Entrepreneurship in Japan: Taking on the Big Boys

Business Features - March 26th, 2012

“If you have to ask someone in Japan for a business favor,” says Lincoln Taylor, a whitewater rafting guide and entrepreneur in Gunma, “bring two bottles of shochu liquor. Give one as a present then suggest you drink the other one together. By the end of the visit, you’ll have what you want.”

It’s been working for him so far. Taylor’s launched several successful outdoor adventure companies in Japan guiding foreign and Japanese clients down on whitewater rafting, snowmobile and snowshoe trips. The two-bottle trick has helped him forges local partnerships in the rural areas where he operates.

Taylor’s business development skills are not only a boon to Japan’s shochu brewing industry. Entrepreneurs like Taylor are also crucial to Japan’s economic development. The more start-ups and small businesses in a country, the healthier its economy: entrepreneurs create jobs, bring innovative products to market and sometimes manage to grow small start-ups into large, successful companies.

Japan’s post-war recovery was driven by ambitious entrepreneurs who grew small businesses into household names. Masaru Ibuka and Akio Morita turned their small radio repair shop into the Sony Corporation. Tadao Kashio grew his small business selling cigarette holders into Casio Inc.

The Ibukas, Moritas and Kashios of today, however, are in short supply. According to the Global Entrepreneurship Monitor, a consortium that collects data on entrepreneurial activity around the world, only 1.9 percent of people between 18 and 64 in Japan were actively involved in setting up new businesses. In South Korea, that rate is 2.7 percent and in the United States it’s 4.9 percent.

What’s stopping would-be entrepreneurs in Japan from starting businesses? Misato Okumura, owner of a successful English business in Tokyo, thinks it’s fear.

“People want security,” she says, and often hesitate to quit their jobs to take a chance on a business idea, “especially now, when the media talks constantly about how bad the economy is.”

Four years ago, Okumura decided to take her chances. She left her corporate career at Sanyo to start her own English coaching and online lesson company. Determined to make a go of it, she took business consulting classes, taught herself accounting, and found both a business partner and a mentor. Business is booming.

“I work hard,” she says, “but I live the life I want.”

Twenty years before Okumura launched her business, Hiroshi Murayama and his business partners took the same chance. After some of Murayama’s friends were laid off from their corporate jobs, they decided to join forces and launch an academic publishing business.

“They had the skills and I had some money,” Murayama recalls. “We thought we had an innovative business idea and a good chance of success.” They were right. After his first venture succeeded, Murayama launched a series of start-ups in the same industry.

Japan’s Ministry of Economy, Trade and Industry wants to see more Okumuras, Murayamas and Taylors in Japan. Aware of the benefits of a strong entrepreneurial sector but equally aware of Japan’s comparatively low rate of start-ups, the Ministry announced the formation of a bilateral US-Japan Innovation and Entrepreneurship Council in January of this year.

The council’s goal is to bring business leaders and experts on entrepreneurship together to discuss how to encourage the growth of new businesses.

The council has its work cut out for it: in 2010, a Global Entrepreneurship Monitor survey found that only 28 percent of people in Japan aged 18 to 64 think starting a business is a desirable career choice. Among Americans in the same age range, 68 percent approved of entrepreneurship as a career choice.

The problem seems to be one of perception as much as of policy. All the entrepreneur-friendly policies in the world won’t boost Japan’s start-up rate until people start to think of going into business for themselves as an admirable decision.

The power to strengthen Japan’s entrepreneurial sector, therefore, lies as much in the hands of current entrepreneurs whose success stories can inspire would-be start-up founders as it does with the country’s policy-makers.

One of the most famous entrepreneurial success stories in Japan is Hiroshi Mikitani, founder and CEO of e-commerce and internet service company Rakuten Inc.

After earning his MBA at Harvard, Mikitani decided to leave his job at the Industrial Bank of Japan to start his own consulting business. His various ventures led to his current position as the head of a company that took in revenues of $4.7 billion last year.

There’s no data available on how many start-up founders decided to take the plunge after being inspired by Mikitani’s success, but judging by the frequency with which Mikitani is profiled in Japanese business publications, it has to be more than a few.

Murayama, the educational publishing entrepreneur, argues that what Japan’s would-be entrepreneurs need is empowerment.

“When I started,” he says, “I didn’t worry about failing. I know I might lose money or property, but not my life or hopes. There are people who say the government should provide more financial support in order to foster entrepreneurship, but I disagree. Japan is changing and we can’t expect to lead the same lives as the older generation. People need to learn entrepreneurial skills. We need to learn to take charge of our destinies.”

On this point, Murayama and Mikitani’s philosophies converge. Mikitani describes Rakuten as an “empowerment company” that uses technology to help small and medium merchants reach a large market.

Mikitani sees his business as a way to enable other entrepreneurs to succeed. Given the disparity in American and Japanese perceptions of entrepreneurialism, this message of empowerment may have more effect than any government policy.

There’s another note in Mikitani’s story that sounds particularly strongly at this moment in Japan. As he mentioned at a panel on entrepreneurship at an American-Japanese business summit in Tokyo in early March, it took the 1995 Hanshin earthquake in Kobe, Mikitani’s hometown, to jolt him onto the entrepreneurial path.

As Mikitani’s story attests, although a disaster like the Hanshin quake can devastate, it can also empower people to take a chance on a long-held dream. How many nascent entrepreneurs did last year’s earthquake and tsunami shake awake?

If you start seeing people wander Japan with a dream in their eyes and two bottles of shochu in their arms, you’ll know the country is back on the road to growth.

Text by Annamarie Sasagawa