Taking Control Back from the Distributors – Allen Miner – Oracle

Today is the first episode off our new expanded format. From today, we’ll be covering both disruptive Japanese startups and detailed market entry case studies of global companies that are disrupting Japan from the outside.

Oracle first came into Japan more than 25 years ago, but the challenges they faced and overcame then are exactly the same ones firms are facing today in executing their Japan market entry.

Allen explains why Oracle needed a unique sales and marketing strategy for Japan, and how he managed to get buy-in from headquarters — even though Oracle already had a sales and marketing program that had proven fantastically successful in other markets.

We also talk about how Oracle managed to negotiate a amicable exit out from their exclusive distribution agreements not just once, but twice. That’s an amazing accomplishment considering that many foreign companies have destroyed their Japanese business the first time they attempt it.

But Allen, tells the story much better than I do. I think you’ll enjoy the interview. I know I did.

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I’ve got some big news for you today. Disrupting Japan is going to be twice as big, twice as informative, and twice as frequent. From today on, we’ll be sending out new episodes every single week. To do this, we’re going to be expanding the format. Half of our interviews will be with start-up founders, just like before, and half of our interviews will be with people who are disrupting Japan by bringing foreign companies, technologies, and innovation into Japan.

This really makes a lot of sense because as fans of Japanese history know, foreign pressure has always been a powerful agent of change in Japan. I think you’ll find these additional episodes very interesting. And to kick things off today, we’ll get a chance to sit down and talk with my good friend Allen Miner about the challenges Oracle faced, and overcame, when breaking into Japan.

I’ll warn you in advance that this episode is longer than most, and believe me, I cut things to the bone. But there is just too much great information about how to overcome both the personal and professional challenges that foreign companies face here. I felt like I would be cheating you if I edited out any more. In fact, Allen explains how Oracle successfully maneuvered out of an exclusive distribution agreement, not only once, but two separate times. This is something that has sunk more than one foreign company here. But Allen tells the story much better than I can, so let’s get right to the interview.

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[Interview]

Tim: So I’m sitting down here with Allen Miner and Allen, you’ve been involved with the market entry of a lot of companies into Japan. But today I want to focus on the one that you led personally, which was Oracle Japan. So let’s back up. What was attractive about the Japanese market? What made Oracle decide that they needed to be in this country?

Allen: Actually, that happened a few years before I joined Oracle. In, I believe it was 1982, Oracle was about a $5 million a year company worldwide, 5 years old as a company, and just released their first commercial version of the Oracle database software. There was quite a bit of press about, “How interesting is this relation to technology? It doesn’t require traditional programming to do data manipulation.” And the U.S. press got read by some technical geeks in Europe. And one in particular in Japan said, “This sounds really interesting. We ought to figure out if we can bring this cool new technology to Japan.”

Tim: So it was a partner company pulling you in?

Allen: Yeah, it was a company called Digital Computers Limited, that at the time was building DEC VAX clones. Because Oracle originally was released on the DEC VAX computer platform, the president of that company, a gentleman named Mr. Yamada had read an article about it. So this is when we reached out to Oracle and see if we can sell their software in Japan and that contact from an interested Japanese distributer was what got it all started back in 1982.

Tim: Okay. Even today, I think that still a really common case.

Allen: Yeah. I think it is. For companies that come into the market early, perhaps earlier than they are really ready, I think that’s the most common. It’s very common for a young company with really interesting technology to be found by someone in Japan, or other countries of the world. Everyone knows that Japan is potentially a big market. I don’t think there’s a question of the potential opportunity or the size of the potential market in Japan, but often it is the trigger of, “Oh, someone is interested in our software in Japan.”

Tim: But it seems like that could really be a two-edged sword. Oracle was not a small company at that point.

Allen: No we weren’t. It was 5 million in revenue, maybe 60 people. There was no international division at the time so the person who took the inquiry was one of, I think, 3 or 4 U.S. sales representatives.

Tim: How did you guys vet this company? How did they make sure it was for real?

Allen: The president and one of his technical staff, I understand, flew to Oracle’s headquarters in California, met with the sales team at length. I’m sure that because they were clearly well-informed about the DEC VAX environment, they had customers for their computer products, they clearly had some kind of understanding with what you could do with a relational database that I think was some technical vetting, maybe not a lot of time spent on what they might be able to do in the marketplace. I’m not sure that Oracle really, at that point, had really figured out how it was going to grow the market.

Tim: So it just was a good strategic fit and it was a market they couldn’t have addressed anyway, so let’s give it a try.

Allen: They weren’t even actively pursuing international opportunities yet so I think our initial entry into England, the Netherlands, and Japan all started that way, with some local geek who was always staying on top of the latest technology trends reaching out and saying, “We’d love to distribute your software in our country.”

Tim: All right. So things obviously went well for them. They sold the product.

Allen: Yeah.

Tim: How did you get involved? When did they bring you on board?

Allen: Well, as Oracle continued to grow, we expanded the platforms that the product ran on. It was initially on the VAX, then we introduced UNIX platforms, the PC, and even IBM mainframe computers. As we were expanding the platforms for Digital Computer Limited, the UNIX environment and the VMS environment were quite comfortable. But when we wanted to introduce a mainframe product, they didn’t know anything about the IBM space, they didn’t want to get involved with the IBM space, and by that time we had hired a vice president of international. I think he had one or two staff and their company was maybe a couple hundred people by then, worldwide. The decision was that we were now proactively trying to grow the business internationally and if the distributor in a particular country was not interested in the mainframe product, we believed at the time we were going to have a huge business in the IBM mainframe world. Turned out not to be the case but at the time that was what the folks in Oracle believed and because Digital Computer Limited didn’t understand, didn’t want to pursue the mainframe space, the decision was made to identify a second distributor in Japan that would focus on the mainframe products. This was in 1986 that this work was going on—or 1985 rather—and we added a second distributor called NESHEEN Products that had experience with the product out of Germany.

Tim: So for the structure of this, did each of these distributors have an exclusive right to resell the product—

Allen: So Digital Computer Limited had exclusive rights around the VAX line of computers. NESHEEN Products had exclusive rights around the mainframe and both companies were free to sell the UNIX and PC products.

Tim: Okay. This is a challenge I think a lot of companies get themselves into coming into Japan, is if you give a distributer exclusive rights, and they’re successful, you’re going to want to come into the market yourself and that’s exactly what you did.

Allen: That’s exactly what happened with Informatic.

Tim: How did you deal with that? How did you kind of change the game for these exclusive arrangements you had?

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Allen: Well, I think—remember we had the two distributers in Japan with distinct sectors of the market. I think between the two of them, the fact that we had those two distributers and we did not have a Japanese language product at the time, and the two distributers apparently were arguing about what the specs should look like and which of them should be authorized to build it for Oracle. Which of the two were technically more competent to advise us on building a Japanese version. That is the situation in which Oracle came and interviewed me on the campus university, and when they noticed that I was not only a computer science student, but I spoke Japanese, the recruiter said, “We want to hire you.” He said, “Oh, I see you speak Japanese.” I said, “Yes, but why is that relevant in a computer programming giant?” And he explained the situation, “We need someone to sort this out for us.” And it was the first time I realized that there was such a thing as making software work in the Japanese language.

Tim: Right. It was a lot harder back then.

Allen: And no one had really figured it out yet.