Disrupting Japan

Some of the most important startups are ones you never hear about. Some industries are so complex and arcane that its hard for people on the outside to understand the problems that startups are solving or the long-term gain of solving them. Freight forwarding is one of those industries. Today we talk with Taka Sato of Shippio, a startup trying to change the way freight forwarding works in Japan.  We talk about the challenges involved in trying to disrupt a low-tech, low-margin industry and also the potential rewards if Shippio succeeds. We also cover some of the bight spots in Japanese entrepreneurship and talk about how one large company, in particular, has had to change their hiring practices to respond to the fact that so many of their best young employees are leaving to found startups. It's a great discussion, and I think you will really enjoy it. Show Notes What is freight forwarding and why is it important? The biggest advantage of moving from corporate life to startups Why so many startups are coming out of Mitsui The challenges of building a platform in a low-margin industry How to decide between a service-based or SaaS-based business model Why there is finally enough pain in Japan to drive change How the logistics industry reacts to new technology Why the global logistics industry is a myth The paradox of Japanese logistics quality Links from the Founder Everything you ever wanted to know about Shippio Connect with Taka on LinkedIn Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for joining me. You know, there is nothing more interesting than startups in boring industries. They are the ones that are taking on entrenched interests and business convention, and because so few outside of their industry really understand what they do and the problems that they solve, they tend to get a lot less funding and a lot less media attention than consumer-facing startups. No, the startups in boring industrial B2B spaces are old school startups. They may not have the party atmosphere or the easy customer adoption, but the truth is that on average, they have the best chance of success. Today, we sit down with Taka Sato, the co-founder of Shippio, a Japanese startup trying to change the nature of the freight forwarding business in Japan, and if you're not exactly sure what freight forwarding is, don't worry, Taka explains it simply and really well at the start of our conversation. We also talk about the challenges of pivoting in a B2B space in Japan and how to balance the very real trade-offs between the scalability of offering B2B SaaS products with the stability of offering a service direct to the customer. And if you're interested in the freight forwarding industry, and by the end of this interview, I think you will be, we also talk about how the global market is likely to play out. Freight forwarding might seem like a winner take all marketplace, but Taka explains that this is probably not going to happen. Oh, the industry is going to be disrupted -- that's already happening, but it's not going to play out quite the way that Silicon Valley thinks it will. But you know, Taka tells that story much better than I can, so let's get right to the interview. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] Interview Tim: So, I'm sitting here with Taka Sato of Shippio. Thanks for sitting down with me. Taka: Thank you. Thank you for inviting me today. Tim: No, it's been great. We've been trying to make this happen for a long time now. Taka: Yeah, I know, I know. Tim: I'm glad you're finally here. So, Shippio is a digital freight forwarder, but for the audience, let's explain what freight forwarding is, so let's say for example, I've got some construction equipment sitting in a factory in China, I've got to deliver it to a construction site in Japan, what happens and what does the freight forwarder do in the process? Taka: Okay, so if you want to ship your equipments from China to Japan, firstly, you need to study the regulations of China and you need to arrange trucks, warehouse, and custom clearance from China, and then ocean freight, and then when you bring it to Japan, then you need to again study the Japanese regulation and you need to pass Japanese custom clearance and you need to arrange Japanese trucking, warehouse, and everything, but freight forwarder will arrange it on behalf of you everything and they arrange everything by using foreign email or faxes. Tim: No, that makes sense, so a freight forwarder makes all the arrangements, prepares all the documents, but they don't actually own the warehouses or own the ships, or the plane. Taka: Yeah, we have access to the actual asset holders' warehouse, like planes or vessels. We arrange it on behalf of those guys. Tim: So, freight forwarding is a really well-established business, but tell me about Shippio's customers. Who's using Shippio? Taka: Okay, right now, our customer is SMB, like small, mid-size companies, especially we have like middle class companies, they have 10 to 30 shipments per month. Tim: Is it a particular type of company? For example, do you work with a lot of, I don't know, apparel companies? Taka: Right now, a lot of furniture companies and generic goods, maybe. Tim: Okay, and is it mainly outbound of Japan or imports to Japan? Taka: Imports to Japan, mainly. Tim: What is the size of a typical order in terms of container size? Taka: Okay, we quote through container. Inside the container, we have 100s of furniture sometimes or if it's a bigger table, then two or three tables inside the container, so it sort of depends, yeah. Obviously, we don't ship a bottle of wine, or if we import the wine, we did once from Italy to Japan, it was like, 8000 bottles. Tim: So, I mean, a typical order would be something that would be at least what, a quarter of a container or something like that? Taka: Yeah. Tim: Okay, that makes sense. Taka: We also have the air freight, so we have ocean freight and also, we have the air freight. We cooperate with ANA, plane company. Tim: Yeah, actually, I want to talk about that. Actually, I want to talk a lot about the business model, but before we dive into that, let's talk a bit about you. Taka: Okay. Tim: So, I mean, you started Shippio in 2016. Taka: 2016, yes. Tim: But before that, both you and your co-founder were at Mitsui, a very traditional Japanese trading house, and you joined Mitsui like, right out of university. Taka: Yes. Tim: So, when you joined, did you think you were going to be a lifetime salaryman? Taka: That's a good question because my father and my grandfather, they ran their own business, so since I was a kid, I just see what they were doing. I don't think I will be the lifetime salaryman, but yeah, I did enough. Tim: Just like a safe path? Taka: Yeah, yeah. Tim: Yeah? Taka: Yeah, yeah, yeah. Actually, my father, he was happy I joined Mitusi because he knows all risks about entrepreneurs. Tim: Oh, so what did he think when you announced you were quitting Mitsui to start your own company? [pro_ad_display_adzone id="1652"  info_text="Sponsored by"  font_color="grey”  ] Taka: Yeah, after 10 years, he was also glad to hear that? Tim: Yeah? That's great. You know what, I find that so many Japanese startup founders now have -- one of their parents is some kind of a role model, either they were a startup founder themselves or they had kind of a different career that it seems to be really common. Taka: Yes, yes. Tim: I mean, after six years, like one changed your mind, what made you say yeah, this is what I want to do? Taka: So, after 10 years, actually, 10 years in Mitsui. I lived in China five years out of 10 years. I saw a lot of challenges in entrepreneurs in China. At that time, in Japan, it was like 2015 or something like that, at that time, there were not so many entrepreneurs and yeah, we had a chance to dive in that market. We built our own business model, so I asked my co-founder Takashi, and because we met in China, in Beijing, I asked him like, "Hey, let's go back to Japan and let's build our business model," and he said, "Yeah, why not?" Tim: So, you both had that experience in logistics between China and Japan when you were at Mitsui? Taka: Actually, not really. I'm really focusing more on investment side and Takashi was handling the logistics, especially energy. Tim: All right, so why logistics? It's a tough low margin business. I mean, it's a hard business to be in. Taka: Yeah, yeah, but I saw a lot of logistics in Mitsui and I knew they're so inefficient, like it's really annoying. Everything is done manually right now -- at that time, 2016, but I always explained that that logistics, especially the global logistics of freight forwarding, it has not changed in the last 50 years. Tim: So, you still have to send a lot of faxes? Taka: Yeah. Tim: Yeah, actually, Mitsui though, Mitsui -- I mean, because they're a trading company, so they kind of have this kind of deal-making in their DNA, I think, but there's a lot of pretty successful startup founders that have come out of Mitsui in the recent years. Taka: Yes, liek Terada-San from SanSan. Tim: Inada-san? Taka: Inada from AtamaPlus. Actually, he's my douki. Tim: Oh, yeah. Taka: And we stayed at the same dorm in Mitsui. Tim: So, is Mitsui, are they supportive? Is there like a Mitsui alumni group? Taka: We have Mitsui Alumni Association, kind of, but it's just like situations. Tim: Just casual over drinks kind of thing? Taka: Yeah. Tim: All right. Taka: Actually, venture capitalists, we also have ex-Mitsui guys. For example, Kuraboashi-san from DNX, Ito Kengo from DforB.

Most great startup ideas don’t grab your attention right away. It takes a while before the founder’s vision becomes obvious to the rest of us. On the other hand, the startups that immediately grab all the press attention often go out of business shortly after shipping their first product. Reality never seems to live up to the promise. And then there are products like Orphe. This LED-emblazoned, WiFi-connected, social-network enabled dancing shoe seems made for fluffy, flashy Facebook sharing, but only when you really dig into it, do you understand what it really is and the potential it has in the marketplace. Today we sit down with Yuya Kikukawa, founder of No New Folk Studio and the creator of the Orphe, and we talk about music, hardware financing, and why this amazing little shoe is finding early adopters in places from game designers to hospitals. It’s a great conversation, and I think you’ll really enjoy it. Show Notes The inspiration for musical shoes Why Yuya's first musical instrument attempt was a failure The biggest challenge in moving from prototype to production Orphe's technical specs How Orphe is being used in hospitals and other healthcare applications How small Japanese startups can achieve global distribution Where the next big startup opportunities in Japan will be Why most hardware startups fail Links from the Founder No New Folk Studio Hompage See Orphe in action Check out Yuya's blog Follow Yuya on Facebook Check out PocoPoco on YouTube [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero, and thanks for joining me. As expected, my new Google duties are taking a lot of my time and taking me out of Japan quite a bit. Things will be returning to normal soon, but in the meantime, I wanted to bring you a special selects show with a really interesting update. Yuya Kikukawa first sat down together a few years ago to talk about shoes, but if you listened to the last episode of Disrupting Japan you know that when you are talking about shoes you are never really talking about shoes. In this case, the shoes in question are the Orphe, and they are a combination musical instrument and social network, and yeah that will make a lot more sense when you listen to the interview. And we also talk about what defines a musical instrument, the unique challenges of Japanese hardware startups, and the nature of innovation. Oh, and I also have some news. In our conversation, Yuya and I debated a strategic decision that all hardware startups face, and just last month we finally got our answer.  I’ll tell you about it in the update after the show. Intro You know, most good startups are obvious. I don’t mean that I could have had the idea before the founders did. By obvious, I mean that right away you can understand the problem the company is solving for their customers and how they’re doing it. Naturally, that makes it easier for the customers to buy. Most non-obvious startups are in reality still struggling to find the product market fit and are probably not long for this world. And then there are products like Orphe, an LED-emblazoned WiFi-connected social sharing enabled dancing shoe. Yeah, it sounds like something you would find on Indiegogo and that one time not too long ago, it was. But when I sat down with Yuya Kikukawa, founder of No New Folk Studio and the creator of the Orphe, it became clear that this was not some quirky side project or some overfunded crazy hardware startup. This was something really different. We talked about the original inspiration for the shoe and what does and does not qualify as a musical instrument and how Orphe is being used by the artistic community in Japan. But we also dive into the technology inside it, and that, well, that’s something special. That’s why this quirky little blinking shoe is starting to get used by game and UI designers, as well as hospitals and sports trainers in Japan. It’s a fascinating discussion but you know, Yuya tells the story much better than I can. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] Interview Tim: I’m sitting here with Yuya Kikukawa of No New Folk Studio. Thank you for sitting down with me. Yuya: Thank you for inviting. Tim: Now, you guys make Orphe which is an LED dance shoe but it’s so much more than that. Can you describe what Orphe is exactly? Yuya: Yeah. Orphe is kind of world’s first smart LED shoes. Smart means it has a computer inside of the sole, at the same time there are about 100 full color LEDs. The computer can control each pixel. So the user can change the color through the smartphone application. Tim: Okay. It’s always so hard to describe dance and visual effects on an audio podcast. Yuya: Okay. Tim: So it’s basically a dance shoe with an array of LED lights around the sole that are controlled interactively both from the cellphone and from motion sensors in the shoes, right? Yuya: Yes. Tim: Okay. On a high level, the idea of putting lights in shoes isn’t new. I remember back in the ‘90s, there was a company, LA Gear or something, that made a shoe that lit up. Was that an inspiration or is what you’re doing completely different? Yuya: To be honest, I don’t think it’s completely different because the inspiration was actually come from the LED shoes itself. My idea is combine instrument function and LED shoes. I combined the two ideas. Tim: So your inspiration was really viewing the shoe as a musical instrument? Yuya: Mm-hmm. Tim: Well, actually when you think about it, there are some cases where the shoe is a musical instrument, right? Yuya: Flamenco, tap dance. Tim: So like tap dancing or lots of folk music. So yes, okay, that’s not so strange at all. Do you have global competition now? Are there companies doing what you do or is this truly unique for the moment? Yuya: In the genre of smart shoes, there are some startups. For example, Under Armor is making smart running shoes. It has sensor in the sole. There are some competitors. Tim: Okay. But they seem to be going after a very different market. Nike also released a product that had fitness tracking. But you seem to be more targeted at performance art, at least for the moment. Yuya: Mm-hmm. Tim: All right. Actually, tell me a bit about your customers. Other than having cool blinking lights on your feet, how are people using Orphe? Yuya: Our main target is -- so dancer and performers. Orphe can react with performance motion. For example, the steps. There are already some users before Orphe, wearing LED shoes and dancing but it can’t react with motion and music. Tim: So for example when the dancer takes a step, the impact sensor could trigger lights in the background or sound effects? Yuya: Our shoes can send the information in a step. For example, background lights can be controlled by the step. Tim: Right. That’s what I was thinking. Once it’s connected to the smartphone, it’s just data input? Yuya: Mm-hmm. Tim: Actually, we’ll talk about that a little later because I think that’s one of the most exciting things about this shoe. Yuya: Okay. Tim: For the moment, it’s dancers and performance art? Yuya: Mm-hmm. Tim: Okay. Another thing I find interesting is, you mentioned there’s also a social sharing component. So people can share their color patterns, their pre-programmed dance performances. Are people doing that now? Yuya: The user can download the lighting pattern from the cloud but the motion sharing is not open yet. Tim: Okay. So it’s just people sharing the lighting patterns? Yuya: Yeah. It is important idea because now we are more open platform for the shoes. We are now developing the system to share the sensor data, for example. Tim: Well, actually, before we talk about that, I want to take a step back and let’s talk about you for a minute. Yuya: Okay. Tim: How did you get into this? Because you originally wanted to make musical instruments, right? Yuya: Yes, yes. Tim: Tell me about that. Actually, you did create a different musical instrument, PocoPoco, right? Yuya: In graduate school, I was major in Industrial Art Design and I studied designing musical interface in a laboratory. At that time, I came across the idea of mixing light and sound in one musical interface. So PocoPoco is one example. Now, PocoPoco is an instrument. It is black box shape and it is a kind of sequencer to make loop music. Just by pushing the buttons, it makes some loop sounds and not just sound, it light up at the same time it has a haptic interaction. Haptic means it has a solenoid magnetic power actuator. Tim: So it gives a touch feedback as well? Yuya: Yes, yes. Exactly. Tim: It sounds like a really interesting project. What happened with it? Did you try to commercialize it? Yuya: After the prototyping, we made video in a laboratory and it has big feedback from all over the world. So after that, I thought about commercialize the product but problem of design. It is very costful. Tim: So it’s too expensive to produce? Yuya: Mm-hmm. For business, it is not good. Tim: Okay. All right. So a great project, lousy business? Yuya: Mm-hmm. Tim: I’ve had a few of those. [pro_ad_display_adzone id="1652"  info_text="Sponsored by"  font_color="grey”  ] Yuya: So after that, I thought about what product is good for merchandise. Tim: Just thinking about it, it’s very difficult to introduce a new musical instrument. Even something like the invention of the guitar took about 200 years to become popular or even the piano for that matter. It took over a century before it really became widespread. It’s hard to get people to make music on something new.

Today I am going to correct two big mistakes; one of my own and one of society's. I lot of listeners emailed me about the comments I made regarding how Japanese companies treat their employees and customers while they are pregnant. I got it wrong, so I would like to set the record straight. I also explain what I see as the obvious answer to the current #KuToo controversy. I realize that this puts me at serious risk of having to publish another retraction, but I think it's an important way of looking at this problem. Please enjoy, and let me know what you think. Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero, and thanks for joining me. As expected, my crazy Google travel schedule has caused me reschedule some of my interviews, but I promise that I’ll get back to talking with some of Japan’s most amazing startup founders really soon. Today, however, I want to talk about the feedback I received from my recent discussion with Miku Hirano about how pregnant women are treated at work in Japan, and specifically, about my comments in the outro of that episode. Hey, when I screw up, I have no problem admitting that I screwed up, and boy did I step in it this time.    So today, I want to set the record straight on what it’s like for women working at startups and at large enterprises here in Japan. Oh yes, and we are also going to tak about shoes. And yeah, I totally understand how strange it is for a white guy to stand behind a microphone and talk about the situation women face in Japan. I’ll get to that in a minute, but first, let me explain what I got wrong, and let me set the record straight. In our conversation, Miku told the story of how supportive her clients and prospective clients had been while she was pregnant. Doing things like adjusting their schedules and coming to her office for meetings, where Japanese business protocol would require that she visit them. Both Miku and I were surprised and delighted that so many Japanese salarymen, who have a reputation for being rather sexist, voluntarily went out of their way to accommodate her and to make things just a little bit easier for her while she was expecting. In the outtro, I speculated that this outpouring of support might be because she was a startup CEO, and many of the traditional rules of Japanese business etiquette don’t seem to apply to startups, and I mused that her experience might have been very different if she had worked at a more traditional Japanese company. Well, I was wrong. I was really wrong. And in fact, I have to say that I’m pretty happy that I was wrong about this. Let me explain what happened…. After that episode aired, I received a lot of email from female listeners working at large Japanese companies who explained that both their clients and their companies made exactly the same kinds of accommodations for them when they were pregnant. And I also heard from a few senior managers and HR professionals telling me that I got it wrong. They gave me examples of how they had made a point of traveling to visit a vendor who was pregnant or broke up long meetings into multiple short ones to make things more manageable for pregnant employees or visitors. So I got it wrong. And that’s awesome! But I can’t just leave it there.  I probably should, but I mean something still doesn’t fit. There is a great deal of gender discrimination in Japan. Both international organizations and Japanese NGOs consistantly rank Japan very poorly in this regard. In fact, the World Economic Forum’s Gender Gap Report ranked Japan 110th out of 149 countries. And then there are things like Tokyo Medical University marking down girl’s scores on the entrance exams to ensure “enough” boys would get in. So how do we reconcile this seeming contradiction?  The independent research showing that discrimination exists is consistent and respected, and there is no reason to doubt it, and the personal experiences of the Disrupting Japan listeners who took the time to email me are also every bit as real and I have no reason to doubt them. I asked a number of my women founder and professional friends about it and got, well let’s call it a range of opinions on the matter. On one extreme I had people tell me that the macro-research was just misleading and that Japan is quite supportive of women who really want work hard to get ahead. On the other extreme, one friend of mine concluded that this support for pregnant women was actually a subtle form of gender discrimination, explaining that the behavior was the just reenforcing the patriarchal idea that, above all else, it is a women’s job to have babies. So after carefully examining all the evidence and considering all of these opinions, I’ve come to the conclusion … That I don’t know.    Now I realize that is not a satisfying answer. As a podcaster and an author, I am expected to boil things down to a simple sound-byte, or at least clear, cogent explanation.  In today’s world, not having a clear opinion on a subject is viewed as a sign of being uninformed, or unintelligent or indecisive. The idea being, we’ll get back to us when you’ve finished the assignment and have your opinion ready. But I disagree. Any five-year-old can have an opinion, but there is a kind of valor in consciously deciding that you don’t know. And, no I don’t mean in the disingenuous “I’m just providing the facts and let you decide for yourself” way.  But in the more complex, “I’m going to walk you though the facts and my thought processes that show you why your current belief probably wrong, even though I don’t have a new belief to replace it with.” And yeah, I admit that sounds like some kind of negative learning, but stay with me on this one. I’ll walk you though the facts and logic regarding female founders in Japan. I’ll take you right up to the point were we would normally jump to a conclusion; and then I’ll hold you back. Because in all likelihood neither you nor I are ready to make that jump just yet. Hah! All of this will make a lot more sense in a few minutes when we start talking about shoes. Oh, and before we go any further. Let’s just address the elephant in the room here. I’m a white American male talking about the life experiences of Japanese female founders. We can all agree that that’s at least a little bit weird, right?  The thing is though, the situation for women founders and managers in Japan is a really interesting and and an important topic, and I get asked about it a lot. Not only when I’m talking about Japanese startups overseas, but even when I’m speaking to Japanese audiences here in Japan. So, I feel like it would be even weirder for me not to talk about it, especially when there are so many far less informed people spouting all manner of nonsense about the topic. But it’s tricky. The farther something is from our own life experiences, the harder it is to really understand, and the more likely we are to get it wrong. But I try. And I rely on my female friends, fans, and founders to let me know when I screw something up, so I’ll get closer to the truth next time. But the real truth, the one that journalists just refuse to accept, is there is no single experience of being a women fonder in Japan. Even on basic issues like the level of discrimination women face or the value of the programs that support female founders, the women founders who have come on the show have had very different opinions about most of it. And so trying to make simple statements about the experiences of hundreds of different people is going to be error-prone. What’s interesting though, is that after interviewing more than 150 Japanese startup founders, I think that the female founders have a much greater diversity of experience than male founders do. I mean that men’s stories are more like each other’s than the women’s stories are like each other’s. And I think there is a good reason for this. If you are a salaryman in Japan, there are clear rules for social interaction. You and everyone one else knows how you are expected to behave in any common social situations. Now over the past ten years or so in Japan, a kind of standard, stereotypical image of a startup founder has developed in Japan. He’s young, dresses casually, is outgoing and confident and constantly busy. It’s a ready-made social persona that any male founder can step into and people will understand how to treat him.  It’s not required of course, I mean, some founders are introverts, and a few even prefer to wear ties. But that persona is there, fully formed. If you chose to step into it, you’ll understand how to act, and people will understand how to treat you. But it’s different for women founders. There is no standard persona yet. There is no baseline. There is no clear idea of who exactly they are supposed to be. So every female founder is both free to, and in a sense, required to, create that persona for herself. And as a result, we see much greater variation in the way that female founders interact with customers, manage staff, and they way they present themselves to the world. So, I’ll continue bring you their individual stories as they tell them, and I’ll made general observations when I think I can. OK Tim. Can we talk about shoes now? Yes, yes dear listener,  now we can talk about shoes. But it’s important to remember, that whenever you are talking about shoes, you are never really talking about shoes. Last January, Yumi Ishikawa started the #KuToo movement protesting the fact the many corporate and government dress codes require women to wear high-heels. Now, there is a very important social issue here, and as we’ll see in a moment, it’s not really about the shoes.

There is big news for Tim and for Disrupting Japan this week. It's a very short episode, and I have no special links or show notes this time around. Please give the show a listen for the big reveal, and please accept my sincere thanks for all your support over the years. Disrupting Japan is just getting started. The best is yet to come. Leave a comment Transcript -- vintage news sounds -- This is a Disrupting Japan news flash. We are broadcasting live from Tokyo, Japan to bring you today’s breaking news. In just a few minutes from now, we will be witness to …. Hold on. Let me turn this thing off. OK. That’s better. So, this is the first episode of Disrupting Japan ever that has not been released early on a Tuesday morning Japan time, so as you might expect, something big is going on. And I wanted you to hear it from me. Because you, the Disrupting Japan listeners, are a big part of what has led to this, and as you’ll see, I think that you are going to be a big part of what’s to come. Some of you are new fans, and that’s great. The podcast keeps growing steadily every month. And some of you have been with me since the very beginning and you were with me as my ContractBeast startup went under. You were part of my Crowd-Sourcing-My-Career project. You were part of my journey to becoming Japan’s first professional podcaster, and with me when I decided to take the show non-commercial in order to work with energy startups at TEPCO. So it’s only fair that I let you know what’s coming next. I’m joining Google as the new Head of Google for Startups Japan. So what exactly does Google for Startups do?  Officially, it's "Google’s initiative to help startups thrive across every corner of the world. Bringing together the best of Google's products, connections, and best practices to enable startups to build something better." And that’s, admittedly, pretty cool. In practice, however, what Google for Startups Japan will become is largely up to us. Google for Startups has different programs in different countries, and this is an amazing chance to create something unique for Japan and to make a real impact for Japanese startups. I have a lot of ideas, but I want to hear from you are well. If you are out there growing your startup in Japan, let me know what are some of the biggest challenges that you could use some help with. Or if you’ve already overcome those challenges, let me know what kind of resources and advice you wish you had access to back then. I’ll need your help to really make this work. So, what does all this mean for Disrupting Japan? Well, good things mostly. Google is being very supportive of the show, and with the audience as large and engaged as it is now, I don’t think I could stop even if I wanted to. However, my travel schedule for the next few months is absolutely crazy — even by my standards, so interviews will be hard to arrange. But we’ll make it work. I might be able to squeeze in interviews on the few days I’m in town and edit them on airplanes. Or maybe I’ll get a chance to interview Japanese founders in the countries I’ll be visiting. Or maybe I’ll bring my microphones with me, make a little pillow-fort studio in my hotel room and record some shorter solo shows on the road. I don’t know, but I’ll make it work. I haven’t missed an episode in the five and a half years since I started Disrupting Japan and I’m not going to miss one now.  Format-wise,  content-wise, things will return to normal in a few months. So I’m incredibly excited about this new opportunity. I mean its a chance for me to work full time with Japan’s startup founders to further develop Japan’s startup community. And that’s pretty much a dream job for me. But there is something else here, and it’s something that I don’t think anyone looking at Japan’s startups from the outside is quite ready for. You see over the past 10 years, and the past five years in particular, I’ve watched Japan’s startup ecosystem transform from a small group of innovators trying to figure out how to make things work into a dynamic and growing community of startups that are truly world-class. I mean sure, there is still a lot that Japanese startups can learn from global innovation and global startup strategy, but we are at a point now where there is also a lot that Japanese startups can teach the rest of the world. Long-time listeners know about my ongoing frustration with the foreign media coverage of Japanese startups. Far too much of it will feature a Japanese startup in an “oh this is cute and interesting” kind of way and either miss or ignore the potentially transformative ideas that underly the basic concept.    There are some truly amazing things going in Japan in AI and robotics, and machine learning, and minimal UI design that are either radically different from what is happening anywhere else in the world or years ahead of it. And oh yes, you will be hearing more about the Evocative Machines project since I will now have the time and resources to breathe new life into it. You know, in the very first episode of Disrupting Japan I talked about the fact that Japan is innovative and that, once change begins to happen, no country can change as quickly and as completely as Japan.  Well, here was are over five years and over 150 episodes later, and the rest of the world is now starting to see that this is indeed the case.  Ten years from now, Japan is going to be seen as every bit as innovative as she was in the 1950s and 1960s. But it’s not going to look like Silicon Vally. The end result is going to be something very, very different. It’s going to be a new model of innovation.  And so yeah, I admit there are all kinds of things we haven’t figured out yet. And I’m not exactly sure what the end result will look like.  But that’s OK. I’m looking forward to working with Google and working with you to figure it all out. But most of all thanks for listening, and thank you for letting people interested in Japanese startups know about the show. I’m Tim Romero, and thanks for listening to Disrupting Japan.

Technology is global, but ideas are local. The same IoT technology is being deployed all over the world, but a small Japanese startup might be who helps us make sense of it all. There is amazing work being done in user experience design, but most designers are operating with the contract of keeping users engaged. This is a fundamental shift from the traditional user-centered and functional design approaches. Today we sit down with Kaz Oki, founder of Mui Lab, and we talk about user design can actually improve our lives and help us disengage. We also talk about the challenges of getting VCs to invest in hardware startups, why Kyoto might be Japan's next innovation hub, and what it takes for a startup to successfully spin out of a Japanese company It's a great discussion, and I think you will really enjoy it. Show Notes How Japanese design philosophy informs user interface design How UI design got so bad Who are the early technology adopters in Japan Why VCs hesitate to invest in hardware companies How to pitch corporate management to let you spin out a startup Why you should run a Kickstarter even when you have corporate backing Why a major manufacturer decided to outsource innovative manufacturing The secret to making corporate spinouts work in Japan How to convince Japanese employees to join a spinout How to get middle-management on-board with corporate spinouts What changed in Kyoto to make it one of Japan’s best startup hubs Links from the Founder Everything you ever wanted to know about Mui Lab Check out the Mui Kickstarter Keep up-to-date on the Mui Blog Check them out on Facebook Follow Kaz on Twitter @mui_labo Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for joining me. If you're a fan of Disrupting Japan, you know that I have a strong dislike for attempts to make Japan sound too exotic and this goes in both directions. On one side, we have consultants who claim that Japanese business practices are so unique, arcane, and confusing that the only way westerners can possibly understand them is by paying large sums of money to consultants such as themselves. And on the other side, of course, we have people insisting that foreigners can't really understand Japanese anime without a thorough and nuanced knowledge of Japanese language and history. It's all utter nonsense. I mean, there are differences, of course, and those differences should be acknowledged and respected, but whether an idea is coming from Japan or America, or Germany, one true measure of the value of that idea is its universality. The most important achievements might emerge out of cultural biases or sensitivities but they address something universally true, something deeply human. Today, we sit down with Kaz Oki of Mui Lab and we're going to talk about Mui's radical rethinking of how we should interact with computers and the different contexts for that interaction. The Mui itself is a tactile and visual user interface that literally fades into the furniture when you're not using it. Now, this interface is clearly informed by Japanese aesthetics. In fact, some of the deeper issues Kaz and I talked about kept bubbling up in my mind in the week following the interview, and Kaz and I are going to do a follow-up later over a couple of beers in Kyoto, but there's nothing about the Mui design that looks particularly Japanese. It's tapping into a deeper and more human design sense, and that's far more interesting. Oh, and Mui Lab also represents a very rare kind of startup, a creature far, far more rare than unicorns. Mui Lab is an innovative and successful Japanese corporate spin-out. We talk about how Kaz made that work, his valiant battles against multiple layers of middle management, and how he managed to recruit top startup talent into that company, but you know, Kaz tells that story much better than I can, so let's get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Interview Tim: So, I'm sitting here with Kaz Oki, the co-founder of Mui Lab, so thanks for sitting down with us. Kaz: Yeah, thank you for having us. Tim: It's great to finally have you on the show. So, Mui is a woodgrained control panel for the home but yeah, I think you can probably describe it better than I can. Kaz: Yeah, Mui is originally, the concept is coming from like, Chinese philosophy. Mui Shizen is original concept, so Mui Shizen is talking about lifestyle without intention, leading naturally. So, that concept for the coming IoT world, so IoT world at the next year, 20 billion devices will be connected to each other and it's more than the people or humans, so it's like a tremendous, like the technology is coming very soon, but we don't know what's going on yet. Tim: But you guys made really different choices than like, the rest of the world and I love people who are making different choices, so everything else is focusing on additional interfaces, additional functionality, additional features, but you guys really went the opposite way -- you tried to scale things back. Kaz: Yeah, we make the technology like a zen garden, so zen garden is like, expression of the world but the element is only stone, sound and like, plants. Tim: Yeah, and very much focused on touch. Kaz: Right, right, right, yeah. Tim: Whereas one of the things I felt was interesting with both Amazon Alexa and Google Home are really focusing on voice commands, but you guys very intentionally stayed away from voice, so what was your thinking in that decision? Kaz: So, there's a couple of reasons. One is synergy. We are a spin-out from a company called Nissha. Nissha is the largest touch panel company, and we also focused on visual aesthetics and the touch panel combination, so from that point of view, we focus on touch panel -- Tim: On the touch? Kaz: Display system, and at that point of view, we focus on what’s the essential value for the people or human, and then these just two measures of  value from like, a user's perspective, so that's visual and tactile feeling. Tim: Right. Kaz: So, that really matched to our technology. Tim: And I noticed, you've gotten -- I mean, this aesthetic, this design sense has gotten you a lot of attention and award overseas as well. You won like, the most innovative at CES this year and a Best of Kickstarter award. Do you think it's just because what you're doing is so different from everyone else or do you think there's like, something fundamental that we just want to interact with something simple? Kaz: I think we probably visualized the hidden problem, which we describe as like the relationship between technology and the people. In other words, user experience. Sometimes, we get smart speaker or smartphone coming up but it's always a technology-centered design, but our approach is human-centered technology design. Tim: Yeah, and I guess you're right. So much of design now is driven by the technology in that we have touch-sensitive displays, what can we do with this? We have smart speakers, what can we do with this? And as a result, it's just, it's a lot of innovation, it's a lot of creativity, but it's people just adding more and more and more, and more. Kaz: Right, right, it's like, more features. Tim: And you guys are actually trying to take things away. Kaz: Trying to remove from in front of us, but backend technology is actually the same. We use cloud or like the latest computing, but to deliver that technology to touch-based or certain like, a human relationship, we changed that delivery system. Tim: Okay, so tell me about your customers. Who's the target audience for Mui, is it homeowners or gadget geeks, or interior designers? Kaz: So, actually, we started targeting interior designers or architects, so that's our original concept, and in extension to that, we made a Kickstarter for the smart home or those like, those early adopter users, but in the meantime, we've been piling up our technology platform. It's a very niche platform, but we have patent and we have like, UX system, we have like a cloud structure, so we make that a very small platform, and now licensing to other companies. Tim: But most of the current interest, is it coming from Japan or from the international market? Kaz: International market, yeah. Tim: Why do you suppose that is? Because this has such a strong Japanese design sense to it. Kaz: I think that wood material, it's like common sense for everybody, so from that, like a traditional or authentic behavior point of view, sometimes, people love our technology. Tim: Well, I think so. I mean, wood, we humans have been working with wood for the last 15,000 years. It's pretty fundamental, but do you think it's just the foreign companies have been more willing to try new things than the Japanese companies? Kaz: I think Japanese are most of the time, we follow the concept from overseas, especially like, technology, but those leading countries like the US, it's technology-driven but also, there is a certain amount of people focusing on the issue of technology. Tim: Yeah. So many Japanese startup founders have told me that they first got interest overseas and when the Japanese companies saw the overseas interest, then they became interested. Kaz: Yeah, it's exactly that! Tim: The same thing happened? Kaz: Yeah, yeah, yeah. Tim: That's got to be a little frustrating though. Kaz: Right, right, right, yeah, Japan is not a trendsetter, yeah. It's actually more like a follower. Tim: At least, the large companies. I think there's a lot of really amazing things going on in startups and tiny companies. Actually,

Technology develops differently in Japan. While US tech giants have been grabbing artificial intelligence headlines, a business AI sector has been quietly maturing in Japan, and it is now making inroads into America. Today we sit down again with Miku Hirano, CEO of Cinnamon, and we talk about how exactly this happened. Interestingly, Cinnamon did not start out as an AI company. In fact, when Miku first came on the show, the company had just launched an innovative video-sharing service. Today, we talk about what lead to the pivot to AI and why even a great idea and a great team is no guarantee of success. We also talk about some of the changing attitudes towards startups and women in Japan, the kinds of business practices AI will never change, and Miku give some practical advice for startups going into foreign markets. It's a great discussion, and I think you will really enjoy it. Show Notes How Miku invented TikTok before TickTok and why it didn’t work How you know when  its time to pivot a startup Why companies will never go digital and will always use paper Who will benefit most from AI The four categories of AI How AI will change the legal profession How japan is actually ahead of US and China in some kinds of AI What's really driving business innovation in Japan Can AI actually reduce overtime? How enterprise clients treat women founders Links from the Founder Everything you ever wanted to know about Cinnamon Follow Miku on Twitter @mikuhirano Friend her on Facebook More about Cinnamon Miku's original Disrupting Japan interview Eliminating Repetitive Office Work through Disruptive AI Miku on the John Batchelor Show - Part I Miku on the John Batchelor Show - Part II Leave a comment Transcript  Welcome to Disrupting Japan, straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for joining me. Today, we're going to sit down and talk about artificial intelligence with Miku Hirano of Cinnamon. Now, Cinnamon is actually a great example of a successful Japanese startup pivot. When we first sat down with Miku four years ago, she had an innovative micro-video sharing company called Tuya and really, you should go back and listen to that episode. I've put a link on the show notes and it was really a good one. Anyway, Miku basically started TikTok a few years before TikTok and we talk about why things didn't work out, why even with the same idea, one startup will become a multi-billion dollar brand and the other will pivot. Of course, the pivot to AI and the rebranding to Cinnamon has led this to their current success in using AI to read and to understand common business forms. In fact, for reasons that Miku will explain during the interview, Japan is actually ahead of the US and China in the area of business AI. We'll also talk about how attitudes towards women are changing here and how Japanese men at traditional companies treat women founders, particularly women founders with children, and I think it might surprise you. I mean, it surprised me and it surprised Miku as well, But you know, Miku tells that story much better than I can, so let's get right to the interview. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] Interview Tim: So, I'm sitting here with Miku Hirano of Cinnamon and it's great to have you back on the show again. Miku: Yeah, thank you so much for having me here again. Tim: Well, so much has changed since -- it was three years ago, right? Miku: Yeah, yeah, and I had a totally different business at the time. Tim: Well, not only a totally different business but you've gotten married and you've had two kids. Miku: Yeah, yeah, and at the time, I think I was living in Taiwan and now, my business is in Tokyo, so everything has changed. Tim: And so, we're not even going to cove what we talked about last time even though in the intro, I've told my listeners to go back and listen to the old show, I know some of them won't do it. Miku: So, please listen to the last audio show. Tim: Okay, so guys, listen to Miku. It was a great show. But let's just pick up where we left off because it's been a busy three years. Last time we talked, you were working on Tuya which was this great seven-second video sharing startup. So, what happened? Miku: Tuya was a video sharing app but unfortunately, that business didn't go well, so we couldn't get enough users to raise a fund, so I called the Taiwan office at the time and... Tim: Let's get back to it because I mean, the mechanics of what happened are important, but I think what's more interesting is the idea, the seven-second videos, it was a great idea. It was basically TikTok a couple of years before TikTok, and this is something that happens so often, so for example, like Uber and Lyft were not the first companies to try that business model. AirBnb certainly wasn't the first company to try that business model. There is so much more involved than just having a great idea and a great team, and we'll get to how you're executing now, so we know it's a good team. Miku: Thank you. Tim: But why do you think that Tuya didn't take off where TikTok became a worldwide craze? Miku: I see, so we lost some users and some of the users used Tuya, our app, every day. They took a video, it's just a seven-second video maybe seven times or eight times a day, so there are some active users, but I think Tuya doesn't have a power that our users want to tell to other friends. So, for example, TikTok, sometimes, you find some very interesting hilarious videos, right? And sometimes, you show it to your friends, but on my app, we didn't have that part. Tim: So, was the key innovation, the key driver at TikTok, you think, was that integrated sharing mechanism? Miku: Yes, yeah, to other friends. Tim: Alright, and what was the trigger? What made you decide to say, "Okay, we're shutting down Tuya and we're moving to AI"? Miku: So, that pivot didn't go that quickly. It was very ugly, to be honest. Tim: It usually is. So, what were the steps? How did it roll out? Miku: Okay, so our company was almost going bankrupt, so we found that our company will have no cash in two or three months, so we needed to change our business. Tim: And you were a pretty big company at that point, right? How many employees did you have? Miku: We did have around 20, but I need to restructure maybe one-third of the company, and then I need to come back to Tokyo to survive some of the members, I need to earn money, so I came back to Tokyo. So, in that point, I had two options. One is to raise enough fund and the other is to get cash, I mean, from sales, but for the first option, I guess, I thought it wouldn't go well. We just had a failed business, so both me and Hajime, my co-founder Hajime are serial entrepreneurs but we couldn't make the second business wait. Tim: Yeah, I think especially in a business model like yours, raising funds at that point would be extremely difficult because the investors would say, "Well, look, you tried it, it didn't work, try something else." Did you try to raise funds or did you just --? Miku: Actually, I didn't try. Tim: Just figured that this is time to... Miku: Yeah, just finding, I mean, just doing sales would be better. Tim: What kind of sales did you do? Miku: Just system development. So, at that first point, we didn't think about AI at all. Tim: So, just we'll develop apps, we'll do javascript programming app development business? Miku: Yeah, with somebody else to get money. I think most of entrepreneurs having engineering background have this kind of idea, that if our business doesn't go well, we can do systems development business and then we can survive, so we have that kind of fault, but actually, it didn't go well. Tim: It did not? Miku: No, no. Tim: What happened? Miku: It was really difficult. Yeah, so I did not have any sales experience and also, another reason, most companies have experience, have system development company that they have already used, right? So... Tim: Right, so they need a reason to start looking for a new vendor. Miku: Yeah, yeah, so yeah, I improved the sales material that there was a page, things that we can make, and actually, one of them was AI. The reaction of the potential clients got changed. Tim: You found something that their current vendors couldn't do. Miku: Yeah, and at that point, we totally forgot that both me and Hajime didn't research about AI when we were students. We totally forgot about it. Tim: You did your Masters in AI, didn't you? Miku: Yeah, yeah, and even my co-founder had phD in AI deep learning, but we totally forgot about it. Tim: Just too much stress of trying to keep the company going? Miku: Yeah, and then to increase what we can do, I just wrote AI, then their reaction changed, so I thought it might be a chance. Tim: So, you started getting contracts, and then you just started re-tooling the company around AI? Miku: I started to get contracts from a couple of companies, so that is how we could survive. Tim: And I guess from that interest, eventually developed the Flax Scanner product. Miku: Exactly, so the idea of Flax Scanner which is our flagship product came from one of our projects. So, one of the projects was extracting the information from resume. Tim: And so, who's using it now? What kind of companies? Miku: Yeah, so now, more than 50 companies use Flax Scanner, mostly insurance companies and banks, and manufacturers, including Toyota, Daiichi Insurance, Nihon Insurance, so that kind of top tier Japanese huge enterprise. Tim: And what kind of documents are they using this on? Miku: For example, in an insurance company, the receive tons of documents, so for example,

Ari Horie has always had a different approach to supporting women entrepreneurs. She doesn't talk about "empowering" women and ...

Japanese enterprises are their own worst enemy when it comes to innovation. In this live panel discussion, I talk about my experience driving innovation at TEPCO, and Ion and Jensen share their experiences running innovation labs. This panel was part of the btrax Design for Innovation event in Tokyo last week. We talk about the specific challenges that Japanese companies are facing and the strategies we've used -- with varying degrees of success --  to help overcome them. Of course, like everyone else, I always remember the most important thing to say ten minutes too late, so I've added those thoughts to the outro at the end of the podcast. It's a great conversation with four people who really care about innovation in Japan, and I think you'll enjoy it. Links from the Panel Brandon Hill (moderator) Connect on LinkedIn Follow on Twitter @BrandonKHill the btrax homepage Tim Romero (me) You've already found me here, but we can connect on LinkedIn if you like. Or follow me on Twitter @timoth3y, but my Twitter game is pretty bad Jensen Barnes Connect on LinkedIn Ion Nedelcu  @frogdesign.com Check out Frog Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. I’ve got another live show for you today. I’ve gotten some great feedback on the past couple I’ve put out, so while I finish up the big solo show I’m working on about how to raise money in Japan, I thought I would bring you another live show today. But this one is a bit different. Last week, at the BTrax Design for Innovation conference, I was part of a panel where we talked about the challenges a lot of large companies face in driving innovation internally. I talk about some of the specifics from my work at TEPCO and my fellow panelists share their experience running innovation labs for Japanese enterprises. And, I’m sure you will not be surprised to learn that Japanese companies are pretty bad at innovating this way.  At least so far. Most have good intentions, of course, but almost all of them are making the same core mistakes in their innovation programs. We go over a few of the big ones in our conversation, and in my comments at the end of the show, I’ll give you my closing thoughts on the problem with what I call the "innovation market." But for now, lets get right to the discussion. Interview Brandon:          So let's see the topic innovation labs. So sounds really Silicon Valley, isn't it? So I like to start by getting a poll from the audience about Silicon Valley. So how many of you guys have visited Silicon Valley in the past, but few, one third maybe? I live in San Francisco and I see many Japanese companies visit Silicon Valley looking forward to some ideas or methods for innovation. And I feel like every single week there's one company visiting from Japan trying to find some ideas. However, I feel like result-wise and output wise, I haven't seen a clear results least. So I like to open up discussion here to ask your opinions about while we did some of the challenges that Japanese companies are facing when it comes to creating innovation, even though they do come to the second Valley very often. What's, what's wrong with it? What's, what, what do they need to do? Anybody JV, go ahead. Jensen:            Well hi, I'm Jensen Barns. I'm from California, lived in Japan for six years. Basically opened up, well co founded the innovation lab here in Japan. Been active in many institutions and I kind of brand myself as doing new things, always doing new. So I think the, the issue I see in this in California is Japanese key Japanese companies coming, but then not really setting with Tim has, both Ian and I have, we've talked about is like setting objectives, setting the right objectives and coming for the right reasons. As a, as someone who opened up a lab here too, it's, it's sort of a trophy to have a innovation system or innovation process within the company. And I think there's a lot of mid sized companies that could really, you know, use great, great innovation lab to prop up the brand of the institution and, and the employees without hiring, you know, expert maybe Toyota some, you know, today we heard about Yamaha Toyota, you know, I mean Honda rather. And you know, without hiring, you know, expert researchers or engineers transforming their own people more into innovation experts. Brandon:          So how about the from the viewpoint of expert TEPCO Ventures yourself then? Tim:                 I guess should I should introduce myself a bit? I, I'm my name is Tim Romero. I'm CTO of TEPCO ventures where we work with both Japanese startups and foreign energy startups to develop new business models and energy here in Japan. Before I joined TEPCO, I've started four startups here in Japan over the last 25 years. Sold to bankrupted too. So 50/50. That's not bad as far as startups go. Yeah. I also work with some other large Japanese companies on their startup outreach and innovation programs. But I'm probably best known for a podcast I run called Disrupting Japan, where we sit down and we talk with Japanese startup founders about not so much their specific company, but what it's like to sell to big enterprises as a tiny startup. How they managed to convince their wife to let them leave Mitsui and start this crazy, you know, side project. Just what it's like to be an innovator in a country like Japan that prizes conformity. To answer the question, I think the single biggest mistake that large Japanese enterprises make when creating an innovation program, it's a lack of a specific goal. So innovation is not a goal. It is a means to an end. So when a company says they want innovation, they're, they're still a little bit confused. So do you want to create new business models within your existing industry? Do you want to create new products that can be sold to consumers? Do you want to streamline existing businesses taking technology and best practices from other companies? So all of those are reasonable and achievable goals. But the single biggest mistake I see most companies make is saying, well, go outside and find some of this innovation and bring it back and that that doesn't work. Cause innovation is a, it's a process. It's not the goal. Brandon:          So speaking of with the goals how to major innovations maybe on can start introduce yourself and you can add some of the ideas or? Ion:                  Happy to. Hello. Good afternoon. My name is Ion. I'm general manager for Frog. Frog is a global design and strategy consultancy. We've just celebrated our 50th anniversary and are in our third year a partnership together with Dentsu to help Japanese companies grow basically and stay relevant in the future by designing experiences that people love. Thank you. I, I agree with what everybody else has said. Innovation is, is complex and is not anything magical. It requires a lot of planning. Before answering the question, how to measure innovation. If you don't have objectives, you don't have an innovation strategy. If you don't have an a plan to actually see how whatever comes out of your innovation activities will be embedded into the organization, you are going to fail or you're going to shut it down, which is not obviously the purpose of making investments. Innovation should never be measured by return on investment in day one, year one. It should always be a long term thing. If you look at the horizon that McKinsey basically works around horizon one, two and three. Horizon one is the known horizon two is the partially known and horizon three is the unknown. What's innovation can influence all the three horizons. The one you should be focusing on is the third one, the one that is furthest away. So it's five years plus. Anything else that you expect from innovation coming to the business sooner is going to be a failure. Brandon:          So where do you think of like the, the last session I had a Nick with Honda says their measurement is number wows or devolving over that I'm not going to, to have that the wows that they get from the audience. Is that a good measurement for innovative at least Jensen:             Well, like I think Tim and Ion, you know, the system that you have within the company and how you measure it. I think it's just very important. If the company uses OKRs, which I, you know, measuring what matters. I don't know if you know this, this book Measuring Which Matters Most, it's one of the, you know, prime books of how to structure objectives within your company. And I'm sure they do, many companies do, but somehow I think innovation teams are just exempt. A lot of teams just simply don't do them because of this worry of, of watching them. And I differ a little bit from the KPI. I think all innovation teams should have KPIs and I think there should be carefully watched. I don't think it should just be this kind of, you know, open-ended thing that we don't watch. I mean, it's like this, it's like a seed. I mean, it's like you wouldn't just plant the seeds and run away and not, you know, and just like, Oh, just grow somehow. I think this is like really important that you, you, you care your Nutri nurture this thing. But you like all controlling things, you can't just obsess and control it and stifle it by shutting it down for example. I think, I think that's what you're getting to. Maybe it's just like, you know Brandon:          So  at TEPCO Ventures. Do you guys have any KPIs or goals set? Tim:                 We do, and again, it depends on the team. So we have a CVC team and we've got several different project teams. And I think the, I mean, KPIs are essential and it's important to set them in line with whatever your goals are. So if the goal is new business creation,

This year at CEATEC, I worked with Plug & Play Japan to bring on stage founders from two very different hardware startups. We talk in-depth about what it takes to be a hardware startup in a world where venture capital seems fixated on SaaS companies and software platforms.  Although their startups seem very different, Tomo Hagiwara and Keith Tan had very similar core experiences. Tomo and Keith share some great advice about raising money as a hardware startup, how to give large companies confidence that your product will meet their quality standards, and some pretty surprising answers to questions about the best way to go global. It's a great conversation, and I think you'll enjoy it. Links Everything you ever wanted to know about Crown Digital Learn about Aquabit Spirals Follow Tomo on twitter @hagi_w Friend him on Facebook Leave a comment

The promise of AI is easily understood by anyone with an imagination, and for 40 years, venture capitalists have been enthusiastically investing in that promise. However, it's been significantly harder for founders to turn that investment into sustainable business models.  Today we are going to look at why that is, and go over what might be a blueprint for startups to create business models around artificial intelligence. Tatsuo Nakamura founded Valuenex in 2006 with the goal of using artificial intelligence to supplement the work being done by patent attorneys, and their software was instrumental in the resolution of one of Japan's most famous, and most valuable, lawsuits.  the Blue LED patent case. We also talk about how to sell to large companies as a small startup, the challenges in trying to make product strategy based on technology, why staying private longer is not always a good thing for startups, and how Valuenex technology accidentally discovered a secret collaboration between Honda and Google. It's a great discussion with the founder of one of Japan's most successful AI companies, and I think you will really enjoy it. Show Notes Why AI can understand patents better than lawyers can Why the market should drive technology rather than the other way around How Valuenex helped resolve one of the biggest patent lawsuits in Japanese history How a new law if forcing change in Japanese universities How Valuenex discovered a secret collaboration between Honda and Google How to create sustainable business models in AI Why quantum computing will both break AI and save AI Why Valuenex IPOed early instead of staying private and growing Some unusual advice about when to do a market entry Why Japanese VC often make market entry difficult Links from the Founder Everything you wanted to know about Valuenex Connect with Tatsuo on LinkedIn Friend hin on Facebook Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today, we're going to be talking about something that's frankly difficult to talk about on an audio podcast. Tatsuo Nakamura founded Valuenex in 2006 to use Artificial Intelligence and modern visualization techniques to help clients make sense of their patent portfolios and to keep an eye on what the competition is doing. In fact, this technology uncovered some of the core evidence that decided the famous blue LED case. It's highly effective but highly visual, so let me try to explain it. Valuenex creates a kind of topographical map that shows companies where in the market, their IP is strong and where it's weak. This can let them spot new market opportunities or learn what their competition is about to do. It's all pretty intuitive when you see it, but today, we'll have to use our imagination as a kind of screen simulation. Tatsuo and I also talk about Valuenex's US market entry - well, their two US market entries, actually. We cover what he sees as the best overall strategy for AI startups for them to find their product market fit, and Tatuo explains how he was accidentally able to discover a significant collaboration between two world-famous companies six months before the project was announced. But you know, Tatsuo tells that story much better than I can, so let's get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Interview Tim: I'm sitting here with Tatsuo Nakamura, the CEO and founder of Valuenex. So, thanks for sitting down with me. Tatsuo Nakamura: Thank you very much. Tim: Now, Valuenex is a leader in visualization and big data analytics and it's so hard to talk about visualizations on an audio podcast. Tatsuo: Yes. Tim: But we're going to try. So, what's the best way to explain? What does Valuenex do? Tatsuo: Valuenex is a predictive analytics company using big data analytics. So, the main purpose is finding the future situation and making the strategy for our client. Tim: Okay, and you specialize in intellectual property and patents, right? Tatsuo: Because patent documentation is very, very good and useful for data source, because there's many fields in the data and they have a very clean documentation, so it is easy to analyze. Tim: Patents, especially, are interesting. I've heard from a few people in AI that right now, AI can read patents better than humans can because the language is so specialized and unusual that's it's really well-suited to AI. Tatsuo: Yes, so at first, when the people entered the IP field, "Oh, this is confusing because this is not language." It's a special words. However, when you apply machine learning technologies, it is easy to understand it because it is a very clear some kind of mechanism for the sentence. So, it is easy to transfer to the machine languages. Tim: Okay, so once the algorithm goes through hundreds of thousands of patents and uses machine learning and AI to understand the contents, it builds kind of clusters of meaning around it, right? Tatsuo: Mm-hmm. Can you imagine? It was a 400 documents are there so how many relationships each side? Tim: Well, it is geometric, right? So, it will quickly get into the tens of millions of... Tatsuo: Yes, it is huge relationships. Tim: Right, so a human being cannot possibly understand that from text information. Tatsuo: Yes, we use a very special person to try reading each by each, so probably, it takes over 10 years. Tim: Have a bunch of patent attorneys, put them in a room. Tatsuo: Yeah, but either he or she is in the Japanese major company, IP chains with over 50 people working for the reading for the analytics. After five years, good. So, that, of course, this is the old style. Now, the people are using the analytics tools. Tim: And so, Valuenex creates the visualization. The output is sort of like an IP heat map, so the users can see where the IP is clustered. Tatsuo: Basically, it's three layers. When we think about the next products or next markets based on the technologies, at first, we describe the technology mapping, technology landscaping, and finding the significant technology and connect it to the product, either the competitive product or service, so if there's no products or services, or this is a good opportunity. Tim: Okay, so you could use the visualization to say, "Okay, we've got a hot cluster of technology in this space, but it looks open in terms of products in the market"? Tatsuo: Well, most of the cases are market-driven analytics, so the people who want it have a lighter device, then they try to change the materials, but along this side, everybody is trying to make a new idea, so they want to know where is the market? Tim: Oh, wow, yes! So, I guess it can go in both directions. So, tell me a bit about your customers. How are your customers mainly using this? Tatsuo: At first, we started, our service is R and Design, so my original company is R&D division and IP division, they have many projects, many ideas, so I guess 99% idea in technology was not released. However, I think that there's more opportunities and more good services, then they have to use the panoramic view analytics describing, oh, this idea, this technology is very similar and they can be combined. Tim: So, is that the most common use case where your customer is using it bottom-up? Tatsuo: Ideally, it is a very good way. However, any company has divisions and they make a wall, secret walls, so they can’t reach into other fields. Tim: I could see that, yeah, the technology, it seems ideal for just looking and saying, "Hey, you have an opportunity," but the different divisions in the company force them to have more of a product focus. Tatsuo: So, if someone thinks about, "Oh, this technology is very good for the battery technologies," however, they are just materials, so they have to collaborate with electric filed persons. They can't work that. Tim: So, for example, let's say I was the division chief at a big database company and responsible for the automotive industry, could I say, "Let's look at all of our patents and see what might be suitable for the automotive industry, what blank spaces there are that we could exploit?" Would that be a good use of Valuenex? Tatsuo: Yes, although a concrete case is a chemical company, Asahi Kasei. At first, they rejected us because they had an analytics genius, but when they used our methodologies, this is good work for the Asahi Kasei president - company president - because the big company's president has some kind of image for each division's relationships. So, our or radar chart is almost the same with the president's idea. So, we can easily point out, oh, this division should be the collaboration or both divisions have white space, so collaborate on the bridge technologies. Tim: This is really interesting. It sounds like you took the customer's biggest objection to your product that was bottom-up and we hit all these walls, and you said, "Oh, well, let me explain these walls to you." That's great. Tatsuo: Yes, I established in 2006 this company, so always, the starting point is a negative start. Tim: Well, actually, I want to drill down deep into the marketing and to the technology in a minute, but before that, let's step back a bit and talk about you, and when you founded Valuenex, so at Stanford, you and I were talking and you mentioned the importance of the blue LED case, and can you tell me? I think that's really interesting. Tatsuo: So, this example case is very famous in Japan and this is a very big event for the society and also me. However, some parts are very confidential, but I can say I was the project leader at these court issues, I belonged to the Nichia Chemical Companies. At the time, 2005,