Open Innovation in Japan

The future is here – It’s just not evenly distributed

William Gibson

The diffusion of innovation has been a central research topic for the last 60 years. In Japan, open Innovation is becoming a reality. Social Media and the Internet replaced word of mouth and gradual adoption. It is just the beginning.  Two billion internet users in Asia only represent a penetration rate of forty-nine percent. Six hundred million Chinese and nine hundred million Indians are still waiting to join the global online community.

The world is shrinking, the market place is expanding, and Technology and Innovation are accelerating.

The linear Moore’s Law has shifted into the steep Ray Kurzweil’s exponential rate of change in technology. At this pace, the next hundred years will see more innovations that the world has experienced during its last ten thousand years. All of these fast-paced innovations have to come from somewhere. In 2003, Henry Chesbrough introduced the now widely used concept of Open Innovation as a “new Imperative for Creating and Profiting from technology.” In the Close Innovation strategy, ideas are internally generated. Open Innovation is just the opposite. In Open Innovation, the company’s boundaries open. Global open innovation networks are a powerful way to boost innovation in your company and bring out of the box ideas. The focus is on bringing disruptive products and business models rather than concentrating on being the first to reach the market. Measuring the ROI of Innovation is a complicated process, especially when Open Innovation is involved.

Japan: Highly innovative but can still do better

According to the latest report from the World Economic Forum on Global Competitiveness, Japan ranks in 5th position out of 140 analyzed countries. When compared to the US, Japan somehow develops three times fewer products in partnership with universities.

In 2017, apart from the restrictive labor regulations and the taxes, the insufficient capacity to innovate was ranked as the third most problematic factor of the Japanese market. When analyzing collaborations between Universities and Industries, Japan was only in the 27th position, far behind Germany, Switzerland, United-States, and Israel. Things are improving somehow. Japan can nowadays be considered as an innovation hub (6th)….even if this hub is still quite a domestic one. In 2018, the country of the rising sun ranked as first for patent applications/million pop but ranked only 24th concerning International co-inventions. Japan needs to nurture the “soft” drivers of the innovation ecosystem to become a “super innovator.” Japan also scores low on several measures of entrepreneurial culture, including risk aversion (47th) and creativity, as well as critical thinking (70th). Open Innovation is a way to balance risk and increase the ability of Japanese mega-corporations to think outside of the box they have created.

Last June, the Ministry of Economy, Trade, and Industry (METI) released the second edition of its survey on Open Innovation. Despite increasing the number of research collaborations between private companies and universities, the proportion of research expenses between companies and universities was still low. When Germany invests 3.6 p100 on collaborative innovation, Japan only invests 0.68. Startups were also seldom chosen for collaborative projects when compared to current business partners or research institutions. All of these factors contributed to the low ranking of Japan on Open Innovation (47th out of 78th analyzed countries).

Open innovation as a priority in Japan

Japanese companies have long favored close innovation. In the 1980s, discovering new projects was a collective close process. In most of the companies, any employee was allowed to suggest an improvement. They were small changes, of course, but the accumulation of these grains of sand contributed to the success of the Japanese industry. At Toyota, during this period, the average employee suggested 70 implemented ideas. With the acceleration of the world, mentalities are changing, though. Traditional companies can no longer rely exclusively on close innovation. Innovation is evolving. Large corporations are now more and more, embracing the many benefits of Open Innovation Programs. Major Japanese companies are involved in so many different business segments that it is becoming virtually impossible to innovate in all of them without external collaborations.

Closed innovation is hardly sustainable in a globalized and fast-moving world.

In 2014, Fujifilm launched an Open Innovation Hub.  The goal was to present Fujifilm Group’s fundamental and core technologies to external business partners and initiate an innovation network.

Denso Corporation, a car equipment company also engaged in robots and QR Code readers, has, in 2018, implemented a collaboration program called “Denso Accelerator 2018” dealing with the next generation of energy.

In Biotechnology, organizations such as Link-J by establishing partnerships with international research clusters aims at bridging foreign and local companies. Among the large Pharmaceutical companies, Bayer is leading the way with its Innovation Center, located in Osaka, devoted to promoting networking and partnerships among academics, biotech community, and Bayer Japan. Takeda, Japan’s oldest pharmaceutical company, launched in 2015 an open innovation platform (COCKPI-T: Co-Create Knowledge for Pharma Innovation with Takeda) to provide funding to early-stage research projects.

Open innovation challenges are flourishing in Japan. NTT, the telecommunication giant, has been running Open Innovation challenges for Technology startups for the last nine years. Metlife has also been pushing digital insurance transformation global open innovation challenges.

By opening to the world, Japan is reinventing itself. Business development in Japan is evolving. Historically, for more than two centuries, Japan has been following a strictly isolationist foreign policy. Even if the Sakoku (literally “closed country”) ended in 1868, this policy took time to disappear. The low level of immigration in the Japanese aging society and national business practices have long contributed to favor close innovation. Mindsets are slowly evolving. Nowadays, we see more and more cross-collaborations agreements. As an example, last July, the French and Japanese economic ministries signed a partnership agreement regarding Innovation and Digital Economy. Under this agreement, collaborations between the Scientific National Institutes of both countries will be reinforced. Japanese and French startups will have more opportunities to meet and potentially collaborate. The world is global, and significant Japanese companies have now subsidiaries all over the world.

Cross-fertilization of ideas and open innovation is not anymore a nice to have, but a must-have to remain competitive and innovative in the global market place.

Companies in Japan and Universities are ready for open innovation. The Government has also realized the many benefits of open innovation. In 2016, the “Japan Revitalization Strategy plan” was released. It set an ambitious goal to “boost companiesʼ investments in universities, national research, and development corporations. By 2025, Japan aims at investing three times beyond the average levels of OECD member countries.

Through its global network of partners in Universities, startups, or corporations, Hashi Consulting provides the necessary foundations to start or strengthen successful open innovation projects, deal with intellectual property, and ultimately enter the Japanese market. For all your open innovation consulting needs, do not hesitate to contact us and we will discuss your project on a confidential basis.