Japan is losing the tech race. One AI startup is hoping to change that [ Tritiyo Matra News ]

Japan is losing the tech race. One AI startup is hoping to change that

Global November 26, 2019

A robot that can find the laundry even if you've moved it could give Japan's startup scene a much-needed shot in the arm.

Preferred Networks co-founder Daisuke Okanohara says his company's artificial intelligence software enables the Human Support Robot to react to changes in its environment in unique ways.

The technology is a source of pride for the Tokyo-based firm, which is worth roughly $2 billion, according to CB Insights. That kind of valuation is rare for a Japanese startup. While the United States and China have seen the rise of hundreds of unicorns — private tech companies worth at least $1 billion — Japan has just three.

Falling behind

It wasn't always this way. The third biggest economy globally was once a leader when it came to disruptive, innovative technology. After all, this was the country that gave the world pocket calculators, the Sony Walkman and LED lights. But Japan has since fallen far behind in the innovation race.

Japanese inventions that changed the way we live

PHOTOS: Japanese inventions that changed the way we live

"The Tale of Genji" is a Japanese story that is considered by many to be the first modern novel. It was written by a woman Murasaki Shikibu in the 11th century and is about the life and romances of Prince Genji.

In 1955, electronics company Toshiba released Japan's first electric rice cooker. It was an instant success and became symbolic of prosperity for the working classes, before spreading internationally.

Shinkansen, or the bullet train, is a super-fast train with a top speed of 400km/h that connects Japan's cities across the country's challenging geography. The first passengers went aboard in 1964 on a journey between Tokyo and Osaka. It is the first and most traveled high-speed railway in the world.

In the early 1990s, three Japanese scientists, Isamu Akasaki, Hiroshi Amano and Shuji Nakamura used semi-conductors to produce high-brightness blue LED light for the first time. LED technology was a revolutionary discovery that went on to be used in TV, mobile, and computer screens -- reducing their energy usage.

Japanese company Kawasaki introduced the first commercially successful jet ski in 1972. The models in the 70s and 80s were designed for one person to skim across the water. At the time the early models were described as tiring and difficult to handle.

The rather chunky Canon "Pocketronic" was the first hand-held, battery-powered printing electronic calculator. Introduced in 1970 it could easily be transported, as opposed to the desktop calculators previously used.

The Epson HX-20 laptop was the world's first hand-held computer. Launched in 1982, it features a full size keyboard, LCD screen, printer and built-in rechargeable batteries.

The Imperial Japanese Navy ship Hosho, which entered service in 1922, was the world's first purpose-built naval aircraft carrier.

The first commercially available car navigation system was released in 1981 by Japanese company Honda. It was called the Electro Gyro-Cator and used inertial navigation systems. This system is not based on satellites. But if you knew the distanced traveled, the start point and the direction your were heading, then the sat nav could guide you.

The first attempts at 3D printing were in the 1980s, when it was known as Rapid Prototyping technology. Hideo Kodama was the first to publish an account of the technique.

Shigetaku Kurita introduced emojis in the late 1990s on Japanese-made phones. Initially, emojis were not created for chit-chat text messaging, but for simple weather reports or business information for pagers. Emojis are now part of our everyday language and in 2015 Oxford Dictionaries named "the face with tears of joy" emoji as its word of the year.

The Toyota Corolla is the best-selling car of all time. First coming to the market in 1966, it soon became popular globally because of its reliability and simplicity. Now, on its 10th-generation model, the Corolla has sold 44.1 million cars.

Nintendo has a surprisingly long history. Beginning in 1889, Fusajiro Yamuachi manufactured playing cards called "Hanafuda" (flower cards). In 1933 Nintendo was registered as an unlimited company and from the 1970s onwards Nintendo expanded into electronic games. The Game Boy, Nintendo 64 and Wii have been some of its most popular products.

The PlayStation 2 was released in Japan in 2000 by Sony. It is the best-selling home console of all time, with over 155 million units sold. Introduced six years after the Playstation 1, it has had over 3,800 game titles released since its launch. In 2012 Sony halted the long-running production of the console.

Sony's stereo cassette player, the "Walkman", changed the way we listen to music. It enabled people to listen to cassette tapes on the go. Sony announced the Walkman to the public in 1979 and after a month in Japanese stores it had sold out. It soon became popular worldwide, with the term "Walkman" becoming a byword for any portable tape player.

Umami is one of the five tastes (along with sweetness, sourness, bitterness, and saltiness). A Japanese chemist Kikunae Ikeda discovered it in 1908. It is described as a meaty taste and it's prominent in foods such as Parmesan cheese, mushrooms and anchovies.

The square watermelon is an expensive decorative fruit in Japan, but it was actually created for more practical reasons. It was invented in 1978 by Tomoyuki Ono.

Sudoku is a puzzle game created by Maki Kaji (pictured) in 1984, which became a popular brain teaser worldwide. The aim of the game is to fill a 9x9 grid, so that each row, column and each 3x3 grid contains the numbers 1 to 9.

The Epson HX-20 laptop was the world's first hand-held computer. Launched in 1982, it features a full size keyboard, LCD screen, printer and built-in rechargeable batteries.

The Imperial Japanese Navy ship Hosho, which entered service in 1922, was the world's first purpose-built naval aircraft carrier.

The first attempts at 3D printing were in the 1980s, when it was known as Rapid Prototyping technology. Hideo Kodama was the first to publish an account of the technique.

The square watermelon is an expensive decorative fruit in Japan, but it was actually created for more practical reasons. It was invented in 1978 by Tomoyuki Ono.

A study from consulting firm McKinsey found that Japan was keeping pace until about 2000, when the revenues of companies such as Sony (SNE) and Toshiba (TOSBF) fell sharply below those of industry leaders like Apple (AAPL) and Samsung (SSNLF).

Japanese companies were known in the 1980s and 1990s for making consumer tech products lighter and thinner, said Kenji Nonaka, senior partner with McKinsey. But then the market changed. "Super engineered" products were less in demand. Consumer-driven tech, with an emphasis on software, became more important, according to Nonaka.

"To be successful for that innovation, you have to be close to the customer, you have to have a sense of those customers' needs. And Japan is very far from the United States and far, culturally, from China," he said.

Moreover, startups like Google (GOOGL), Netflix (NFLX), Facebook (FB) and Amazon (AMZN) — all American — have been responsible for the most exciting innovations in tech over the last 20 years, he added.

"In Japan, there is a very limited startup community," Nonaka said. "Everyone wants to go to large enterprise[s]."

The company that owns TikTok now has one billion users and many are outside China

Experts also blame the innovation decline on Japan's homogenous work culture, combined with a risk-averse financing system that has stifled creativity and innovation.

Japan's government directs tech investment. The salary-man work culture discourages employees from leaving their jobs. And companies rely heavily on banks, rather than debt markets, to raise money.

The different approach to investment is particularly significant. Angel investors are plentiful in the United States and China, for example, where there's more of a willingness to bet on people and companies that are taking big risks and are likely to fail.

"When you're going for new product innovation, the money and personnel that can be attracted in a short amount of time is amazing in the United States," said Seijiro Takeshita, dean and professor at the University of Shizuoka's School of Management and Information. But Japan is home to "a culture that frowns on failure," he added. "At Japanese corporations, it's more important not to fail than to succeed."

Some signs of progress

That's not to say Japan doesn't innovate at all. Takeshita said there are still a lot of ideas in the country, but they just aren't as splashy as what's coming out of Silicon Valley or Shenzhen. Japan excels at taking an existing tech product and making significant improvements on it so that it can be more easily mass produced. Sony debuted the Walkman in 1979, for example, but magnetic cassette technology had been around for more than a decade by then.

Japan is still a world leader in technological innovation based on another metric. It filed more intellectual property patents per capita than any other country in 2018, according to a report released last month by the World Intellectual Property Organization. (China and the United States still rank higher in total number of patents filed.)

Sony releases a Walkman for its 40th anniversary

Even then, Japan has fallen far behind when it comes to "the political environment, education, infrastructure and business sophistication" needed to drive innovation, the group said. The country ranked 15th in the World Intellectual Property Organization's annual global innovation list earlier this year, falling two places. It lagged far behind countries such as the United States, the United Kingdom and Israel. Switzerland came first.

Daisuke Okanohara, co-founder of Japan's biggest tech unicorn Preferred Networks, says the country needs more creative diversity for new ideas to flourish.

Okanohara, the Preferred Networks co-founder, pointed to diversity as one solution. His company employs roughly 270 people, and about 10% are foreigners, representing more than 30 countries. The company recommends using English around the office and on Slack, and employs translators to help with communication. By comparison, foreign-born individuals make up roughly 57% of Silicon Valley's technology workforce, according to a 2017 report published by the Silicon Valley Leadership Group, an advocacy organization, and the Silicon Valley Community Foundation.

"We need more diversity to think or adapt more new, radical ideas," Okanohara said, adding that Preferred Networks wants to create an environment where "new ideas [can be] easily adopted and tried."

At Japanese corporations, it's more important not to fail than to succeed.

SEIJIRO TAKESHITA, DEAN AT THE UNIVERSITY OF SHIZUOKA'S SCHOOL OF MANAGEMENT AND INFORMATION

Nonaka, of McKinsey, said Japanese startups also need to have global ambitions.

"Many startups have been very comfortable with succeeding in Japan. Japan's not a small market, but it's small compared to the US and China. They need to think of their growth in the US and China when they start their business," he said.

The same holds true for more established tech companies, too. When carrier company SoftBank (SFTBF) announced last week a plan to merge Z Holdings, formerly Yahoo Japan (YAHOF), with messaging app Line (LN), for example, it said that Japanese internet companies are lagging behind their American and Chinese counterparts and need to expand into other Asian countries to stay competitive.

Finding investors

Powerful investors can often make companies, but that's yet another obstacle that many Japanese startups face. SoftBank (SFTBF) founder and billionaire tech investor Masayoshi Son is the country's biggest tech cheerleader, but his $100 billion SoftBank Vision Fund has notably not invested in any Japanese startups.

Instead, the fund is pouring billions of dollars into big global startups like Uber (UBER), Chinese used car startup Chehaoduo and Indian hospitality group Oyo. Its lack of interest in Japan could be because of the slim pickings — most of Japan's options likely don't meet Son's criteria, which requires late stage companies that are only a few years away from going public.

Okanohara shrugged off being overlooked by Son, saying the Japanese tech environment "is very challenging."

"Compared to places like China there aren't many opportunities," he added.

Toyota is working on a moon buggy

But his company did pique the interest of another big Japanese company: Toyota. (TM) The carmaker first began working with Preferred Networks on joint research and development in 2014. Toyota has invested more than 11 billion yen ($101 million) in the startup since 2015, fueling work on projects such as artificial intelligence, robotics and driverless technology.

That kind of investment has enabled some important breakthroughs for the company — like its AI software. After all, the robot that Preferred Networks is powering with its technology was made by Toyota.

News Courtesy: www.cnn.com