The following is the summary of a breakout session that was part of the 2016 Annual Conference.
Greg Caltabiano framed the session by looking at the perception and reality of whether Silicon Valley has any interest in doing business with Japan today. The perception is that since Japan is not featured in Silicon Valley headlines, it is not viewed as an important player in the Silicon Valley ecosystem.
By way of background, in the early to mid-1980s, Japan was perceived as the country that was taking over the world. Everyone was focused on Japan as the leader in technology, innovation and new products. American companies believed that if they wanted to "keep up with the latest,” they would have to commit to working with Japan. But with the downturn in the Japanese economy the late 80's and the following three decades of recession, Japan has fallen off the radar.
Each of the panelists commented on the issue of perception and reality. Ambassador Roos commented that while the perception is that Japan is less important, in fact the reality is quite different. All the major American companies view Japan as an important place for business opportunities, and they generally want to enter the Japanese market. Christopher Reberger stated that the 2020 Olympics, along with Prime Minister Abe's call for structural reforms, are critical for business development in Japan and with Japan. Yu Sasamoto noted that Twitter has been very successful in Japan, and that it generates 10% of their company revenue. Their users have increased from 6 million to 40 million. The key to Twitter's growth is recognizing the shift from computers to mobile.
Mr. Reberger noted that profit margins are higher in Japan, but that the cost of doing business in Japan is also greater than in other parts of the world. Japan is an important country in Cisco's global strategy, but it is also very challenging because of higher costs and stiff competition from Panasonic and Hitachi. Future opportunities lie in IOT, which is highly profitable.
Ambassador Roos noted the many challenges of entering the Japanese market, but said that success is possible if the company makes a long-term commitment to Japan. Foreign companies must learn to embrace the Japanese culture and not fight it. Long-term commitment must come from the highest levels of American companies, which may result in phenomenal success for those who are willing to stick it out. The key to doing business successfully in Japan is to build a long-term relationship with Japanese counterparts instead of looking for a quick profit.
Mr. Sasamoto noted that Japan’s population is much smaller than that of India or Indonesia, but that it is important to measure the engagement by those people. What is important is the amount of usage, income level, education and sophistication with the company's products. In terms of the quality of the customer, Japan is much stronger than those other countries.
Mr. Reberger echoed Mr. Sasamoto's comments by noting that Japan has a mature economy and a high level of innovation even in big companies. He made the important point that Japanese are more into innovation and not into disruption, which is the model and mantra that is used in Silicon Valley.
Another important point is to customize the product to the local economy. Twitter has been successful in Japan because they have modified the product so that it “fits” Japan. They began working with local marketing partners two years before they introduced Twitter to the Japanese market.
One common problem is in HR. There are not enough Japanese hires to fill all of the needs of Silicon Valley companies that want to do business in Japan. While it is important for a company to know and understand Japan before going in, it is also important for Japanese companies to develop employees who understand Silicon Valley and its ecosystem.
The attempts by Japanese companies to enter the Silicon Valley ecosystem have generally failed since they don't send their top people to Silicon Valley. As a result, decision making is very slow, risk adverse and in many ways incompatible with the fast pace of the Valley. Japan also has to better understand the market in the United States and Silicon Valley if they are serious about partnering with the movers and shakers in the Valley.
In sum, both sides have much to gain from each other, but in many ways, it is a clash of cultures: on the one side, quick and nimble companies that are able to make decisions quickly, and on the other side, a much slower decision-making system that is risk adverse. However, if each side commits to long-term business partnerships, both sides could benefit from each other’s strongest assets.