2019“Large companies” and “startups.” Their values and organizational structures are extremely different, even for companies in the same country. When talking in the context of innovation, big companies are often described as “not cool.” Certainly, there are a lot of talented people who have moved from large companies to startups, and who are active like fish in water, while feeling “fresh air” and “a sense of speed.”
Recently, however, such large companies have been performing a counterattack. They are collaborating with startups and are pushing for transformation by focusing on “open innovation.” Nevertheless, there are still few cases where an organization that has grown too large has actually succeeded in transforming. What do large Japanese companies need to do to transform and regain their global competitiveness in the future?
Shunsuke Ishikawa of AnyProjects, who has popularized “design thinking” in Japan, and Tadaaki Kimura of addlight Inc., who through hands-on support, has been involved in the listing of startups, will talk about the future of corporate organizations in Japan and look for clues to transformation.
・The sense of crisis and the expectations for Japan sit side by side. There are reasons why they both support “transformation”
・Do Japanese companies misunderstand diversity?
・Creating an organization that is not afraid of failing “projects
・Silicon Valley is the hottest…? Wait a minute!
After graduating from Central Saint Martins, University of the Arts London, Shunsuke worked for Panasonic Design, PDD Innovation UK, etc., and later participated in the launch of IDEO Tokyo and worked on various projects as Design Director. After establishing AnyProjects in 2017, he joined BCG Digital Ventures in 2018. He was involved in projects, such as starting an in-house venture for a big company as Head of Design. In March 2019, new partners were added to drive activities at AnyProjects. His book is “HELLO, DESIGN, The Japanese and Design” (published by Gentosha).
Tadaaki graduated from the Graduate School of Economics at The University of Tokyo. After graduating from graduate school, he joined a major auditing firm and was involved in support operations offering stocks to the public. In 2008, he founded addlight Inc., which deals with innovation co-creation. He provides hands-on support to domestic startup companies as an appointed non-executive director, of which five (Euglena, ZIGExN, CrowdWorks, SLD Entertainment, and Money Forward) are listed companies. He actively supports overseas startup companies in Asia and the United States. So far, he has been involved in the investment and development of more than 20 companies, three of which have been acquired.
The sense of crisis and the expectations for Japan sit side by side. There are reasons why they both support “transformation.”
They are two people who have worked in completely different industries, design and finance. They took different paths, but they both had the same sense of crisis about Japanese companies, and because of this, they have been seeking “transformation.” First, let’s talk about their careers.
Ishikawa: After graduating from high school, I went to a British design university. Later, after five years of experience as a Panasonic designer, I made a career move to a British design consulting firm. However, the company was only a consulting firm, and it specialized in solving logical problems using design. As I worked there, I started to want to do more creative things and things that don’t end up in a pre-established harmony. Then, I participated in the launch of the Tokyo branch of the world’s largest design company “IDEO.” The work at IDEO was very creative, using an approach that utilizes intuition and subjectivity. After that, I worked for the Boston Consulting Group establishing various joint ventures, and in 2019, I launched “AnyProjects.” Now, I have just started the company, and I’m going through extreme difficulties.
When you look at work in Japan and overseas, you will notice that the way issues are proposed is very different. For example, overseas, if there is a ‘making a refrigerator’ project, it starts with the question ‘what do you eat?’ Questions are asked from the lifestyle perspective. However, in Japan, the viewpoint is toward consumer electronics mass retailers. We are just thinking about differentiating it from the other refrigerators that it would be placed next to. Therefore, only a refrigerator with a slightly better function and a more fashionable design than other companies will be created in that world, … that is the difference.
However, I’m not going to say that Japan is bad. Rather, Japanese people have great ideas, and they have a spirit of care and compassion that is important for design thinking. It is a shame that it is not used in business, and now I think it is necessary to ‘transform’ the former, using design thinking.
— Mr. Kimura, what kind of career did you have, and what made you feel the incongruity of Japanese companies?
Kimura: I have belonged to the entrepreneurial community since my college days. I was interested in the origin of businesses, and I became an accountant to support startups. In 2008, I worked independently as an accountant and worked with startup clients. In 2012, Euglena, which I supported as a non-executive director, was listed, and after that, five startups in a row were listed, which I also supported in the same way.
So far, what I have noticed in many successful startups is that everyone has a different way of building teams. Therefore, I actually conducted inspections to see example cases from overseas. When I went to Silicon Valley for the first time, I was honestly surprised to see that they are less fruitful than I expected. Certainly, there are many people in Silicon Valley who are excellent at going from zero to one. When you meet and listen to various people, there are many people with interesting ideas. However, there are a limited number of people who can scale. Honestly, I didn’t have the impression that it was much better than Japan. In fact, from the perspective of East Asian countries, Japan has a better reputation than Japanese people think. Many companies want to work with Japanese companies.
However, large Japanese companies stubbornly refuse to publish their research results. Large companies have a lot of research results, but they don’t use them. There are monopolies inside companies, including around their results. In other words, they have been appreciated from overseas and cooperation has been requested, but there has been no answer. I feel a sense of crisis there. I think that more opportunities will come to Japan if we make the data and research results more useful outside the companies.
While feeling a sense of crisis about large Japanese companies, the two say that there are resources to utilize, such as imagination and research results. What changes will companies need to make, in order to take advantage of these resources?
Do Japanese companies misunderstand diversity?
What is the main difference between large companies and startups? Mr. Kimura, who has seen a number of startups, says:
Kimura: Recently, you can see cases where people who work in big companies also work in startups as a side job. They can perform a predetermined job well in a large company, so they play unexpected active roles in startups. However, the story changes when it is the reverse. Even if a startup’s employees work for a large company, performance can’t be improved. The reason for this is that startups can assimilate to the way that large companies work, so they are able to play an active role in big companies, but large companies can’t assimilate to the way startups work. Large companies place importance on ‘type.’ As many people are involved in the work, everyone aims to achieve the same performance, but that’s not the case in startups. As a result, even if employees from a startup company enter a large company, they are required to fit in and won’t be able to play an active role. If large companies can accept values and methods that are different from their own, I think there will be more opportunities for transformation, and I hope that will happen.”
— So, what is necessary to be able to accept a different approach?
Ishikawa: It’s like the chicken and the egg, but I think organizations need more diversity. Ideally, there should be people with different backgrounds. Recently, we have often gathered together people with different occupations, saying diversity is necessary. However, if those people have received the same degrees from similar educational environments, they will create the same atmosphere. If you work with someone who grew up in a completely different environment, you will have to acknowledge the differences. For example, if you say the word “simple,” it will mean something completely different to a German, an Italian, and a Japanese person. When you talk of simple products in Japan, there are many people who imagine something like the store “MUJI.” However, in Germany, you can imagine more streamlined designs, and in Italy, vivid colors. In some countries, “La Sagrada Familia” may be the image of as a simple building, but you can’t disprove the other person, just because their image is different. Even if the values of a person are very different, you have to accept this. I think that if you work in a diverse environment with so different values in Japan, you will naturally be able to accept the values of others.
However, as startups grow, there are many cases where they become more like big companies. Mr. Kimura talks about the process of a startup becoming like a large company.
Kimura: As startups grow, tacit knowledge and rules increase, for better or worse. It may seem like they have developed as a company at first glance, but it is also a cause of brain freeze. When looking at the common points of successful startups, we are looking for the best solution to the problem each time without following a precedent. We try to solve problems in a flat state without creating habits, as much as possible. Sometimes, managers themselves flip the “normal” that has been formed in the company. It can also be flipped by external factors, even if it is not intentional.
However, as the organization grows larger, what is considered normal inside the company is not overturned. That’s why many habits and rules remain strong. Increasing these rules and implicit knowledge is by no means a disadvantage. Rules and implicit knowledge allow you to respond quickly when the same challenges arise. That’s efficiency, and a large company is a culmination of this. As a large company is a mass of efficiency, it is a priority to follow the rules rather than find the best solution for each case.
— Mr. Kimura says that large companies create rules and implement “operationalization” as a compensation for making work more efficient. How can we prevent “operationalization”? Mr. Ishikawa talks from his own experience.
Creating an organization that is not afraid of failing “projects.”
Ishikawa: Projects are effective in preventing the operationalization of work. At IDEO, all work was made into projects, and common goals were set. A lot of companies don’t turn work into projects, and as a result, work becomes operations, the team spirit disappears, and morale doesn’t increase.
For example, at Teikyo University, which won eight consecutive university rugby championships, players often gather together in groups of three during practice, and time is taken for senior students to give feedback to their juniors. In rugby, it isn’t possible to give instructions from the sideline after the game starts, so you must play while thinking for yourself during the game. For that reason, it seems that it is a good training method for students to think about the common goal of “victory.”
Developing projects is to make use of this in business. For example, even if people are engaged in the same job, motives are different if they are in different positions. Designers may want to create something new, and engineers may want to reduce costs as much as possible. Many people can imagine that problems will occur due to the difference in motives. Here, if you have the opportunity to implement a project and have a kick-off meeting for the first time, you can share the objectives of the project. This allows you to align the views of members and increase their morale. If it is a startup in the seed period, I think that the goals of members are aligned because they are developing projects naturally.
— Many large companies think about changing their approach, but it is not easy to transform a big organization. How should large companies change their organization?
Ishikawa: In a successful example at IDEO, instead of changing the entire organization at once, the rules were changed for only one floor or one team at a time. If a rule covering everyone is created, and everyone wants to join that team, the overall rules will change. Not everything will work well, and failures will often occur, but it is important to change them one by one. Even if it fails, it will lead to the next opportunity.
— At startups, there is a culture of trying things out, even if they fail, but this is quite unlikely in big companies. How can we create an organization that can learn from failure?
Kimura: In the first place, when you say, ‘to tolerate failure,’ you are assuming success. The acceptance of failure comes from the idea that it is natural to succeed. However, it is assumed that startups will basically fail. If the assumption is failure, we will explore how we can increase the likelihood of success. Accepting failure on the assumption of success is completely different from looking for possibilities in the assumption of failure.
Ishikawa: In that sense, it would be more interesting if there were more exploration-type companies. At IDEO, we experimented with prototypes and took the stance of learning from failures, and everyone enjoyed the process.
However, big companies seem to firmly reject failure. If you work at a big company, it is important to be able to conduct experiments that won’t produce anger if they fail. If the experience of failure increases, the number of exploration-type companies may also increase.
Silicon Valley is the hottest…? Wait a minute!
When a large company tries to make organizational changes, there are often cases of adopting ways of doing things, such as the example in Silicon Valley. However, Mr. Kimura disagrees with that.
Kimura: If you apply the way of working in Silicon Valley to a Japanese company, it won’t be successful. You need to make adjustments to fit the way we do things in Japan. The process requires a lot of trial and error. The main aspect is not to incorporate the process only on the surface. This is because, even if you take only the process, the feelings of those who actually work are not included. It is important to create from scratch an environment that the workers can enjoy. In order to do so, it is also necessary to subconsciously change the rules. Subconscious rules are hard to notice. That is why it is important to have a completely different perspective from other industries and, in order to adopt a completely different perspective, we need relationships formed on mutual trust. Without relationships based on trust, you can’t accept the opinions of others. The most important thing for making open innovation successful is building relationships based on trust.
Ishikawa: Building relationships based on trust is not just about the world outside the company. You also need to have trusted relationships within the company, that is, including junior and new employees. New employees don’t know the ‘normal’ of the company yet. I don’t know the ‘normal’ of society, so I sometimes have more important opinions than people in other industries. However, as people get older and have a career, they can’t say ‘I don’t know’ to their subordinates. As input from subordinates decreases, the field of view narrows. The important thing is to be able to show weakness even to your subordinates on the premise that you don’t know everything.
Think of a new employee as a teacher and honestly ask about things you don’t know. If you can do this, the air flow in the organization should be much better.
Globalization is progressing, and the era of it only being necessary to benchmark domestic competition has just ended. Without the assumption of competing against growing companies overseas, Japan will quickly lose its global competitiveness.
What Japanese companies need is transformation tailored to Japanese people rather than the superficial monkey imitations of overseas success stories considered to be the most advanced in the world. There may be many people who are seeking and studying know-how and cases from overseas with the aim of transforming their own company. However, the elements for transforming a company are surprisingly familiar to us; the opinions of the employees who are working now, the flexible attitude of a startup with a different size and culture, and the relationship built on trust. Yes, they are in our hands.
・We need to have “diversity” in terms of different values and ways of perceiving things, in order to aim for “transformation” through design thinking and open innovation.
・It is important to continue to flip customs and implicit knowledge, in order to maintain the continuity of diversity.
・It is important to create projects and have common objectives and goals, in order to prevent work and morale degradation.
・The organization should be an exploration-type organization that “learns from failure” rather than “tolerates failure.”