Message from the publisher.

An interesting trend in IP

Several weeks ago, two representatives of a major Japanese financial group came to see me with an unusual request. As many readers will know, our sister company Japan Inc Holdings does market entry and venture funding consulting, and our services are in particular demand by foreign firms with great Intellectual Property (IP) but no clue, and often no cash, to get the IP into Japan. Usually, the challenge for our team is to find interested partners and get them to commit cash and resources to getting that IP productive in Japan. But that was before the visit by the two gentlemen in question.

Their request, which goes to show that someone high up is thinking about the problem, was to ask if we could start channeling the IP into their group of investee companies so as to help those firms do better commercially. Their problem is that they have made thousands (literally) of investments and about a third of those investee companies wind up running out of gas and ideas. In the past people talked about 'Zombie' companies--referring to manufacturing firms losing out to China. Now we have the 'Walking Wounded' (my phrase), referring to start-ups and tech firms that have run out of ideas on things to sell their customers.

It has often been said that Japanese people lack creativity and inventiveness. I can categorically say that this is not true, and a visit to any lab of any large company or Internet business will show that innovation is alive and well. However, it is true that innovation follows profits, and those companies further down the food chain are now also unable to borrow money as they once could and thus can't afford to bring in the creative types. As a result, they generally wind up trying to compete on price rather than fresh ideas, eventually atrophy their ability to innovate and cause their younger and more creative employees to lose hope and leave.

I'm not sure that a simple injection of fresh IP or products is the only answer to my visitors' problem--the culture and leadership of a walking wounded company also demands attention. But the fact is that if something sufficiently new and exciting is given to a tired sales force, providing the idea connects with customers, it won't take long before those salespeople realize they're on to something good. They will soon be pushing their bosses to further develop the business so as to create a steady flow of income.

You might wonder if I should be introducing low-performance Japanese companies to high-performance foreign IP owners? Well, there is indeed an added ingredient needed to ensure success, and that is the recommendation that the foreign IP owners insert one of their own employees into the Japanese partner company for a couple of years. There is nothing like a fresh-faced high-energy foreigner plonked smack dab in the sales and planning team to start changing the team's attitude to a new product.

Because the newcomer is not Japanese (but they should be bilingual), these foreign change-agents can do things that their Japanese colleagues can't, like go pitch new clients without the usual three months of drinking and getting to know each other first, or push the IP owners back in the home country to make some quick changes so that the product will work more appropriately for Japan.

The meeting with my two visitors went really well, and later I sent them a list of the market sectors that I frequently get market entry requests from. They are now working through the list to see how many of these sectors match up to their lack-luster portfolio members. Not one week after they left, I got a call from another financial organization wanting to talk about a similar idea. This could be coincidence, but I suspect that with the stock market tanking for start-ups and technology firms over the last six months (Q4 2007 and Q1 2008), there will be a lot more investors trying to find a silver bullet to help their investees recover--potentially in the form of foreign IP or products.

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So, now is probably a good time for foreign firms with IP to be looking at Japan again.

Terrie Lloyd

Publisher, J@pan Inc Magazine

Writer of Terrie's Take

terrie@japaninc.com