JAPAN IS LOSING THE TECH RACE. ONE AI STARTUP IS HOPING TO CHANGE THAT

 In Investor News

A robot that can find the laundry even if you’ve moved it could give Japan’s startup scene a much-needed shot in the arm. Preferred Networks co-founder Daisuke Okanohara says his company’s artificial intelligence software enables the Human Support Robot to react to changes in its environment in unique ways.

The technology is a source of pride for the Tokyo-based firm, which is worth roughly $2 billion, according to CB Insights. That kind of valuation is rare for a Japanese startup. While the United States and China have seen the rise of hundreds of unicorns — private Tech companies worth at least $1 billion — Japan has just three.

Falling behind

It wasn’t always this way. The third biggest economy globally was once a leader when it came to disruptive, innovative technology. After all, this was the country that gave the world pocket calculators, the Sony Walkman and LED lights. But Japan has since fallen far behind in the innovation race.

A study from consulting firm McKinsey found that Japan was keeping pace until about 2000, when the revenues of companies such as Sony (SNE) and Toshiba (TOSBF) fell sharply below those of industry leaders like Apple (AAPL) and Samsung (SSNLF).

Japanese companies were known in the 1980s and 1990s for making consumer Tech products lighter and thinner, said Kenji Nonaka, senior partner with McKinsey. But then the market changed. “Super engineered” products were less in demand. Consumer-driven Tech, with an emphasis on software, became more important, according to Nonaka.

“To be successful for that innovation, you have to be close to the customer, you have to have a sense of those customers’ needs. And Japan is very far from the United States and far, culturally, from China,” he said.

Moreover, startups like Google (GOOGL), Netflix (NFLX), Facebook (FB) and Amazon (AMZN) all American have been responsible for the most exciting innovations in Tech over the last 20 years, he added. “In Japan, there is a very limited startup community,” Nonaka said. “Everyone wants to go to large enterprise[s].” Experts also blame the innovation decline on Japan’s homogenous work culture, combined with a risk-averse financing system that has stifled creativity and innovation.

Japan’s government directs Tech investment. The salary-man work culture discourages employees from leaving their jobs. And companies rely heavily on banks, rather than debt markets, to raise money.

The different approach to investment is particularly significant. Angel investors are plentiful in the United States and China, for example, where there’s more of a willingness to bet on people and companies that are taking big risks and are likely to fail.

“When you’re going for new product innovation, the money and personnel that can be attracted in a short amount of time is amazing in the United States,” said Seijiro Takeshita, Dean and Professor at the University of Shizuoka’s School of Management and Information. But Japan is home to “a culture that frowns on failure,” he added. https://edition.cnn.com/2019/11/25/tech/japan-tech-startups/index.html

 

 

 

 

 

 

 

 

 

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