Japan: Entrepreneurs spur out-of-the-box thinking

Yusuke Takahashi (L) and Atsushi Nagase Yusuke Takahashi and Atsushi Nagase of AppSocially working at one of Open Network Labs' spaces in Kanagawa, just outside Yokohama

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A week after getting married, Yusuke Takahashi had an alarming surprise for his wife's family. He dropped his prestigious and stable job as a university professor and struck out on his own as an entrepreneur.

A few weeks after, finding it hard to get feedback on his ideas within Japan, Mr Takahashi decided he had to go to San Francisco to validate them. He spent two months sleeping on various couches while he talked to more than 200 people, from chief executives to those at the same stage as himself.

Mr Takahashi read Steve Blank's The Four Steps to the Epiphany, translated into Japanese as The Textbook for Entrepreneurs, on the nine-hour flight from Tokyo, having randomly found it on his iPad.

"I read the book twice on the airplane," he says, "and I found out where I'm at right now and what I should do when I land."

Mr Takahashi is one of a growing number of Japanese shunning prestigious employment in large firms in favour of doing their own thing.

"To make your own kingdom is not a bad thing," agrees Shotaro Tsuda.

Start Quote

Joi Ito

Japan has lost its edge, and a lot of it due to not having this entrepreneurial spirit and agility”

End Quote Joi Ito Open Network Labs

He shares a space with Mr Takahashi at Open Network Labs, an "accelerator" based in Tokyo which was set up in 2010 with the aims of fostering an ecosystem for entrepreneurs. The "accelerator" chooses around half a dozen start-ups to spend three months at the lab developing their ideas.

"One of my dreams was to do my start-up," Mr Tsuda says of his drive to be an entrepreneur in what is a risk-averse society with a legacy of having a job for life.

But ultimately it is the economy, rather than personal ambitions, that is making this decision for Japan's growing number of entrepreneurs. Big companies aren't doing as well and are hiring fewer young graduates.

"There are like 40,000 fresh graduate students who don't have work," Mr Tsuda says. "So some people try to set up their own companies because they have to survive".

It is a reason often heard by Hiro Maeda, one of the founders of Open Network Labs.

It is not just young graduates who are turning to their own enterprises, but Mr Maeda sees many applications from people in their 30s and older who have worked in established companies.

"A lot of the established players are no longer so established," he says, explaining that companies like Panasonic and Sony hit their all-time lowest share prices this year and have been laying off workers.

"It's because there's that uncertainty that people are willing to leave their jobs and take higher risks."

Less competitive

Japan suffered a sharp recession in the wake of the 2008 global financial crisis, as exports fell, hitting some of the country's most prestigious and successful companies.

At the same time, the costs of starting a company, in particular for those operating in the technology industry, have fallen dramatically, and increasingly innovation is happening in this space.

People rest on a bench in front of an advertisement of an electronics shop in Tokyo, 27 Sept 2012 Many giant firms in Japan were badly hit in the 2008 global financial crisis

Japanese-American entrepreneur, venture capitalist and MIT Media Lab director Joi Ito, who is also a founding member of Open Network Labs, believes that entrepreneurship is essential if the country is to regain its competitive edge.

"As the world gets more agile and as innovation gets pushed to the edges, into small groups of people, many of them not even part of larger organisations, that's where innovation is happening," Mr Ito says.

"You need an entrepreneurial spirit to turn those ideas into companies or even to take the risk to try those ideas in the first place," he says.

Wider changes

While the model of a life for job has become less of a possibility with Japan's current economic situation, other changes are also making entrepreneurship more attractive and feasible.

Prof Kenji Kushida of Stanford University's Walter H Shorestein Asia-Pacific Research Center notes that traditionally the entire structure of Japan's economy and society has made things difficult for entrepreneurs.

"Entrepreneurs are people that are non-conformist," he says. "It's difficult for non-conformists in the way that the whole system is set up, but things are moving in the right direction."

Students of the Science University of Tokyo demonstrate a robotic 'Muscle Suit' at Asia's largest electronics trade show CEATEC, 02 Oct 2012 Prof Kushida: Universities are increasingly supportive of entrepreneurship

Banks now lend more easily, whereas previously personal assets were required as collateral, meaning that failure of the firm would lead to personal bankruptcy.

There is also money available from venture capital funds and "angel" investors.

There are also wider social changes at play. The country's much discussed fear of failure is slowly fading, a fact confirmed by Mr Tsuda's openness to talk about his first start-up, which was unsuccessful.

Mr Tsuda laughs heartily about this experience. "My mother was utterly disappointed," he says, "and a little worried about me."

The fallout of the earthquake

The earthquake of 2011 was the most powerful to have hit Japan, resulting in more than 15,000 deaths and affecting several industries.

Furthermore, the earthquake and resulting tsunami affected several nuclear power plants, resulting in a nuclear scare after radiation levels rose in the surrounding areas.

Joi Ito sees profound changes taking place in the country as a result of this natural disaster, citing protests regarding the nuclear power situation as an example.

"The Japanese seem to have more civic energy than ever before," he says.

Lisa Katayama has close experience of this.

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Lisa Katayama

I think it comes from survival, and needing to survive”

End Quote Lisa Katayama The Tofu Project

The Tokyo raised journalist founded the Tofu Project, which connects entrepreneurs, innovators and business leaders in Japan and the US through a series of events.

She has seen more interest in entrepreneurship and from a wider range of people. Ms Katayama sees the fallout of the earthquake as being a key catalyst to this process.

"It comes from survival, and needing to survive," she says.

Her documentary We Are All Radioactive follows a community of surfers rebuilding a coastal town in the aftermath of the earthquake. She has been in close touch with people in the northern coastal regions of the country and seen people starting their own ventures.

One example is the farmer Ishimori, who appears in the documentary measuring radiation levels.

"He bought a radiation detection machine and is single-handedly trying to help other farmers see whether their crops are radiated, it's very entrepreneurial," Ms Katayama says.

The Tofu Project aims to put him in touch with the right people and resources during their next event in October.

"Japanese people have always traditionally really trusted the government to take care of them," Ms Katayama says, "or they've worked in an industry that's been sustainable and fine, like farming or fishing."

"Now they can't do that anymore because of the earthquake. I think it's forcing people to think outside of the box."

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