When Noriyuki Ichihashi, an employee of Itochu Corp., proposed his idea to the firm’s Internet venture incubation office about a year ago, the trading house was quick to give him the green light. Within a month, the 34-year-old had set up a planning company.
“Without this (incubation) system, my plan would not have been realized that fast because the idea was still premature,” recalled Ichihashi, president of Customer Loyalty Networks K.K., a venture that provides businesses with programs for setting up royalty systems to attract customers to their Web sites.
Itochu’s “intrepreneurship” system, introduced in March 2000, focuses on incubating online ventures.
Like similar attempts by other major firms, it aims to create new businesses and stimulate its employees. But to facilitate prompt action, decisions about which ideas should come off are left up to Eizo Kobayashi, the Itochu executive officer in charge of the firm’s Net venture incubation group, Net Valley.
“With information technology development, we can’t take years to incubate new businesses,” Kobayashi said. “Rather, we need to quickly push potential business ideas into realization.”
Net Valley, with 1 billion yen in venture funds annually, examined about 100 employee ideas during its first year of operations and set up 25 ventures, he said.
While the economy has yet to show clear signs of recovery and many companies are promoting restructuring, Japan is embracing its third venture boom — following ones in the 1970s and 1980s — centering on Internet businesses.
Despite backup from established organizations in terms of finance, management and credibility, in-house ventures have not borne much fruit in the past.
This time around, however, in-house ventures may finally take root in Japan, according to Hiroshi Tasaka, president of SophiaBank Ltd., a Tokyo-based think tank.
Major companies used to set up new firms to explore new fields unrelated to their core business or as places to send senior officials no longer needed in the main organization. But now, such practices seem to be changing.
“Observing the mushrooming of Net ventures (in recent years), some major companies have begun making quick moves to incubate ventures,” Tasaka said. “Besides, employees’ attitudes toward ventures are changing so that more workers at major companies (quit the firms and) opt to work for ventures. Furthermore, it’s easier to start up Net businesses (than other ventures).”
When Kenzo Tsutsumi, 44, a former researcher at Japan Research Institute, began a venture in 1997, for example, he built an extranet connecting eight companies that invested in and supplied workers to his firm, First Energy Service Co. (FeSCO). The venture designs energy efficiency systems for facilities like factories and office buildings.
During the first year of operations, FeSCO workers, including Tsutsumi, stayed with their home companies but did work for the venture over the extranet, Tsutsumi explained.
“A virtual corporation is a way to start up a business fast and inexpensively. In addition, it made it easy for me to secure capable personnel who were involved in the project from an early stage,” Tsutsumi said, noting that companies often send unnecessary employees to a joint venture like FeSCO.
Meanwhile, Sanyo Electric Co. last year started hiring people who have business ideas, venture experiences or special business skills.
Such a move helps to conceive realistic business plans and stir up employees’ enthusiasm, SophiaBank’s Tasaka said, adding that companies need to create an environment in which the abilities of workers with an entrepreneurial bent can be fully used.
“Major companies have not made the best use of capable employees,” he said. “But if they could motive them successfully, intrepreneurship would produce some interesting developments.”
Ichihashi of Customer Loyalty Networks is working as hard as he can so that the firm can begin offering part of its service next month. The firm, capitalized at 735 million yen with Itochu group holding a 52.4 percent stake, delivers online marketing programs developed by U.S.-based Netcentives Inc.
“It’s challenging to promote a new business. But I’ve studied it for about three years and I want to make this venture a success,” he said. Ichihashi hopes to be in profit and make an initial public offering in three years, when the firm’s performance will be reviewed by its shareholders.
FeSCO’s Tsutsumi, who quit Japan Research Institute a year ago, is trying to put his firm in the black during the current business year to March 2001, one year behind his initial plan, due to an unprofitable deal last year.
“You have to take risks . . . I hope to realize IPO in two and a half years,” he said. “If I could make this business a success, I would start another venture that realizes my lifetime desire to create a business that helps mitigate environmental problems.”
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