Winning In Japan

Your company is firmly on the path to success in the U.S. Customers love your products and sales are brisk. Maybe you even have a presence in Europe and are seeing positive early momentum there. A natural next step for the business is entering Japan, and there are a multitude of reasons why you should. Japan is the third-largest economy in the world and has strong protections for intellectual property, a stable business climate, and a well-educated population with an appetite for the latest technology and trends.

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However, the Japanese market presents challenges as well. A well-educated and tech savvy population means that new Japanese startups quickly spin up to emulate and ultimately compete with top-tier U.S.-based consumer Internet companies — think Amazon vs. Rakuten. On the enterprise side, large Japanese companies are hungry for innovation, but are also slow to change and put more value on relationships than their Western peers typically do.

As a result, over the years we’ve seen many companies enter the Japanese market, but very few succeed. Salesforce.com is a notable example of success — landing big wins with leading organizations like Japan Post. However, less well-publicized was the commitment required to win. In comments made to Japan Today in 2013, then-CEO of Salesforce Japan Eiji Uda noted that “I think I approached them about 20 times. It took about two years to get their trust … and today, Japan Post is our biggest customer.” In 2014 Salesforce set out a goal to build Salesforce Japan into a $1B business with more than 2,000 employees.

Clearly the opportunity in Japan is vast, but many companies are aware of the unique challenges Japan presents, and worry that they may struggle to get the Japan market right. Geodesic recently hosted a series of panels in Tokyo for leading U.S. startups interested in Japan, including speakers from technology companies that have already succeeded in Japan, recruiters that are intimate with the Japanese market, and government policy experts. Our panelists broadly addressed the unique business landscape in Japan and outlined strategies for navigating key challenges. Key findings include:

1) You can’t succeed without investing in people. Japanese businesses respect (and buy from) companies that show long-term commitment to the Japanese market. A key part of that is establishing an on-the-ground presence, bringing in the right senior hires to build out a team. Japan country managers need to be able to successfully navigate the Japanese business culture and fit into the more free-wheeling tech startup culture. The number of people able to bridge those two worlds is slim, and working with a seasoned recruiter with strong references can be essential in order to find the right match.

2) You can’t succeed without investing time. Our speakers shared multiple anecdotes of prominent technology CEOs like Steve Ballmer and Marc Benioff spending weeks, and in some cases, months, effectively living in Japan to help them understand the culture better. Not all leaders will be willing to make this level of commitment, but this does underscore that the Japanese value business partners willing to show a real investment in the market. Our panelists also advised patience — it could take years to build towards the first big win in Japan, but once you are an accepted part of the community, the opportunity is large.

3) Partner, and partner often. Partnerships can speed up entry into the Japanese market, but selecting the right partners and partnering with a broad selection of players is important. Aligning too closely with one partner might limit opportunity as some companies are reluctant to work together. A balanced approach to partnerships is important, and strong partnerships don’t eliminate the need for local staff in Japan.

4) Be forthright. The Japanese value openness and long-term partnership. As a result, sometimes the Silicon Valley win-by-any-and-all-means approach does not resonate in the local market. The Japanese government is broadly supportive of bringing U.S. innovation into the country, but some companies run up against government regulations. In those cases, emphasizing the value of a solution is more likely to get approval than aggressive lobbying, which is generally frowned upon in Japan.

Succeeding in Japan is both possible and lucrative, but also requires commitment, investment, and patience. We believe the right local knowledge and domain expertise can increase the odds of a positive return on investment.

Geodesic Capital

Growth stage venture capital fund focused on supporting the…