By Philippe Huysveld
“Innovate” means “Introducing something new or different,” which is not an easy thing to do. This can only be achieved by entrepreneurs willing to develop and promote something that does not exist yet.
Therefore, Innovation is a key component of growth and economic development of a country. With 18.8 billions JPY spent on R & D in 2008, that is, 3.8% of its GDP, Japan definitely wants to be an innovating country, trendsetter in Asia and in the world.
With its record number of patents, this country has been the source of breakthroughs in various industries, like Automotive, Electronics, Telecoms, Automation and Robotics, among others. Having recognized the importance of Science and Technology, its government has strengthened in the 90s its support to technological innovation by funding fundamental research as well as key applied research projects.
In 2013, what is the situation? Plagued with major structural problems, is Japan still an innovative country? What are the successes and mistakes of the Japanese example? What are the challenges and priorities? What lessons can we learn?
A few figures to start
According to data from the World Intellectual Property Organization (WIPO), the ranking of the number of patent applications per country in 2010 is as follows:
502 000 applications in Japan (# 1), 400 000 in the United States (# 2), 203 000 in China (# 3), 172 000 in Korea (# 4), 135 000 in Germany (# 5) and 47,000 in France (# 6).
According to the same sources, the ranking of the number of patents per million of inhabitants in 2005 is as follows: 117 patents in Japan (# 1), 107 patents in Switzerland (# 2), 81 in Sweden (# 3), 76 in Germany (# 4), 67 in the Netherlands (# 5) and 39 in France (# 6).
To conclude, these figures clearly reflect an intense activity of research and development in Japan. In practice, what does the Innovation process look like and what are its origins?
An example: “Maido-kun”, a “Made in Osaka” satellite
In Japan, in the Kansai region, the city of Higashi-Osaka (eastern part of Osaka) is called “the Manufacturing City” due to the large number of SMEs (Small and Medium Enterprises) locally active and constituting a manufacturing cluster/pole of excellence.
In 2001, in a region hit hard by recession, the SOHLA Project (standing for “Space Oriented Higashi-Osaka Leading Association”), whose objective was the creation of a satellite by a small group of six SMEs, was launched by assembling technologies of local businesses. Objectives were twofold: to revitalize the local economy and to hand over these technologies to future generations.
The major challenge of the project, besides funding, was finding the necessary time for the development of the satellite, Japanese engineers volunteering on this project, after their normal working hours!
The ouput was outstanding: “Maido”, a small-scale satellite developed by SOHLA, Japanese universities and the Japanese space agency JAXA. The build was completed in March 2008 and the successful launch of “Maido” took place in January 2009!
The same companies are currently working on the next project: “Maido-kun”, with a budget of $ 10.5 million invested in the development of a two-feet robot supposed to walk on the moon in 2015. This example of initiative and self-motivation should be a source of inspiration for our researchers in the West!
History of Innovation in Japan
In order to better understand the Culture of Innovation in Japan, we must go back in time.
The concept of “Monozukuri” or “production of things” is rooted in the rich Japanese craftsmanship tradition, as evidenced in particular by the degree of perfection of samurai swords. This concept is at the centre of the Japanese culture of excellence in industrial production & tangible hardware, as opposed to services & intangible software.
During the “Meiji Restoration” (1868-1912) and after the Second World War, especially during the period of “high growth”, Technological Innovation was at the core of the rapid growth of the country. In particular, it allowed the development of leading industries, the improvement of “Just-in-time” (JIT) Manufacturing Systems, the widespread practice of Quality Circles and the use of fine-precision machinery.
The 1980s saw the advent of Japan “which can say no” (referring to the book of Akio Morita), crowned by the industrial success of companies such as Sony, Panasonic and Toyota, success based on excellence of “Monozukuri”.
The 1990s were less glorious. They were characterized by the bursting of the “housing & financial bubble” and by a long-term stagnation of the economy. Confronted with the gap acquired in the “intangible” Digital domain, a political consensus was reached to bring radical changes in the funding and the management of research.
To conclude, a quick overview of the history of innovation in Japan has highlighted the following mistakes of the past:
1) the “Galapagos effect”: the tendency to launch products in small series, developed solely for the Japanese market.
2) the “Cherry picking effect”: the waste of research results and mismanagement of findings, retaining only the most interesting projects and dropping other projects, some of them being of interest sometimes.
3) a certain disdain for anything that is not “hardware”.
The Reforms of the nineties
In 1995, a New Basic Law on Science and Technology, based on the American model, was passed with as major points:
1. The will to create “high-tech start-ups” especially in the areas of information technology (IT) and biotechnology.
2. Enhanced cooperation between industry, universities and government.
3. The establishment of a fast & efficient system of transfer of technology & knowledge towards the industry.
4. Enhanced support to young researchers, including a drastic increase in the number of post-doctoral fellowships.
5. Enhanced mobility of researchers
6. Increased competition in the selection process for research grants.
This new law was accompanied in 2001 by significant Administrative Reforms whose major axes were:
1. The government’s duty to create Five-Year Plans for Science and Technology
2. Creation of the CSTP (Council for Scientific Policy), with a secretariat of 100 people and the appointment of a Minister responsible.
3. Restructuring or merger of some research institutes & universities.
4. Management by the CSTP of the competition between the various candidates for research grants. These public funds were now available to private researchers.
5. Increased mobility of researchers. With the following consequences: end of lifetime employment, systematic evaluation of the performance of individual researchers, importance of exchange programs & international collaborations.
6. A target of creating 10,000 post-doctoral scholarships in 5 years.
7. The change of legal status of Research Institutes and Universities into Independent Administrative Entities, managing their own budgets. With the following consequences: a “private” status for researchers and the opportunity to receive funds from the private sector.
8. Coordination by the CSTP of the research budgets of various ministries, as well as the launch of “Clusters” or Regional Centres of Excellence.
9. The set up of eight priority areas, including energy, environment, information technology (IT), communications, nanotechnology, space & oceans.
Finally, in 2003, a new Basic Law on Intellectual Property, in favour of universities, was passed.
All these measures helped to establish in Japan a more efficient & competitive research and Innovation support structure, structure whose results became visible nowadays.
Analysis of the Japanese Innovation System
Its Strong Points or Advantages are:
1) Top-class Manufacturing System based on a strong culture of “Monozukuri”
2) Mastering of “hardware” and of all what is tangible.
3) Innovation based on the integration of various technologies sourced in various industries.
Its Weaknesses are:
1) Services and Software Industry, even if the gap has been partially filled
2) The rigidity of the System and the Society in Japan, in general
3) A homogeneous Society which tends to repress eccentricity
Its Challenges and Major Priorities are:
1) Catch up delay accumulated in certain areas such as software. Initially, in spite of the importance of video games, there was little interest from hardware key manufacturers for enterprise software. Significant profits in the sector have finally attracted their attention, generating growth and explosion of patent applications.
2) Find sustainable energy solutions, alternatives to nuclear energy
3) Protect the country against natural disasters
4) Innovate about population aging and related healthcare challenges.
Rebound of Innovation
The earthquake of magnitude 9, which devastated the “Tohoku” region in northeastern Japan in March 2011, followed by huge waves or “tsunami” and a nuclear accident at the “Fukushima” plant, was devastating.
At the human level: more than 15,800 people dead, 2,700 people missing, 6,000 people injured and more than 342,000 people still evacuated two years later. At the economic level: damages to buildings, transportation infrastructures, electricity & other power generation infrastructures were estimated at more than 130 billions Euros.
The question one might ask is: Will the 2011 disaster change something to the two decades of stagnation experienced by the Japanese economy?
Indeed, History has shown that a difficult situation, such as the post-war reconstruction of Japan involving the concept of duty to the nation, combined with the existence of a large human capital (educated people), can stimulate enterprise and a rebound of innovation in a risk averse society.
After the disaster, a Reconstruction Plan of the affected areas, spread over ten years, was adopted. A budget of 200 billions Euros over the first five years has been allocated. The Plan provides for the rehabilitation of the affected areas, the creation of “special areas of reconstruction,” the support to homeless victims and the reduction of disaster risks through prevention at the national level.
In February 2012, the Agency for Reconstruction was established, with more than 300 members of staff scattered in the affected areas and under the leadership of the Prime Minister. Its mission is to coordinate and harmonize all policies and reconstruction measures in an integrated manner, as well as to involve the private sector as much as possible in the process of reconstruction.
In short, the policy of the Japanese government is a policy combining the reconstruction of a disaster area together with the revitalization of the local economy, thus generating a dynamic growth for Japan as a whole. The “drivers” of this growth are renewable energy, information technology, tourism, clean technology and life sciences (healthcare).
The on going construction of “Smart Communities” in the disaster area of “Tohoku” is a good illustration. Based on the principle that, to avoid after-disaster power shortages, electricity demand has to be balanced, at anytime, by renewable & irregular power generation (combination of solar, wind, geothermal, hydro and biomass energies), new buildings are built with the purpose of better withstanding disasters and of making optimal use of renewable energy.
By 2015, innovative cities will be built, where the energy will be managed efficiently and where people will travel by electric cars and buses. Energy production will take place either “offshore” (like the huge pilot wind farm project off the coasts of Fukushima), either “onshore” at the borders of towns, in wind farms or in mega-solar, geothermal & biomass power plants.
Its distribution will be monitored by an Energy Management System (EMS), acting as a control tower. For example, battery charging will be done when there is plenty of energy available, for example, on sunny days. Seven projects are already underway in various towns being reconstructed in the region.
Energy and Innovation
Another economic impact of the disaster has been the increased awareness in Japan of the need to improve energy efficiency in three areas:
1) developing renewable energy
2) reducing the power consumption of electrical appliances,
3) improving insulation of buildings.
In this regard, different alternatives of renewable & safe energy are being developed in an innovative way in Japan:
1) Wind energy:
Kyushu University has developed a new type of wind turbine called “wind lens” whose innovative design delivers a tripled power compared to existing turbines and in line with performances of nuclear power plants. Even if a little more maintenance is necessary because of the larger forces at play, their construction and installation would be relatively simple.
The “offshore” wind farm experimental project in Fukushima is also a reference (a world premiere, at 20km off the coasts), with a production target of 16 MW.
2) The energy of the Sun:
A “spin-off” in Tokyo has developed organic photovoltaic cells, using polymers and organic molecules in place of silicon as light absorbing components.
Another “spin-off” has developed miniature photovoltaic cells, converting into electricity optically concentrated light, allowing its use in crowded urban areas.
Companies like Sharp, Kyocera and Matsushita are heavily involved in this business.
3) The energy of the Sea:
The presence of major ocean currents surrounding the Japanese islands (the “Kuroshio” is the second largest current in the world after the “Gulf Stream”) offers significant potential for electricity generation. Solutions of hydro-turbines, extracting energy from the sea, exist and could be used.
4) The energy of the Earth or “Geothermal Power” for heating & for electricity generation.
As we have explained in this article, the facts and figures about Research and Innovation in recent years in Japan, are impressive:
• globally, a record number of patent applications and of patents per inhabitants.
• a “Made in Osaka” satellite launched into orbit
• following the 2011 disaster, the resurgence of renewable energies and the rebound of Innovation, especially in reconstruction projects.
• an increasing number of Japanese Nobel Prize winners in recent years: physics in 2008, chemistry in 2010, medicine in 2012!
• the success of relatively new players in the Japanese “Internet sphere” Softbank, Yahoo Japan, Rakuten and others
Despite its structural problems and its own challenges, Japan has bounced back in the years 2000 and was able to adopt the right reforms in order to catch up in some areas. Rightfully, having consolidated its past achievements, Japan retains its place among the most Innovative Countries in the world!
Author: Philippe Huysveld
With a double Engineering and Business background, holder of a MBA from Kyoto University, after 15 years+ as a Senior Executive, Philippe Huysveld is now a Business & Management Consultant.
He is founder of GBMC (Global Business & Management Consulting) and his major business activity is Europe-Japan Consulting.
In addition to Consulting, Philippe Huysveld lectures on «The History of the Japanese Economy» and on «Social Structures of Japan» at the Cergy-Pontoise University (in the Paris area),within the Master Program in Languages and International Trade – Japanese Markets option.
He is the Author of the eBook “Lecture Economique de l’Histoire du Japon” available on Amazon/Kindle and other sites.
As a cross-cultural trainer, he also gives seminars/ conferences about Japan, as well as leading workshops on «Business Relations with Japan» in Business Schools, such as the Vesalius College in Brussels.
Contact info: firstname.lastname@example.org; www.gbmc.biz