The Japanese market does not have the reputation of an easy place to do business for foreign companies. But with its high-income, tech-savvy population, it is a dream for many innovative businesses, and neighbouring Russia is no exception. To help Russian hi-tech startups navigate the labyrinth to the Japanese market, the Skolkovo Technopark hosted an event on Monday devoted to the prospects of cooperation between Russia and Japan in commercializing tech innovation.
Now is a good time for Russian startups to target Japan, says Ikuo Ogawa, an expert at Skylight Consulting. Photo: Sk.ru.
The first and most obvious obstacle is the language barrier, said Ikuo Ogawa, a leading expert at Skylight Consulting, which provides consulting to pre-seed companies, among other services. Japanese is considered one of the hardest languages in the world, though Russian isn’t much easier, joked Ogawa, who is learning Russian. In addition, many Japanese people do not speak English well, he said, while noting that this is increasingly untrue of young people, meaning the English-language communication gap – if not the Russian-Japanese gap – should therefore disappear with time.
Another barrier for foreign companies is Japanese legislation, which can be impenetrable to outsiders, making it hard to understand ways of doing business, said Ogawa, whose company also has offices in Thailand and Singapore.
“In Japan, the general interpretation is that everything that isn’t directly permitted by law is banned,” he explained. Big corporations don’t always want to get involved with startups working in innovative fields – which may be grey areas in legal terms – as they want to avoid problems and legal issues. There are also a lot of unwritten rules such as business etiquette that can be mystifying for anyone outside of the system, added Ogawa.
Finally, the central role in the Japanese economy is played by large companies, which also makes it difficult for foreign companies to get involved in Japanese business. Small and medium-sized companies tend to be under the control of large enterprises, noted Ogawa.
Entering the market of the island nation can be an incredibly slow process, warned the consultant.
“It might seem that you have agreed on something with a Japanese company, but the understanding and enthusiasm of one representative should not be confused with having the company’s approval,” said Ogawa. That person will then have to persuade their colleagues further up the company hierarchy. And the newer the idea being considered, the longer the decision-making process may be, he added.
Hidden intentions
Ogawa’s first advice for foreign companies who have set their sights on Japan was somewhat unexpected.
“Never openly demonstrate your intention to enter the Japanese market!” he warned the Russian entrepreneurs in the audience. The best approach, he advised, is to follow the example of companies like Twitter, Instagram and Slack: first build up a reputation as making a product that is in demand in other countries, and establish a ready user-base in advance.
“Once you have enough users there, set up a local company. Japanese business pays attention to high profile companies, and many things from abroad are very popular in Japan – especially celebrities,” said Ogawa.
His second tip was more conventional: find a reliable business partner.
“The partner should have a clear understanding of your goals in Japan, and should have the skills and capacity to achieve those goals,” said the consultant.
Benjamin Wilkening, Skolkovo's vice-president for international investor relations, welcomes the Japanese delegation. The event was organised by Skolkovo in cooperation with ROTOBO Moscow (Japan Association for Trade with Russia and NIS). Photo: Sk.ru.
Despite the difficulties, now is a good time for Russian startups to target the Japanese market, due to changes currently taking place there, said Ogawa.
“Large enterprises are seeing a period of stagnation. People are realizing that the closed innovations model [in which companies generate and develop their own ideas] is obsolete, and expectations are growing regarding the potential of open innovations, [in which companies incorporate external ideas],” he said.
And crucially for Russian companies, Japan has started to shift its focus beyond the U.S., which was for a long time seen as a benchmark for everything.
“Previously, the U.S. was held up as an ideal. With the development of the internet and more access to information, people are looking to many more places,” said Ogawa.
At Monday’s event, Japanese innovators learned in turn about government support measures in Russia and Skolkovo’s international acceleration programmes, while the Russian entrepreneurs heard from Kentaro Sakakibara, CEO of Samurai Incubate – Japan’s first incubator – about how Japanese corporates work with foreign startups in Israel.
Expanding to Japan may be tricky for Russian startups, but it is certainly not impossible, and Skolkovo startups are living proof of that. Eidos Medicine, a resident startup of the Skolkovo Foundation’s biomed cluster, has sold its surgery simulators for training doctors and medical students to Japan’s Juntendo university. VisionLabs, a resident startup of Skolkovo’s IT cluster that makes face recognition technology, announced last year that it would work together with Panasonic Corporation, after the startup was selected by the electronics giant to take part in the New Technology Japan Trip. And ExoAtlet, another Skolkovo IT startup that makes rehabilitative exoskeletons that help disabled people to walk again, announced in November that it was setting up a joint venture in Japan together with the startup’s South Korean partners.
“It goes without saying that entering the Japanese market with a partner who is already present on that market is strategically more effective than doing it ourselves,” ExoAtlet CEO Ekaterina Bereziy said at the time.
In 2016, during a state visit by Russian President Vladimir Putin to Japan, the Skolkovo Foundation signed an agreement with the Russian division of Panasonic on boosting cooperation in the development of innovation in hi-tech and export-oriented industries.
The Skolkovo Foundation organizes regular seminars for its resident companies on entering foreign markets. Previous events have focused on the Czech market and Latin America.