Key Lessons for Entering the Japanese MarketWritten by
We usually get a lot of questions from founders asking how they should tackle Japan. Now most founders are focused on the “new normal” — working from home, social distancing, and taking care of their businesses as well as their employees, customers, and investors in this new environment. COVID 19 has provided us with an opportunity to question our basic assumptions and to reflect upon what we should be focused on. Japan entry is one of those questions to be thinking about.
Most entrepreneurs recognize Japan’s importance to their businesses as they internationalize and continue to scale, but Japan for many seems so foreign and challenging. We wish there was a simple solution that worked for every company but unfortunately, every company and customer profile is slightly different. The precise strategy needs to be tailored for each individual company, and as such, there is no plug and play playbook for how to win in Japan. However, there are fundamental building blocks that have universal applicability.
We’ve compiled some of these basics that apply to every company looking to enter the Japanese market. There are many steps to take and challenges you’ll face but these are a few key points to winning in Japan.
1. Prioritize market significance, not ease of entry
The four largest economies for the next ten years will be the US, China, Japan, and India. If you want to be a global winner, you have to win these four markets. Three of the four markets are in Asia. Within Asia, China is strategically challenging and India is a market of the future in terms of per-unit economics and is still emerging. Japan is large, valuable, and winnable. If you prioritize ease of entry and spend a few years expanding in English speaking markets, competition will have filled the vacuum you’ve created and you will not have a chance to win these critical Asian markets. Prioritizing ease of entry is equivalent to foregoing a window of opportunity that will keep you from being a global winner.
2. Align expectations between HQ and the Japan team
The first thing HQ executives should do is conduct a 3-day exploratory trip to Japan. The trip will give executives a collective sense of the market — by testing product-market fit with key potential customers and assessing the competitive landscape. This first-hand experience will allow executives to make a solid “go”/”no-go” decision for market entry. Next is alignment with the Japan team. The product investment necessary to meet the Japanese expectations of excellence can take time and it’s important to prepare for longer sales cycles. The key is to remember that purchases in Japan are not short-term transactions, but long-term partnerships. Once locked in, these partnerships will pay off more than in other markets. The fact that Japan is the second largest market for many Silicon Valley companies attests to the value of this long-term investment.
3. Cross the chasm with flagship customers
Salesforce invested several years into winning Toyota and Japan Post as customers. Toyota and Japan Post are famous for the rigor with which they select their system partners. Once those two customers had signed up, other clients rushed in. Salesforce crossed the chasm. Before boiling the ocean, you should determine which are your five priority companies out of which two will emerge as your flagship catalysts. These lighthouse accounts have a multiplier effect as references and nods of approval by association. You need to know what accounts these are and have the patience to convince them of your value, potentially over many years.
4. Win the air game — not just the ground game
Japanese business leaders form a community. They meet regularly. They discuss the national agenda with political leaders. Personally being trusted by this community is critical to broad adoption. It’s not enough to win the ground game through hustling. You have to win this air game with the top business leaders of Japan. Global CEOs should use their visits to Japan strategically to build personal ties with this group. Such relationships at the top provide air cover for your Japan-focused team to play the ground game effectively.
5. Understand your fit within national priorities
Twitter and LINE took off in Japan because they helped the Japanese public connect after the 2011 Great Earthquake. They served a critical national priority. The Japanese government and the business community come up with 3–5 priorities each year. You need to know where your company fits within those priorities. Whether you’re seen as a “Japanese” company serving the Japanese public depends on whether you’re seen as being a solution provider for the nation. Understand the priorities, find the fit, deliver, and communicate.
These five keys to success are just the starting point for companies looking to enter Japan. We aim to understand the nuances of every business we work with so we can help formulate and tailor your approach to the market. There is no playbook, per se, but with advanced planning and knowledge, Japan can become a valuable market to power your company to success as a global winner.
If you aren’t convinced that Japan is right for you, let’s chat or read this: Going Global Powers Growth in Post IPO Companies.
Thanks to James Kondo (@jameskondo) for his detailed presentation on Winning in Japan at the 2020 Geodesic Forum. This piece is an extension of his informative talk.