Note from the author:

This article is part 4 and the cornerstone of the “Winning in Japan” series and we’re finally going to dive into the details of a Japan entry GTM. While this is by no means a comprehensive document, we did want it to function as a useful guide for CEOs and other executives embarking on their Japan journey. As such it is a bit long as we wanted to prioritize utility over readability. Also, while this document can and should be helpful on its own, I hope you have read the first three articles in this series as they do provide important context and perspective.

A quick review: 

If I were to summarize the goal of the first two articles in this series in a single sentence, it would be “to impress upon the reader the importance of a localized approach to Japan.” Specifically, as you may recall, article two was an overview of the two biggest challenges that IT startups face when first entering Japan:

1. Japan has a very conservative business culture so it takes time and effort for startups new to Japan to establish credibility and trust in the market before sales will scale.
2. Due to linguistic, technical, and some structural reasons, a high degree of product localization and a modified customer engagement/support model are often prerequisites to broad market adoption.

Of course, similar things can be said of other countries, but it is the extent of the conservatism and the great importance Japanese place on localization that sets Japan apart as a consistently challenging market.

Perhaps it is obvious then that the key to successfully navigating Japan is to build credibility (number 1 above) by delivering a localized product and a modified customer engagement model (number 2 above). This strategy is nothing new: focusing on product market fit and customer success before scaling is the prescribed strategy for “crossing the chasm”, proposed by Geoffrey Moore in his seminal work of the same name.

The key tension for Silicon Valley companies and the reason they often struggle when entering Japan is because it usually comes at a time when the company has already crossed the chasm in the US and is scaling. They have therefore, by definition, found a GTM and financial model that works: inputs today (sales reps, marketing spend, etc.) produce predictable outputs (ARR, consumption, etc.) within a known timeframe. So deviating from this plan and reverting back to a “crossing the chasm” or “product-market fit” mindset just for Japan is difficult, as all expansion activities are being evaluated against the global GTM standard. In Japan getting to or even exceeding that standard is the goal. That said, the fastest path there is not a direct one implementing the global GTM itself, but rather one that is preceded by a period of investment in early adopter engagement, product localization, customer success and relationship building BEFORE trying to scale too aggressively. 

This article, therefore, seeks to 

1. Part I: present a general framework for overcoming Japan’s challenges mentioned above as efficiently as possible 
2. Part II: cover tactical best practices for each of the primary functional areas (sales, marketing, product, etc.) so each functional leader understands where his/her organization fits in the overall strategy

Success in Japan is, after all, a company-wide effort and so we hope this document will help CEOs to not only articulate a clear vision for Japan but also facilitate internal discussions with functional leaders regarding their specific roles and responsibilities.

Note: this article’s recommendations will assume a B2B enterprise software company entering Japan with little or no revenue and no employees. However, we hope the principles discussed will be applicable more broadly.

Part I : Japan entry strategy, goals and timelines

How and why your US GTM will fail:

Japanese companies are quite committed to digital transformation, they have budgets and they are sincere when evaluating new technologies, so even for companies new to Japan, with some marketing and PR it is actually easy enough to secure meetings with prospects and build pipeline. Even POCs are not too difficult to come by and most companies are able to secure a few reasonably big contracts from early adopters as well. So the very beginning (pre-chasm) part of the Japan journey often looks similar to what is happening in the US. Very quickly however, companies hit the chasm and here Japan’s conservative culture manifests itself in two ways: 1) overall pipeline conversion remains low, and 2) deal sizes remain significantly smaller than that in other regions. From a management perspective this high engagement but low output often just looks like poor sales execution and it may be. But it is also the typical experience of companies new to Japan due simply to Japan’s conservative culture. It goes without saying that the ROI on these types of engagements is less than stellar and a sustainable business model based on these early engagements will not be apparent if judged against the global GTM standard of sales productivity. This is how the downward spiral of perceived underperformance and underinvestment/divestment gains momentum, inevitably leading to failed outcomes if the proper corrections are not made.

A winning approach:

So what then is the proper approach? Since leads will not convert predictably or in a way that is scalable while in the chasm, rather than trying to run the US GTM, the better strategy is to bring a “crossing the chasm” mindset and hire, plan and invest accordingly from the start. 

Practically what this means is instead of building a large sales team (and all of the associated expenses and implied revenue expectations), start with a smaller team laser-focused on landing and building deep engagements with targeted early adopters. This should be your first goal.

Then, for your second goal, instead of overspending on lead generation, which will only put lots of leads into a leaky sales funnel and overwhelm the limited resources of your entry team, listen to your early adopters and your Japan team and allocate the budget to product localization and customer success/customer support accordingly. In other words, focus on delivering value and achieving PMF (product market fit with a localized product) first, then growth and scale will follow. 

The opposite approach (trying to drive sales and get the GTM running before localization investments are made) is perhaps the biggest mistake and greatest source of frustration for companies newly entering Japan.

One more thing. . .case studies

A third goal to pursue during the entry phase is to generate compelling local case studies. Local case studies with well-known companies signal that the vendor has not only been able to sell their product, but also deliver the promised value to Japanese customers, and this more than anything will motivate other Japanese companies to buy. So document your successes and get them out into the market ASAP.

Time frames and goals:

Putting a specific timeline and specific numbers behind each of the goals below is difficult given the wide range of possibilities for different companies at different stages in different sectors. So, with that huge disclaimer that your company’s situation may be vastly different from the “rule of thumb” guidelines below, here is a list of goals for the typical enterprise B2B company as it enters Japan:

• Entry period timeframe: 24 months 
• Goals for the end of the entry period (see more details in Part II below):
  • Hire a local team, lead by a strong country manager.
  • Secure 15 – 20 early adopters
  • Deliver the first version of the Japan MVP within 6 – 12 months of your Japan entry
  • Figure out a customer success/support model that works for Japanese
  • Sign and onboard 2-3 reseller/distribution/agency partners
  • Publish 3-5 compelling local case studies

After 24 months, if you can deliver the goals above, you will have built the foundation from which to launch your Japanese business in a much more scalable way. When your sales team engages with customers interested in your product, they will be able to present them with multiple case studies of reputable Japanese customers. When you show them a demo, it will be with a Japanese product. If they do a POC, they will have Japanese training and documentation and when they have support questions they will be answered in Japanese and by someone in their time zone. Each of these interactions with your company will signal a commitment to the market and soften common concerns regarding language and support that prevent so many deals from otherwise happening. This is what will unlock the demand in Japan beyond the few sophisticated and English-capable early adopters. 

From here, as you continue to execute, credibility will continue to accrue and your sales productivity metrics should start to improve. It may not happen all at once, but in general your business should scale in a more predictable and financially sustainable manner allowing you to hire and grow the sales team with more confidence. 

Part II : Japan entry hiring & functional roles

Hiring plan: alignment

Japan entry starts and is centered around a strong leader (country manager) who understands how to create relationships, evangelize, build pipeline and close deals (sell!). After all, nothing starts without landing the early adopter logos, and even after that, although there must be a period of credibility building as outlined above, the posture of the organization should always be to grow and that means sales. (We will go into much more detail about roles, responsibilities, and attributes of a country manager, as well as how to hire one, in a future article.)

After the country manager however, what kind of roles you hire, and how many, can range from a single technical resource (who can handle both pre and post-sales responsibilities) to something much more aggressive depending on the myriad situations companies find themselves in as they begin their Japan journey. Specifics require a bespoke discussion and we will not try to address all possible permutations in this article. From a first principles perspective though perhaps the most important consideration is alignment with the goals and timelines outlined above. And this cannot be emphasized enough. 

This typically means avoiding hiring too many salespeople and associated supporting cast (AEs, SEs, SDRs, etc.) to early. Too many salespeople not only create a mismatch between the hired team and the reality of what needs to happen on the ground but it inflates the revenue expectations beyond what they should be at this stage. This creates a situation where the entry team is set up for failure. Not only because the likelihood of hitting sales targets is extremely low, but because oversized expenses will put a strain on the company and set off a chain of poor knee-jerk reactions: ”No sales, then no localization!” At the precise time when localization and customer success resources are needed, companies conclude that it is not warranted because the sales team is “not performing” and the Japan business is burning too much cash already. 

So while the sales team should be the key driver of the entry strategy, it is important to avoid over-hiring sales and marketing staff, to keep the cash burn manageable, and to ensure that investments and people remain focused on the right activities. Sales can always be scaled up later if justified by the results, so there is no need to hire everyone upfront. 

Functional roles and goals:

Given the general strategy and hiring guidelines laid out above, here is a further breakdown of roles and responsibilities for each functional area (these can be used as a starting point for conversations with functional leaders of each respective team at HQ.) 

Sales: 

It is primarily the sales team’s responsibility to drive the strategy outlined above which means in the beginning, the primary focus should be building relationships with and securing contracts from early adopters. A majority of these early adopters should be selected and pursued carefully based on 1) their reputation and market influence, 2) their propensity to adopt technologies early, 3) personal relationships with the entry team or executive team members and 4) (perhaps most importantly) because the nature of their business makes them a good fit for your technology. Some of these early adopter engagements can and should be created through marketing lead generation efforts, but the core of the strategy should be centered on:

1. a carefully curated named account list followed by 
2. rigorous account planning and execution 

This will focus limited resources on accounts that really matter, that have the highest probability of converting, and critically, are most likely to succeed with your technology and become lighthouse accounts. As stated above, early adopter contracts sometimes are big from the beginning but often they start small. The most important thing at this stage is not the size of the contract but the quality of the logo and the strength of the relationship. 

From a sales management perspective, setting proper KPIs to ensure that the team remains focused on landing these agreed-upon targets is critical to the successful completion of the entry phase. So while traditional sales KPIs should always be a part of the compensation plan, they are not the only ones that matter and may not be the best measure of the health of the business. So modifying traditional quotas, adding targets and bounties for landing valuable logos and ensuring that proper account planning and execution are well engrained into the culture is important to keeping the sales team focused and motivated during this exciting but difficult period. 

One final note regarding sales strategy: If there is a third hurdle that makes Japan challenging for US startups, it is the prominent role of systems integrators, IT consultants, agencies and other third parties that have a direct influence on IT strategies, including which products get purchased and supported. In most software sectors, engaging with these third parties via distribution or reseller contracts is an important part of the GTM to ensure access to customers, scale and also credibility. (See more regarding working with partners in the “Channel” section below.) Regardless of the prominent role of partners, relying on them solely to sell your product will usually produce very mediocre results. Especially in the early days, but even throughout the entire Japan journey, the hard work required to close early adopters and other high-value targets is best done by your own direct sales force, even if those deals are closed through the channel. 

Product: 

it is hard to overemphasize just how much Japanese customers appreciate it when US companies deliver a truly great Japanese product. It sends a powerful message to early adopter customers if as a part of ongoing conversations, you quickly determine their high-priority items, deliver accordingly and then iterate quickly from there. This will create an incredible amount of trust and goodwill, though note, this does not need to happen all at once (as localization is an ongoing process).

The converse is also true: if you fail to deliver a high-quality Japanese product and insist that Japanese customers use an English product or a half-baked Japanese product (ie, no Japanese documentation, etc.), this will almost certainly present headwinds (sometimes significant ones) to your sales efforts in Japan. 

Preparation and timing: Japan is usually not the only country where products need to be localized for so hopefully your product has been internationalized prior to Japan entry so that the work of localization can happen as soon as requirements are understood. Having said that, doing some product due diligence on Japan and knocking out low-hanging fruit opportunities to increase the value of the product “out of the box”, and make sure there are no obvious deal-killing issues, are always things we recommend so that the process already has momentum as you enter Japan. Exactly what these low-hanging fruit modifications might be is different for each sector and each product, but here is a list of common categories of localization that should be considered and addressed: 

• Japan-specific new feature requests
• Integrations with local ISVs and other partners
• Multibyte (Japanese) character handling
• Compliance with local regulations
• Retraining algorithms on Japanese datasets
• Translation of the user interface, documentation, FAQs, knowledge base, etc. into Japanese
• Timing of scheduled maintenance (so as not to occur during Japanese business hours)
• Setting up a local data center (for privacy and performance)

While the level of localization required differs from company to company, generally for products used by IT departments and/or developers, localization is less critical, while for products used by business and non-technical users, localization can be a hard requirement. Whether completely necessary or not, committing to and delivering a world-class Japanese product will always be well received and create an incredible amount of goodwill with customers.

Post-sales engagement & support (including implementation, training, customer success, professional services, account management, technical support, consulting, etc.): 

Once new logos are landed by the sales team, it is the responsibility of the post-sales teams to ensure that the product is properly and quickly installed and that the promised value is delivered.

The most important thing to know about Japanese IT departments is that they are significantly smaller and on average less technically sophisticated than their US counterparts.

Here is a chart from McKinsey’s report Using digital transformation to thrive in Japan’s new normal: An urgent imperative. It shows how in Japan, a very low percentage (28%) of IT workers are employed by the companies they work for (as opposed to 65% in the US). The vast majority of Japan’s IT professionals work for systems integrators, consultants and other 3rd party vendors (referenced on page 9)

So the requirement for a much higher level of support, which we mentioned multiple times above, is cultural but it is also structural. While much of this support can be outsourced to partners over time, in the early entry phase, as part of the broader strategy to deliver high customer success, companies need to invest the proper resources to deliver the support directly. 

While this, of course, has the short-term downside of increasing support cost per dollar of revenue (again upsetting the global financial model), it does come with an incredible upside for companies who do make the investment: customers become very sticky and will allow trusted vendors to influence their IT strategies to a very high degree, providing for ongoing upsell and cross-sell opportunities well into the future. 

Regarding the short-term entry strategy though, keep in mind that the Japanese B2B software market is hyper-concentrated in one city (Tokyo), and word of mouth has a much bigger impact on reputation and sales than marketing, so ensuring that early customers become fans (of your technology and your company) is critical even if the immediate economics don’t justify it. 

Over time, the support cost per dollar of revenue should normalize as accounts and your partner ecosystem expand. Tokyo’s dense concentration of customers also makes it easy and efficient to hold large or small and frequent in-person customer gatherings to build your customer community, create networking opportunities and to spread best practices. Leveraging this unique aspect of Japan is key to delivering high customer success efficiently and to bring support metrics back in line with global standards. 

“Worst practice” warning!: 

To reiterate what’s been previously mentioned, one common “worst practice” to avoid is routing Japanese customers to English-speaking support reps either via phone or email. This may work for some more forward-thinking and sophisticated early adopters and may be unavoidable in the very beginning, but it definitely is a red flag for most Japanese and will impede the adoption of your product within your customer base. Having a capable and enabled local support team who can handle all inquiries and communications with Japanese customers (with a clear escalation path to HQ support staff) is a definite prerequisite to broad adoption of your technology and getting to this point should be an explicit goal of the entry phase. 

Marketing: 

Marketing is simultaneously one of the most important functions when entering Japan and also the place where companies make the biggest errors. It goes without saying that during the entry period marketing needs to be maniacally focused on helping the sales team to execute their strategy of landing early adopters. Practically speaking, here is an overview of best practices to consider and common pitfalls to avoid:

Best practices:

Create a strong online presence: when potential customers find out about your company, they will almost always search the internet for useful information in Japanese and share relevant links with colleagues. So this should be one of the top priorities as you enter Japan including the following:

• Create a 100% Japanese website (the website can be a small subset of your English website – even just a single page to start), but it is supremely important that it is thoughtfully created and 100% Japanese with no stray English text (unless intentional) and no links to English content unless clearly marked as such). Do not just translate the top page of your English website as this produces a very disjointed experience for Japanese users.
• Build up your SEO/SEM to ensure your Japanese website is easy to find on Japanese search engines.
• Publish a Japanese press release soon after your country manager is hired to announce Japan entry.
• Secure coverage in relevant local media, including blogs and social media.

Industry Events: Identifying and participating in relevant industry events (and avoiding irrelevant ones) can provide important exposure and also be the source of good leads.

Customer events: Once you have a few customers, getting them together and inviting a few prospects as well (perhaps once a quarter) can be a very effective way to strengthen relationships and create a community of enthusiastic users. (Great for closing prospects as well.)

Thought leadership: You can start with your standard global messaging but often the messaging that moves the market in Japan will be slightly different. If you find something that resonates better in Japan, have the flexibility to change.

Sales/partner enablement: Partner with sales to identify high-value materials such as sales decks, technical white papers, case studies, etc. and localize accordingly.

Pitfalls to avoid:

Lead generation: Overspending on lead generation in an attempt to build pipeline, a la the US GTM, is one of the biggest mistakes companies make when entering Japan. Since the sales strategy is more about account planning with specific named accounts, creating too many leads with companies that may be low impact or unlikely to convert can be counterproductive. If resources are available some lead generation and nurturing can of course be helpful, but start conservatively and modify thoughtfully based on results.

Launch event: A launch event is a great way to increase awareness of your company. The big mistake companies make, however, is to do the event too early. We usually recommend that companies wait until the end of or just after the entry period before doing a launch event. This is so that they have more than just a compelling global story, but also a compelling local story to tell (local customer case studies, localized product, etc.) and also the infrastructure (sales team, partners, etc) to capture and convert the interest it will generate.

Channel: 

As stated above, IT departments in Japan depend much more on systems integrators, consultants and agencies than their counterparts in the US. In fact, in some cases, large organizations outsource their entire IT operations to a third-party SI. As such, partnering with companies that have the right relationships with target customers and the technical skill to implement and support your technology is an important part of the overall sales strategy. Moreover, if reputable SIs and distributors carry your product, it can be another positive signal of credibility to the market. 

A few success factors for making the channel work:

• Channel is not a replacement for direct sales — Regardless of the need for channel partners, your high-touch sales team will always be the best way to drive sales, but this is especially true in the early stages of Japan entry. 
• Big vs small — larger SIs/agencies will generate a lot of credibility, but they are slower to move. Smaller partners have less market influence but are often much more aggressive in pushing new products. Having both small and large partners can offer a great balance when starting out, but they must be managed very differently.
• Managing channel conflict (deal registration, quota credit) — Deal registration can motivate partners to get the sales process started and ensure that they keep momentum with high-priority deals. Sales incentives and quotas for your direct reps should not discourage them from working with channel partners.

Legal, HR, Finance: 

These three functions, of course, have many roles in supporting the Japan entry strategy. For the purposes of this article, we’ll just quickly mention the following three that have particular relevance to sales: 

• Establish a local entity. This is a prerequisite to hiring and also an important signal of commitment to the market. 
• Prepare end-user agreements in Japanese. Partnering with a local law firm to help support this is a common practice.
• Prepare to accept payment in yen.

Early adopters and even some more conservative companies are often okay with English contracts in dollars, but most customers will need Japanese contracts in yen for obvious reasons. If this is something the company does not want to do then closing contracts through channel partners is a common alternative. However, the company does lose a certain amount of control in these situations. 

Executive engagement: 

In addition to driving the overall strategy, CEOs and other executives can make a huge positive difference by traveling to Japan to meet customers, partners and of course employees. Salesforce’s Marc Benioff and Apple’s Steve Jobs, are legendary for their personal involvement in Japan and the visibility they created for their respective companies by evangelizing new technology paradigms while at the same time fostering relationships and implementing feedback from customers into their businesses and products. (In Apple’s case, Jobs famously took design and quality cues from Japanese companies and sourced a large number of components from Japanese manufacturers.) Both companies are wildly successful in Japan as a result. In new and/or disruptive markets, the CEO can play a large role in securing media interviews, closing large deals, amplifying the corporate message and generally creating a halo around the company, which will help propel the business forward. 

Conclusion:

Two clarifications need to be made. 

1) The proposed entry model above is not about “starting slow” or “being conservative.” It is about focusing the company and limited budgets on the right set of priorities to achieve a very specific set of goals. So while sales quotas may be lowered during the entry period, the purpose is not to take it easy on the sales team. Normal quotas, if lowered, should be replaced with other objectives like landing high-value customer logos, building account plans and establishing executive relationships — or perhaps signing and onboarding key partners. On the product side, there needs to be a goal of defining and delivering the MVP for Japan, etc. Without these clear goals no matter how much time passes, Japan’s cultural idiosyncrasies will remain as pesky headwinds to progress. 

2) The entry period does not last forever. Entry strategy is designed to cross the chasm as efficiently as possible to land on the other side with the right momentum and infrastructure. Once there, the challenge will be to scale fast enough to capture the demand and establish the company as the category leader. This requires an entirely different mindset and skill set but one that is more similar to the global GTM. The other side of the chasm in Japan is an incredible market that should be a major driver of growth for many years. The beauty of Japan is not only its scale but also that it can be accessed through a single city (Tokyo) in a single time zone with a single currency and with incredible transportation and communication infrastructure. So, early investments produce great leverage for those that do it right. If your competition has not made similar investments, they will be at a significant disadvantage as they try to compete.

Closing comments and next steps:

While the best practices above should be helpful directionally, they do not cover nuances for alternative business models such as OSS/developer lead, PLG, and mid-market, which have different sales motions and therefore require slightly modified strategies from the model described above. They also do not cover the next layer of details that need to be addressed: How many people should we hire as part of our entry team and what roles? How much localization does our product require? Which systems integrators or agencies should we partner with and how do we contact, pitch to and negotiate with them? Should Japan report to APAC or direct to HQ? Etc. etc. Again, the devil is in the details and a successful Japan entry requires getting as many of these things right as possible. However, each company is different so the correct answers for your company will most likely come as part of an interactive dialogue with key stakeholders as you lean toward your Japan entry. 

These are exactly the kinds of conversations we at Geodesic have with our portfolio companies every day as we help them plan and execute their entry strategies for Japan. If you have a question regarding your entry strategy, please let us know and we’ll be glad to set up a time to talk. Arigatou gozaimasu!

What’s next? Future articles in this series will focus on how to hire (and properly manage) a great country manager and what happens after the entry phase is done (spoiler alert: growth and scale in Japan require an entirely new strategy, different kind of leadership, and much much more aggressive investment.) Stay tuned!