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Insights on Building a Business Presence in Japan:
ZS Associates' Global Mindset
January 2009 -- ZS Associates is a management consulting firm that specializes in sales and marketing issues. Andris Zoltners and Prabha Sinha, then both professors at the Kellogg School of Management at Northwestern University, founded ZS Associates in 1983 in Evanston, Illinois. Today, the company has over 1,000 professionals in seventeen offices across ten countries, with clients in more than 70 countries. While ZS initially focused mostly on serving the health care industry, primarily pharmaceutical and medical device companies, the company has since expanded into serving clients in many other industries, including the finance, insurance, consumer products, building products, office supplies, transportation and logistics sectors.
ZS Associates applies rigorous, often quantitative, data-driven approaches to sales and marketing issues such as sales force design, sales effectiveness, customer segmentation, market research, sales forecasting, data management, marketing mix and sales performance analysis. The company is especially known for its work in designing the sales and marketing territories of many large multinational companies. Approximately 70% of the firm's work is with the operating units of large multinational companies and 30% is with corporate headquarters. In 1995, clients in Japan first used ZS's proprietary MAPS software, an innovative desktop application that helps companies to design optimal sales territories.
From the outset, "We knew we had to be a global company. We realized that our clients were global, as were our competitors. [Therefore] international expansion was two parts offense, one part defense," remarked Dan Peterson, a Principal in ZS Associates' Evanston head office. Peterson was the fourth employee at ZS, after the two founders and a secretary. In 2008, Peterson returned to the U.S. after living in Japan for five years where he was responsible for establishing the ZS office in Tokyo and growing ZS's Japanese practice.
ZS has worked with companies in Japan since 1986, helping clients to design and implement sales and marketing strategies, identifying the best tactics to implement them, and deploying IT systems to support them, most of which were proprietary technologies designed to enhance the abilities of their Japanese clients' sales and marketing teams.
Peterson observed that it is important to understand the strong tendency among Japanese companies in preferring to develop their own internal capacity to solve critical business issues, rather than outsourcing solutions. While large US-based multinational companies may contract ZS to do their analytical modeling, ZS often works with companies in Japan to help develop these capabilities in-house, so the client can capture, analyze and understand sales data on its own.
As business increased and the company's reputation grew during the 1980's, ZS's clients began to frequently request the firm's assistance with projects overseas. Peterson spent the early 1990's in London setting up ZS's first foreign office. After he returned to the US in 1995, he soon began focusing on clients and projects in Japan. By 1999, ZS's work in Japan had risen significantly and the decision was made to open an office there.
Interfacing with JETRO to Sustain Growth Phases
ZS Associates' Timeline in Japan 1983
ZS Associates is founded in Evanston, Illinois by Andris Zoltners and Prabha Sinha
ZS establishes its first foreign office in London, England
ZS is hired for multiple projects in Japan; MAPS software application is introduced in Japan
GROWTH - ZS obtains additional projects for Japan
GROWTH - ZS obtains more projects in Japan
With its business in Japan continuing to increase, ZS decides to establish a business presence in Tokyo
ZS hires its first two Japanese employees to work in the US first; the company contacts JETRO for information about the process for opening an office in Tokyo
ZS hires two additional Japanese staff in the US
ZS opens a temporary office with 3 people at JETRO's IBSC in Tokyo (Phase 1)
ZS moves to a serviced office facility (Phase 2); staff grows through local hires and transfers of Japanese staff from the US
Staff in Japan grows to 10; ZS moves to its permanent office in Hibiya, Tokyo (Phase 3); staff continues to grow
ZS currently employs 26 people in its Tokyo office
In 2001, the company contacted the Consulate General of Japan at Chicago, which referred them to JETRO. ZS met with JETRO's business development team in Chicago to learn about the process for establishing a business presence in Tokyo.
At the same time, ZS worked to expand their client base in Japan and started to hire Japanese staff. Following the same approach it had used for opening offices in other countries, ZS chose to get its Japan practice group up and running in Evanston before opening the doors of their office in Tokyo. This process would allow their new hires to get to know their colleagues in the US as well as to acclimate themselves to the ZS corporate culture.
By 2003, ZS had the knowledge, staff and clients to go to Japan. With input from JETRO, they chose a phased approach for opening their Tokyo office. For Phase 1, ZS took advantage of JETRO's Invest Japan Business Support Center (IBSC) in Tokyo. From August through October, Peterson and two other ZS consultants worked out of the free temporary office space provided by the IBSC in Akasaka. During this time, JETRO staff at the IBSC worked closely with Peterson and his colleagues, advising them on the process for establishing ZS Associates in Japan.
"JETRO played such a key role in helping us get our office off the ground successfully," said Peterson. "The IBSC just made it so much easier to start an office in Japan. JETRO provided information on taxes, banking, real estate, accounting, shortcuts for establishing ZS's office and perhaps most importantly, helped ZS gain confidence in Japan." He added that, "JETRO also introduced ZS to lawyers, accountants, bankers and other professional service firms, helping ZS to build a business infrastructure."
Phase 2 began at the end of October 2003, when ZS moved to a serviced office in Kamiyacho, Tokyo, managed by Regus, a full-service business center. This fully equipped and staffed facility allowed ZS to focus on building its business in Japan without worrying about the day-to-day details of running an office. During this time, the ZS Japan office grew from three people to nine, all of whom were Japanese except Peterson, though half of the staff had been hired and started in the US first. In addition to introducing ZS to Regus, JETRO also helped ZS formulate a plan to transition from Phase 2 to Phase 3. The Phase 2 and Phase 3 office searches were done at the same time. Based on cost issues, ZS calculated that when the office reached a staff of ten, it would be time to move into their own office.
For Phase 3, ZS was interested in a permanent office approximately 100 tsubo in size (about 330 square meters). Finding the right office proved more difficult than expected. Again, JETRO was on hand to support ZS, helping to review prospective office locations and introducing ZS to a real estate leasing agent.
Peterson, who has been involved in opening ZS offices in all ten countries, indicated that in those other countries where ZS has established an office, there was no organization like JETRO. JETRO worked with ZS to explain the process for establishing a new business in Japan and assisting ZS with all kinds of issues great and small. Peterson said, "Without JETRO, it would have taken a lot longer and been a lot harder to get started in Japan. JETRO simplified so much for us. Nowhere was there a full-service support organization like JETRO."
East Asian Market Integration
Once in Japan, growth was quick. From 2004-2006, ZS doubled its staff in Tokyo, in order to build a base of skilled, experienced staff quickly. However, since 2006, headcount growth has slowed significantly, as the office grows its revenues to maximize the success of its Tokyo staff. The next step for ZS in Japan would eventually be to establish a second office in the Kansai area. At the same time, ZS would like to formulate an integrated Asia-Pacific strategy, similar to their European operation. ZS only recently opened an office in China and their Indian office is currently focused on supporting ZS clients in the US as a competency center and outsourcing provider. In addition to another Japan office, Phase 4 would include more offices in East Asia, India, and perhaps Australia and Korea. Ideally, ZS would also create a framework for their Asia-Pacific offices to cooperate and work together more closely. Peterson expects work on Phase 4 to begin in the next 3-4 years.
The Challenges in Tokyo -- Building a Corporate Brand and Recruiting
While establishing ZS in Japan went smoothly, the lack of a recognized brand proved to be a challenge. While ZS is well known and respected in its target segments in the United States, the company was starting almost from scratch in Japan. To help ZS reach potential clients and build its reputation, JETRO introduced ZS to industry organizations such as the American Chamber of Commerce in Japan (ACCJ) and PharmaDelegates, a healthcare industry association. ZS also contributed to industry publications in Japan and spoke at many JETRO events at the IBSC, which allowed them to network with other international companies in Japan, as well as domestic customers and prospects.
The biggest challenge for ZS in Japan, though, has been recruiting. To date, almost half of ZS's Japan staff has been hired overseas, albeit still being Japanese nationals. "If you had told me that, in 2008, half the Japanese staff in our Tokyo office would be hired outside of Japan, I wouldn't have believed it," Peterson mused. Despite preferring to hire locally, ZS continues to have trouble hiring directly from top universities in Japan. This is due in part to the company's lack of name recognition as well as their rigorous hiring criteria. ZS usually recruits from top-tier schools globally, preferring to hire young people with excellent skills and potential and training them in-house. ZS is very selective and requires its staff in Japan to be bilingual, with strong analytical and interpersonal skills.
When ZS tried to recruit from Japan's top universities, they received only a tepid response. Because universities in Japan lack career centers similar to those in the US, Japanese companies rely on alumni to represent their firm at job fairs and recruiting events. This put ZS at a disadvantage, especially since many of their hires were educated in the US. Also, the top Japanese college grads often want to work for prestigious and well-known companies, not unknown foreign start-ups. JETRO helped ZS examine and make sense of the recruiting process in Japan and then referred them to appropriate recruitment companies. Peterson noted that while ZS has hired outstanding people in Japan, they still have yet to tap into the full universe of human talent in Japan.
Guidance to Companies Establishing a Presence in Japan
For aspiring global companies contemplating a presence in Japan, Peterson indicated, "You have to be open-minded and remove all pre-conceived notions that what works well in the U.S. market will or will not necessarily work in Japan. You must work to understand the market conditions in Japan and then figure out what is the right strategy for you."
Concerning product development, Peterson emphasized, "Always determine your customers' needs. Then, once you fully understand their situation, look at your products and see what fits their specific needs." Peterson indicated that although one's existing product or service may not yet exactly align with a Japanese client's needs, with refinement, it could then help them significantly. "In Japan, you have to closely monitor the quality of your work and have to put your best foot forward, especially with new clients. People in Japan expect a high level of customer service with frequent personal interactions. Companies that are good at listening to clients and reading their needs will be most successful." Peterson stressed, "You must show that your company's solutions work specifically in the Japanese market. It isn't enough that your products and services work in other countries."
Peterson also said that a good recruiting strategy is key for foreign firms entering Japan. "Any company undertaking expansion into Japan must invest in its local staff, so that you have native Japanese speakers that understand your products and services. They are the ones that will be working with your Japanese clients." Peterson indicated that the lack of brand recognition ZS suffered early on in Japan is now less of a problem.
There is also a strategic dimension to consider. "If you fail to enter a sizable portion of the global market, such as Japan, then you will allow a future competitor to develop expertise and innovation that they will soon bring to your market and be your future competition." Peterson continued, "U.S. companies should not assume they can survive in their U.S. niche forever." The lessons that Peterson and his colleagues from ZS Associates have learned from their Japan experience are being successfully applied to ZS's business in China, Korea and Southeast Asia.
Importantly, Peterson's family accompanied him during his five-year stay in Tokyo. The realities of life for an American family in Japan also gave him a unique perspective of the country and its culture. Peterson was not solely focused on establishing the ZS business presence and building its brand in Japan, but also on meeting the needs of an active, inquiring family, with all the varied challenges and adventures that this brings. As an avid flyer with a U.S. pilot's license, Peterson was able to obtain his Japanese private pilot's license as well, while his two young sons played ice hockey, soccer, basketball, and even sumo in Tokyo, and joined the Boy Scouts. He and his young daughter immersed themselves in studying the Japanese language together, while she also swam competitively. His wife explored Japanese culture through collecting ceramics and enjoying travel and cuisine. Peterson and his wife both became very active in Tokyo with their children's school, their church, and the Tokyo American Club. The dynamics of working to grow ZS Associates and his family's many varied interactions in Tokyo resulted in a truly unique Japan learning experience for Dan Peterson.
More past clients
"Setting up a Business" flowchart