3 Main Reasons Why Japanese Start-Ups with Global Ambitions are Lagging Behind

Are Japanese Start-Ups Growing Globally?

Japanese start-ups
Japanese start-ups holding yen sign.
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Recent decades have brought a lot of improvements for Japanese start-ups. The Government of Japan is fostering both local and foreign young companies by providing grants and awarding start-up visas, as well as implementing new policies. There are conferences and collaborations, there are co-working spaces appearing in bigger cities, there are active people with ideas.

So where are then all those great new companies and their products? Why don’t we hear about them from major news channels? While there are many interesting start-ups in Japan, it is hard to find out about them outside of the country, because when it comes to building a really strong international image, Japan is falling behind. And here are three reasons why.

Being Japan Centric

First and foremost, in the majority of cases a “made in Japan” start-up equals a “made for Japan” start-up. The younger generation of entrepreneurs is willingly exploring new possibilities to create and take control of their own brainchild. However, this rarely means coming up with something applicable to a wider community. A certain product or service might gain popularity inside the country, but sooner or later collapse on an international scene where there is no demand or interest in it, or competitive environment is different.

The fact that such services and products are mostly addressing issues particular to Japan and are visually designed for a Japanese user are not helping to overcome the issue at all. Flashy and cluttered pages to name the least is not exactly appealing to users outside Japan. One may argue that Mikitani Hiroshi, CEO of Rakuten, the largest e-commerce platform in Japan, set a good example by making English a corporate language at Rakuten, or that Wantedly has a great localization in English. However, honestly speaking how many of us, non-Japanese online shoppers, would prefer Rakuten to Amazon, or Wantedly to LinkedIn?

Inwards-looking and risk-avoiding behavior is unlikely to prompt unusual ideas or strategies.

Going global requires a lot of effort and planning. And it is definitely a great risk to enter terrains that are different from what you know. But, as the saying goes “no pain, no gain”. And this is yet another point where Japanese start-ups are falling behind.

Risk Avoidance

It is quite obvious that starting a company is a risky undergoing. Yes, chances are extremely high that there will be no funding or that the company will cease to exist within five years even if you got financial support. These and many more other pitfalls await entrepreneurs on their way, and willingness to take these risks is one of the main traits that a start-up needs to have. Yet, Japanese start-ups in their vast majority are performing very high on risk aversion.

Traditionally Japan values stability. Thus, staying small but profitable is almost always better than all-or-nothing fight till the end for an idea. By prioritizing revenues over other objectives Japanese companies quite often set certain limits to their further development, which leads us to the last point.

Lack of Innovation

It is almost impossible to behave like a risky and daring Formula-1 racer if you are more of a train that only goes where the rails are going. It is true that limitations may foster creativity. But taking into account previous two points, that is hardly a case. Inwards-looking and risk-avoiding behavior is unlikely to prompt unusual ideas or strategies.

Save for the like of LINE or UniQLO, if you have troubles remembering any recent Japan-born companies that made it outside Japan, no worries, most of the people cannot. Unless we want to go once again over the glorious rise and a tragic fall of Livedoor. As cheesy as it sounds, being innovative is tightly tied to thinking outside the box and taking a lot of risks. It is hard to break through by following established paths. And so far Japan is not very successful in overcoming these issues.

Hopefully, new measures provided by the government of Japan will foster the right atmosphere, and the fast-learning and motivated start-up community with global ambitions will catch up with the international trends and practices to grow, gain strength, form a distinct culture and surprise us all in the nearest future.

Today’s “otsumami” – a bite size snack:

Japanese entrepreneurs needs to take more risk and step outside their comfort zone, nothing can be perfect before its release; it’s OK to fail if you learn from the lesson.

What do you think?

Participant

Written by Joel Devidal

Joel Devidal is a serial entrepreneur and long time fan of Japan, it's unique lifestyle, culture and delicious food . He has grown several profitable businesses during his 20+ years in small business and IT.

He focuses primarily on Japanese online marketing and Internet retail industries, investing and advising startups wanting to enter the Japanese market.

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