The big reason Japanese companies can’t innovate

Japanese enterprises are their own worst enemy when it comes to innovation.

In this live panel discussion, I talk about my experience driving innovation at TEPCO, and Ion and Jensen share their experiences running innovation labs. This panel was part of the btrax Design for Innovation event in Tokyo last week.

We talk about the specific challenges that Japanese companies are facing and the strategies we've used -- with varying degrees of success -- to help overcome them.

Of course, like everyone else, I always remember the most important thing to say ten minutes too late, so I've added those thoughts to the outro at the end of the podcast.

It's a great conversation with four people who really care about innovation in Japan, and I think you'll enjoy it.

Links from the Panel

Brandon Hill (moderator)

Connect on LinkedIn Follow on Twitter @BrandonKHill the btrax homepage

Tim Romero (me)

You've already found me here, but we can connect on LinkedIn if you like. Or follow me on Twitter @timoth3y, but my Twitter game is pretty bad

Jensen Barnes

Connect on LinkedIn

Ion Nedelcu @frogdesign.com

Check out Frog

Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs.

I’m Tim Romero and thanks for joining me.

I’ve got another live show for you today. I’ve gotten some great feedback on the past couple I’ve put out, so while I finish up the big solo show I’m working on about how to raise money in Japan, I thought I would bring you another live show today.

But this one is a bit different.

Last week, at the BTrax Design for Innovation conference, I was part of a panel where we talked about the challenges a lot of large companies face in driving innovation internally. I talk about some of the specifics from my work at TEPCO and my fellow panelists share their experience running innovation labs for Japanese enterprises.

And, I’m sure you will not be surprised to learn that Japanese companies are pretty bad at innovating this way. At least so far. Most have good intentions, of course, but almost all of them are making the same core mistakes in their innovation programs.

We go over a few of the big ones in our conversation, and in my comments at the end of the show, I’ll give you my closing thoughts on the problem with what I call the "innovation market."

But for now, lets get right to the discussion. Interview Brandon: So let's see the topic innovation labs. So sounds really Silicon Valley, isn't it? So I like to start by getting a poll from the audience about Silicon Valley. So how many of you guys have visited Silicon Valley in the past, but few, one third maybe? I live in San Francisco and I see many Japanese companies visit Silicon Valley looking forward to some ideas or methods for innovation. And I feel like every single week there's one company visiting from Japan trying to find some ideas. However, I feel like result-wise and output wise, I haven't seen a clear results least. So I like to open up discussion here to ask your opinions about while we did some of the challenges that Japanese companies are facing when it comes to creating innovation, even though they do come to the second Valley very often. What's, what's wrong with it? What's, what, what do they need to do?

Anybody JV, go ahead.

Jensen: Well hi, I'm Jensen Barns. I'm from California, lived in Japan for six years. Basically opened up, well co founded the innovation lab here in Japan. Been active in many institutions and I kind of brand myself as doing new things, always doing new. So I think the, the issue I see in this in California is Japanese key Japanese companies coming, but then not really setting with Tim has, both Ian and I have, we've talked about is like setting objectives, setting the right objectives and coming for the right reasons. As a, as someone who opened up a lab here too, it's, it's sort of a trophy to have a innovation system or innovation process within the company. And I think there's a lot of mid sized companies that could really, you know, use great, great innovation lab to prop up the brand of the institution and, and the employees without hiring, you know, expert maybe Toyota some, you know, today we heard about Yamaha Toyota, you know, I mean Honda rather. And you know, without hiring, you know, expert researchers or engineers transforming their own people more into innovation experts.

Brandon: So how about the from the viewpoint of expert TEPCO Ventures yourself then?

Tim: I guess should I should introduce myself a bit? I, I'm my name is Tim Romero. I'm CTO of TEPCO ventures where we work with both Japanese startups and foreign energy startups to develop new business models and energy here in Japan. Before I joined TEPCO, I've started four startups here in Japan over the last 25 years. Sold to bankrupted too. So 50/50. That's not bad as far as startups go. Yeah. I also work with some other large Japanese companies on their startup outreach and innovation programs. But I'm probably best known for a podcast I run called Disrupting Japan, where we sit down and we talk with Japanese startup founders about not so much their specific company, but what it's like to sell to big enterprises as a tiny startup.

How they managed to convince their wife to let them leave Mitsui and start this crazy, you know, side project. Just what it's like to be an innovator in a country like Japan that prizes conformity.

To answer the question, I think the single biggest mistake that large Japanese enterprises make when creating an innovation program, it's a lack of a specific goal. So innovation is not a goal. It is a means to an end. So when a company says they want innovation, they're, they're still a little bit confused. So do you want to create new business models within your existing industry? Do you want to create new products that can be sold to consumers? Do you want to streamline existing businesses taking technology and best practices from other companies? So all of those are reasonable and achievable goals. But the single biggest mistake I see most companies make is saying, well, go outside and find some of this innovation and bring it back and that that doesn't work. Cause innovation is a, it's a process. It's not the goal.

Brandon: So speaking of with the goals how to major innovations maybe on can start introduce yourself and you can add some of the ideas or?

Ion: Happy to. Hello. Good afternoon. My name is Ion. I'm general manager for Frog. Frog is a global design and strategy consultancy. We've just celebrated our 50th anniversary and are in our third year a partnership together with Dentsu to help Japanese companies grow basically and stay relevant in the future by designing experiences that people love. Thank you. I, I agree with what everybody else has said. Innovation is, is complex and is not anything magical. It requires a lot of planning. Before answering the question, how to measure innovation. If you don't have objectives, you don't have an innovation strategy. If you don't have an a plan to actually see how whatever comes out of your innovation activities will be embedded into the organization, you are going to fail or you're going to shut it down, which is not obviously the purpose of making investments.

Innovation should never be measured by return on investment in day one, year one. It should always be a long term thing. If you look at the horizon that McKinsey basically works around horizon one, two and three. Horizon one is the known horizon two is the partially known and horizon three is the unknown. What's innovation can influence all the three horizons. The one you should be focusing on is the third one, the one that is furthest away. So it's five years plus. Anything else that you expect from innovation coming to the business sooner is going to be a failure.

Brandon: So where do you think of like the, the last session I had a Nick with Honda says their measurement is number wows or devolving over that I'm not going to, to have that the wows that they get from the audience. Is that a good measurement for innovative at least

Jensen: Well, like I think Tim and Ion, you know, the system that you have within the company and how you measure it. I think it's just very important. If the company uses OKRs, which I, you know, measuring what matters. I don't know if you know this, this book Measuring Which Matters Most, it's one of the, you know, prime books of how to structure objectives within your company. And I'm sure they do, many companies do, but somehow I think innovation teams are just exempt. A lot of teams just simply don't do them because of this worry of, of watching them. And I differ a little bit from the KPI. I think all innovation teams should have KPIs and I think there should be carefully watched. I don't think it should just be this kind of, you know, open-ended thing that we don't watch.

I mean, it's like this, it's like a seed. I mean, it's like you wouldn't just plant the seeds and run away and not, you know, and just like, Oh, just grow somehow. I think this is like really important that you, you, you care your Nutri nurture this thing. But you like all controlling things, you can't just obsess and control it and stifle it by shutting it down for example. I think, I think that's what you're getting to. Maybe it's just like, you know

Brandon: So at TEPCO Ventures. Do you guys have any KPIs or goals set?

Tim: We do, and again, it depends on the team. So we have a CVC team and we've got several different project teams. And I think the, I mean, KPIs are essential and it's important to set them in line with whatever your goals are. So if the goal is new business creation,