese technology,” Ellenby noted, “but most importantly, with the quality cache that comes from going through the process of launching a serious service on a major Japanese carrier.”

Incorporating Japan’s stringent quality standards into a business or technology was mentioned quite frequently during the discussions.

“The demands of the Japanese market tends to elevate your standards and better prepare you for the world market or give you perhaps some edge in the world market,” said Robert V. Dickinson, president and CEO of California Micro Devices.  “It’s like anything. When the bar is raised, you raise your performance.  Performance rises to meet the expectations, so being actively engaged in the Japanese market is very, very helpful from that standpoint because it’s like the old song, ‘If you can make it here, you can make it anywhere.’  There’s a lot of truth to that.”

Brian Burns, vice president of Asia Pacific Sales at ViXS, reinforced Dickinson’s comments by saying, “No one tests like the Japanese…The due diligence that you will be faced with or put through in Japan is like no other…If you can prove yourself in Japan, then there’s probably going to be no question anywhere you go in the world as to whether you have the quality side covered.”

Further illustrating the mutual benefits of collaboration, the discussion highlighted how the US and Japan work together, pointing to the history of the semiconductor industry.  “In the Japanese semi-conductor market, for example, which was quite a controversial topic back in the late 80s and early 90s,” said Dickinson, referring to the contentious negotiations between US and Japanese companies, “the thing that made American companies successful there was actually innovative products, and in particular, the x86 microprocessor with the boom in personal computers.

“But if you looked at the strengths of the two industries, they were really complimentary,” Dickinson continued.  “As the complimentary aspects began to become more important, then the tensions dissipated relatively quickly.”  The result is a close partnership that the two countries enjoy today, mutually leveraging the technologies and capabilities found in each market.

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2) The business environment has significantly improved

Many of the panelists’ comments captured the positive changes that have occurred in Japan’s business environment in recent years. 

Allen Spiegler, vice president of Worldwide Channels for Fox Technologies, found that starting a business in Japan was far simpler than other markets in Asia.  “The infrastructure in Japan for establishing an entity is well defined.  There are a lot of outside services that you can contract very readily that are reputable and are at a good price,” said Spiegler.  “JETRO was a tremendous facilitator in those activities.”

Spiegler went on to discuss the ease of procedures after establishing an office.  “Setting up the entity was one side of it,” he said.  “The other side is the ability to get access to distribution channels, as well as end customers.  We found these to be very open and receptive.  We didn’t find barriers in taking our product, getting in front of companies like Hitachi. 

“Getting to the global players is fairly easy because you can gain access through U.S. counterparts, but getting to some of the major Japanese companies through a network of contacts we found actually to be much quicker, more open discussions and valuable in getting the market validation and market entry phase it went much quicker than in other markets.”

Paul Misener, vice president for Global Public Policy at Amazon.com, spoke of his company’s entry into the Japanese market, describing how they worked through the tight ties that existed between publishers, distributors, and retailers of books in Japan prior to Amazon’s entry into the market.  “We had to make the case, ‘This is going to be very good for consumers,’ ‘We’ll be able to get out a much bigger catalog.’  The very largest superstore in Downtown Tokyo has maybe 100,000 titles.  Well, we’ve got well over a million titles, so it gives great access to consumers. 

“Publishers love us because they can finally sell off what they call the tail of the market,” Misener continued.  “Get past the first roughly 5,000 titles and then there are all these other titles, the rest of the million plus that are out there that very rarely get sold.  It’s hard to sell them because they take up shelf space in the little corner bookstore when you’d rather put a bestseller in there.  Basically, we made the Web model case to them and everybody saw this as a good idea, except for maybe some of the intermediaries, who got dis-intermediated.”

In response to a question about how his company sees Japan compared to the rest of Asia, Jerome Noll, senior director of the Japan office and business development for Symantec Corporation, said his company was attracted to Japan because of the sheer size of its market but also noted, “Doing in business in Japan, there’s a lot more transparency than what you might find in other Asian countries.  I mean, there’s still a lot of issues and transparency of business in other Asian countries, which for any company that’s regulated by SOX, it’s just an additional challenge.  So Japan is again one of the central investment points for us.”

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3) Differences in business styles benefit collaboration

Of the differences between US and Japanese business styles, the one that is most mentioned is the pace of business.  Several panelists commented on this difference and shared what they learned in the process of taking their business to Japan.

“In Japan, every company talks about quality,” said William Chen, vice president of sales at Authenex.  “That is what they really care about, the value they can get out of something.”  It is due to this high value of quality that Chen said, “It takes about 6 months to a year to start growing in the Japanese market.  But once you got it, you can get it steady.”

Ellenby shared his experience with Japanese companies regarding quality assurance.  “They want to know absolutely everything,” he said.  “They want to have everything understood about what a screen does, and if a button is pushed inadvertently in the middle of a sequence, what happens.  This is extremely thorough.  So when you work with Japan, you have to be aware of the fact that managers at all levels…want to know and understand all of the details.  They’re extraordinarily good at that. “

When asked to compare the sales cycles of Japan to the U.S. or Europe, Dickinson replied, “The sales cycle is definitely longer.  My rule of thumb is that if you want something to happen in a year, you better lay the groundwork now…In Japan, the way I look upon it is that you have to start by building relationships, and you have a tougher audience, if you will, because Japanese firms tend to be a bit cautious in terms of adopting new technologies and new partners.  Once they do, they embrace them very fully, but you have to be able to demonstrate that you have a compelling value proposition for what you’re offering and that you can be a dependable partner for them and really add some value to their situation, and that takes time.”

Spiegler added, “I will agree that monetizing that and watching the revenue streams grow does take longer, but it is very predictable.  You’ve got a lot of milestones along the way that keep the trust that things are happening.  So our investors don’t get cold feet, and our board of directors supports what’s happening because it follows a very predictable path.”

Panelist from Japanese companies offered their perspectives as well.

Masafumi Yasukagawa, senior vice president and general manager of the Procurement & Export Division at Toshiba America, Inc. explained that Japanese companies hope for a long-term relationship and take quality control very seriously for that reason.  “We always recommend that [U.S.] companies be patient with negotiations.  It is actually the beginning of a good long-term business.”

Masaru Sakamoto, vice president of corporate planning and marketing at NEC, added, “The more people you have evaluating technologies and products, the more viewpoints and due diligence occurs.  It is typical for a Japanese company to work in a consensus to minimize risk.  Earlier is not always better.”

Ellenby confirmed the above comments made by the Japanese companies by saying, "The most incredible thing about Japanese companies is their concentration on making sure that all of the details are right.  Once the details are well understood, they are incredibly courageous in making decisions and moving things forward."

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4) Great business opportunities lie in areas other than Tokyo

Panelists also drew attention to the advantages of having operations in areas outside Tokyo.

Amazon.co.jp has their distribution center in Chiba prefecture and their customer center in Hokkaido.  Misener commented on the reasons for choosing such locations, saying, “It always makes sense to have your distribution facilities near transportation hubs and infrastructure, but putting the fulfillment center in Downtown Tokyo makes little sense because it would take a couple of hours to get outside the city. 

“It’s also the case,” Misener continued, “that if you locate a customer service center in a high-cost area, you’re just wasting money because they’re simply answering phones and emails, so they can do this from wherever including some very low-cost, very pretty settings so that the customer service agents can look out the window and be in a good mood when they’re talking to our customers.”

Noll explained the locations of Symantec’s offices, saying, “Our headquarters is in Tokyo, but we have offices in Nagoya, Osaka and also Fukuoka.  And I think there are two primary reasons for setting those up…One is being close to our large customers, such as Toyota in Nagoya. 

“The other thing is being close to our partners,” Noll continued, “because it’s fairly easy in Japan to develop good relationships with partners that have a pretty wide geographical territory, and if you want to do co-marketing and get really good relationships happening, you need to be there.  You need to be in their office; you need to be doing seminars together; you need to be going and visiting customers together.  There’s also the reduction in travel time, so you’re spending far less time on the train and more time actually in front of customers and partners.”

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The audience walked away with the insight each panelist brought to the discussions about launching their business in Japan.  For more information on how to take your business to Japan, contact JETRO.