Can Japan Revive its Stagnant Economy or Not?
Nurturing innovation is the key
Steve Jobs said: “Innovation distinguishes between a leader and a follower.”
Back in 1989, Japan had 14 companies out of the top 20 companies based on market capitalization. It was popularly believed that Japan would surpass the US economy in the coming years.
At that time, Japan was at the pinnacle of developing cutting-edge and innovative products the world had never seen before. After all, it was Japan who conceptualized Shinkansen. Japanese companies pioneered in making consumer-focused products such as pocket calculators, the Sony Walkman, and LED lights. Companies like Sony, Panasonic, Toshiba, and Toyota, etc. used to be global leaders.
And then started the dawn of new companies like Apple, Microsoft, Google, and Amazon which took over Japanese companies in the top global companies list and established themselves as leaders in the technology field. With the advent of the internet newer industries and players like Facebook, Twitter, Airbnb, and Uber emerged, and Japan completely lost here.
At present, no Japanese corporation features in the top 20 global companies list. In the last 30 years, Japan’s economic growth has been stagnant, popularly known as “the lost decades”. To my surprise, Tesla which started in 2003, recently surpassed Japan’s top corporation Toyota in terms of the total market cap which stands currently at 35th spot in the list of global companies.
So, where did Japan go wrong with its rich culture of bringing new innovations to the market?
Scholars have written many articles about it in the past.
They have associated several factors pertinent to the decline of innovation in Japan such as lack of startup culture, no diversity, the complacent young generation, reluctance to change the existing system, etc.
All these aspects, I have also witnessed firsthand during my stay in Japan.
I have been living in Japan for almost 3 years. I joined the University of Tokyo as a master’s student. I worked on several research projects and got the opportunity to work with some of the most amazing people from a variety of professions such as entrepreneurs, researchers, innovators, and startup investors. Currently, I am working with a large Japanese corporation and got to know about the corporate culture in Japan as well.
Lately, I have had some ideas drew on my experiences to invigorate innovation in Japan. So, I thought of sharing these solutions through this article.
Promote scientific research-based startups and joint ventures with large corporations
US universities such as MIT and Stanford have the culture to spin out startups from the research labs. This can be emulated in Japan as well. Japan has no dearth of top universities and excellent research.
During my research at the University of Tokyo, I realized that a lot of researchers are developing cutting-edge technology and some of them have the potential to be commercialized.
I am stressing on scientific startups (also referred to as deep tech startups) is because of the fact that these startups are not easy to copy and have a high barrier to entry, unlike internet or finance startups. They have a strong competitive advantage because of their underlying intellectual property protection.
Japan already had a rich history of innovation and it can carry forward its legacy on the back of these breakthrough startups. But, it’s hard for university students and professors to scale these innovations. That’s where big Japanese corporations can support. It’s hard for big companies to come up with radical technologies. But, the business acumen of top-level executives from large corporations can be used to scale up these innovations. Funding can also be provided by these companies.
One such example is a Tokyo based startup “Preferred Networks (PFN)”. They are working at the frontier of AI/ML technologies in collaboration with Toyota. There are ample opportunities like this, and it is a win-win situation for everyone involved in the process. Startups will have the opportunities to grow, big companies can leverage the technology developed by the small company and the University can get a certain amount of the profits which would be used again to promote research.
Promoting startups will have an additional benefit as well. As big corporations are unwilling to change the already developed company culture. But these new companies will develop a more inclusive culture that will be more open, diverse, flexible, and easy to adapt.
Efforts to attract foreign talent
Deep tech startups require specific skillset and it is very hard to find talent that meets those requirements, particularly in Japan. The population is declining and on top of that, due to the complacent nature of the young generation, they might not be interested to work in startups.
That’s where India has a lot to offer to fill this void such as its consumer market and young talent.
In India, we have a plethora of internet and finance startups but not many deep tech startups. So, there are fewer opportunities for people like me who want to work in cutting edge technology startups. That’s why I decided to come to Japan and many students are passionate about technology but unable to find those opportunities in India.
Indian students prefer to go to the US because of the language ease but currently, due to the immigration issue we are looking for alternatives and hence, the Japanese government should put efforts to attract talent from India. We will bring unique skills and contribute to the growth of Japan. In addition to that, we will help expand the business into the growing Indian market as Japan’s market is saturating which will immensely benefit both India and Japan simultaneously.
To conclude, I would say that Japanese society is transforming to a certain extent. I will forever be indebted to Japan for the opportunities it has given me. I firmly believe that Japan has all the elements integral to bring back its existence as the innovation hub of the world. It is off to a good start, but it will have to let go of the old mindset and embrace a new system.
Thank you for reading and reach out to me here. Do have a look at some of my other articles.
