How to Build a Market in Japan Without Localization – Derek Sorkin – GitHub

GitHub entered the Japanese market under enviable conditions. They already had a strong corporate user base, solid brand awareness and product evangelists throughout Japan. They did not so much push their way into the Japanese market, so much as they were pulled into it.

Even under the best conditions, however, Japan market entry is not easy and Derek Sorkin explains some of the challenges they faced with their distribution plans and the original go-to-market strategies. Managing to salvage a great ongoing relationship from what could have been a very ugly incident.

Derek also explains why even in this age of Skype and go-to-meeting it’s absolutely essential to spend the time and money on airfare in managing international offices and to maintain trust and credibility.

It's a great conversation, and I think you'll enjoy it.

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Partial Transcript

Disrupting Japan, episode 62.

Welcome to Disrupting Japan - straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for listening.

GitHub entered the Japanese market under enviable conditions. They already had a strong corporate user base, solid brand awareness, and product evangelists throughout Japan. They did not so much push their way into the Japanese market so much as they were pulled into it. Even under the best conditions, however, Japan market entry is not easy, and Derek Sorkin explains some of the challenges they faced with their distribution plans and their original go-to-market strategies. And how they managed to salvage a great ongoing relationship from what could have been a very ugly incident.

Derek also explains, even in this age of Skype and GoToMeeting, it’s absolutely essential to spend the time and money in airfare in managing international offices and to maintain trust and credibility. But Derek explains all of that much better than I can, so let’s hear from our sponsor and then get right to the interview.

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[Interview]

Tim: So I’m sitting here with Derek Sorkin, the Asia Pacific for GitHub, who spearheaded GitHub’s entry into Japan and that’s what we’re going to talk about today, so thanks for sitting down with me.

Derek: No problem, Tim. Good to talk to you again.

Tim: Excellent. So listen, you guys have been here a while and you’re doing really well. Let’s step it back a couple of years. What did GitHub see in Japan? What was the motivation for coming here?

Derek: We had quite an interesting background with Japan. Our co-founders had been coming here for some time for different conferences; working with companies like Digital Garage back in the day, talking to them; and open source has always had a strong foothold in Japan, things like many of the contributors to the Ruby Project, which GitHub is obviously built on to a certain extent. In Japan and Japanese.

Tim: Ruby is from Japan.

Derek: Right. So we always had a good core base of those Ruby developers that were interested in open source, that were using GitHub since very early days of GitHub, back in 2009 and 2010. So when we started in the B2B space and working with enterprises—and I think we’ll get into this a little more later, around how decisions are made in Japan—but that really helped us here. There were lots of the forward thinking internet companies. I say “internet companies” broadly, but internet gaming companies like that, that immediately took a hold with organizations on GitHub.com

Tim: Okay, so even before you guys were here, you had brand awareness and you had users here in Japan. That’s a huge leg up in the market.

Derek: Yeah. It makes it very interesting, especially at that time, a little more than three years or so, we didn’t have any staff in Japan. So all of our efforts in Japan to continue to raise that awareness and give back to the community were us coming over from San Francisco, from the U.S., or from wherever we happened to be around the world, for about a week at a time.

Tim: You had one guy out here, Daisuke.

Derek: Yeah, so that’s why I said three-and-a-half years ago. Three-and-a-half years ago, we hired Daisuke—Dice as we affectionately call him—and he was great. And still is great for GitHub.

Tim: So let me ask you, you had brand awareness, you had a user base here from the very beginning, which is fantastic—so what was the trigger that finally made headquarters say now it’s finally time to set up headquarters in Japan for real?

Derek: I think if I can point to one specific event, I was here back in early 2014, with one of the co-founders. We were going around and meeting with some of our existing customers here, and we were also invited to an event that one of the larger trading companies was putting on in Japan, where they had invited lots of other trading companies in and were asking lots of questions and we were on a few panels there. And I think that trip was really the catalyst in the co-founder’s mind that Japan is a very real market opportunity for us, and given that we had the brand recognition here—and that was obvious from the things we were doing like meetups around Tokyo or Yokohama, and that we had now people on the ground with Dice—we made the decision to put more of our investment in Japan and actually get some people on the ground here so we could continue to grow our business. And not just our business, but also the community and our engagement with that community.

Tim: All right. That makes sense. It was a gradual and natural result of what you’ve been doing so far.

Derek: Absolutely. I think just as a natural progression, we were at a point as a company where international expansion was imminent and we were at a point with Japan where Japan seemed like a very logical option for us to move towards.

Tim: So how many users, how many customers did you have here when you pulled that trigger and said, “Let’s go into the market?”

Derek: It’s hard for me to say exactly, but I could ballpark for you that we had around 75 customers on the B2B side, so certainly enough to be able to come out here and establish ourselves a little bit. And tens of thousands of paying users on GitHub.com and close to 750,000 on GitHub.com in general.

Tim: So it sounds like GitHub was really more pulled into the market than trying to force its way into the market.

Derek: Yeah. I would say we were in a very unique position, based on other that I’ve talked to, especially others that have done market entry into Japan, which certainly raised some unique things in our process of opening up the office here and expanding that presence, and working with that community. But we were in a very good position from the beginning.

Tim: Excellent. How did you structure the initial entry? Was it through partnerships, was it a joint venture?

Derek: We originally were intending to open up a small office here that was mainly going to be a sales and marketing arm for GitHub. We quickly realized that in the Japanese market, there is a necessity to have partnerships. Everything is done through partners. Or at least it certainly seems that way, on the surface, when you talk to companies that have recently made a market entry.

Tim: It seems like across the board, most B2B software companies do a much higher percentage of their business through their partners Japan than they do in the rest of the world.

Derek: Certainly, and I can see where that makes sense. Especially if you’re a U.S. based company accustomed to doing direct sales regularly, it almost seems foreign to—no pun intended—to come into a foreign market and work almost exclusively through the channel. That was further complicated by the fact that we had existing customers here but we decided to move forward with the partner approach and eventually we were brought on with a distributor here, and decided that instead of trying to manage 20 or 30 partners individually, we wanted one central distributor that could help us manage those partner relationships and help us drive sales to the enterprise here. Then we could continue to manage directly, the community side, community growth, active user growth on GitHub.com—some of the other metrics that are important to us.

Tim: And is it okay to talk about who the partner was or do you want to—

Derek: Sure, I think that’s public knowledge. We partnered with Macnica Networks to come into Japan.

Tim: So you mentioned you have a lot of customers before your market entry. Were those customers also being handled through Macnica or was Macnica something you did during the market entry?

Derek: It was something we did during the market entry. The customers that we had before—we had maintained and still do maintain relationships with almost all of them, with the exception of ones that had a strong desire to work with Japanese companies directly for things like invoicing, being able to transfer into Japanese bank accounts—lots of things that as we found out, we continued in the process of building out this market.

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Tim: You ended up outgrowing that relationship pretty quickly. Actually—we’ll get back to that story a little later on because there’s a lot that happened between then and now. So the subsidiaries, the GitHub employees here were going to focus on community building and outreach support, and not so much work on the partner sales side. You already had a customer base in Japan, but after your market entry, did you discover anything about the product, or the services lined up around the product, that you needed to change for the Japanese market.

Derek: Absolutely.