Entrepreneurship must be encouraged more if Japan is to play a key role on the global stage, and foreign entrepreneurs are in a great position to lead the way, experts said at a recent conference in Tokyo.
“Japan has grown too structured, which has been a strength but is now a weakness,” said Sanjeev Sinha, president of Sun and Sands Advisors Co., a Japan-based consultancy that advises companies doing business between India and Japan.
“Failure has been a big stigma and there is a lack of institutions for ventures,” he said.
The Nov. 20 event at the National Graduate Institute for Policy Studies was part of Global Entrepreneurship Week, a worldwide movement across 85 countries aimed at promoting innovation.
Sinha’s views were echoed by Naoto Kan, deputy prime minister and minister of state for science and technology policy.
“Unfortunately we do not yet have an environment in Japan that is suitable for venture companies,” Kan said in a video message to the conference.
If Prime Minister Hatoyama is to act on his pledge to cut carbon dioxide levels 25 percent by 2020 compared with 1990 levels, “a great deal of innovation will be necessary,” Kan said, referring to clean energy and energy-efficient technologies.
U.S. Ambassador John Roos, who was one of the main speakers at the daylong event, reflected on his experience as a lawyer in Silicon Valley, the hub of venture capitalists in California.
“I think the turning point will be when taking risk is embraced,” Roos said.
Japan and U.S. are the two most innovative countries in the world, and thus should lead other countries in solving such global issues as climate change, he said.
To encourage Japan to fully take on that role, Roos has been talking to academic institutions to promote entrepreneurship and companies to encourage employees to start businesses of their own. Promoting entrepreneurialism is one of the priorities of his ambassadorship, he said.
“I’m encouraging them to support entrepreneurs, because ultimately it will benefit Japan in a huge way,” Roos said.
“You don’t want ideas to be lost. The reality is that a lot of ideas that people come up with don’t necessarily fit with the strategic plan of any particular company, so that should not be viewed as the end of that idea, but something that leads to a new company,” he said.
Roos named India, China and Israel as the world’s current hotbeds of entrepreneurship.
One of the main reasons Japanese shy away from entrepreneurialism is an exaggerated fear of risk, according to Mike Alfant, president and CEO of Fusion Systems Co., an Asia-based IT consulting firm.
“Japanese people tend to overfocus on perceived risk,” he said during a panel discussion with Sinha and other foreign entrepreneurs.
Alfant, a 20-year resident of Japan and vice president of the American Chamber of Commerce in Japan, described the horror he feels from the lack of ambition in youths he meets when lecturing at universities.
“It’s shocking to me that when I said, ‘Why are you getting your MBA?’ (they replied) ‘I want to work at Toyota.’ That’s a good aspiration, but not if 95 percent of people in the room have it,” Alfant said.
Young people must be taught to recognize the actuality of the risk and the potential for stability in any venture, he added.
Jesper Koll, CEO of Tantallon Research Japan, said Japan must not only encourage entrepreneurship domestically, but also promote its talents worldwide as other countries do.
“Government policy must be more proactive; there is no national strategy to promote Japanese innovation to the rest of the world,” he said.
Koll, who moderated the panel discussion, then asked the audience: “Do you know that Japan is the only country that when the prime minister travels overseas on a major trip there is no business community going with them?”
He compared Japan with Germany, his home country, where he said Chancellor Angela Merkel usually takes 50 or 60 businesspeople, including midsize companies and entrepreneurs, on tours abroad.
While the Japanese must encourage their own kind to startup businesses, foreigners can use Japan’s cautious environment to their advantage, the experts agreed.
“We have an advantage of being different, we can make small roads here and there” without being restricted by the inertia of organizations, Sinha said.
He explained that foreign entrepreneurs arriving in Japan are by nature more ambitious, risk-taking and flexible than their Japanese counterparts.
Terrie Lloyd, founder and CEO of LINC Media, Inc., a management consulting and outsourcing firm based in Japan, agreed that foreigners have the cutting edge in Japan-based entrepreneurship.
“Foreigners are seen as change agents,” he said. “You’re treated the same as long as you’re fulfilling the social contract.”
Lloyd explained that the traditional way to get funding in Japan is debt, and a bank manager initially refused to lend him money in the 1980s for fear that he would run away with it. But having proved him wrong and developed a successful business, he has now become one of the bank’s most important clients, he said.
“Japan is kinder to entrepreneurs, it’s more forgiving. For example, if you miss a tax payment there is an interest rate that the tax office charges you — of course they say they’re not the bank of last resort but in a way they are — whereas in other countries, you’ll be shut down.”
Alfant agreed that foreign entrepreneurs should be aware of Japan’s distinct business environment.
“(Starting a business in) Japan is a marathon, you just have to keep putting one foot in front of other and don’t think about the finishing line.”
He compared it with China, where he said the worth of products is judged more instantaneously and transactions are more frequent.
“Japan is more of a gentlemen’s club. People tend to shake hands and try seriously to maintain their reputation,” he said.