Disrupting Japan

There is big news for Tim and for Disrupting Japan this week. It's a very short episode, and I have no special links or show notes this time around. Please give the show a listen for the big reveal, and please accept my sincere thanks for all your support over the years. Disrupting Japan is just getting started. The best is yet to come. Leave a comment Transcript -- vintage news sounds -- This is a Disrupting Japan news flash. We are broadcasting live from Tokyo, Japan to bring you today’s breaking news. In just a few minutes from now, we will be witness to …. Hold on. Let me turn this thing off. OK. That’s better. So, this is the first episode of Disrupting Japan ever that has not been released early on a Tuesday morning Japan time, so as you might expect, something big is going on. And I wanted you to hear it from me. Because you, the Disrupting Japan listeners, are a big part of what has led to this, and as you’ll see, I think that you are going to be a big part of what’s to come. Some of you are new fans, and that’s great. The podcast keeps growing steadily every month. And some of you have been with me since the very beginning and you were with me as my ContractBeast startup went under. You were part of my Crowd-Sourcing-My-Career project. You were part of my journey to becoming Japan’s first professional podcaster, and with me when I decided to take the show non-commercial in order to work with energy startups at TEPCO. So it’s only fair that I let you know what’s coming next. I’m joining Google as the new Head of Google for Startups Japan. So what exactly does Google for Startups do?  Officially, it's "Google’s initiative to help startups thrive across every corner of the world. Bringing together the best of Google's products, connections, and best practices to enable startups to build something better." And that’s, admittedly, pretty cool. In practice, however, what Google for Startups Japan will become is largely up to us. Google for Startups has different programs in different countries, and this is an amazing chance to create something unique for Japan and to make a real impact for Japanese startups. I have a lot of ideas, but I want to hear from you are well. If you are out there growing your startup in Japan, let me know what are some of the biggest challenges that you could use some help with. Or if you’ve already overcome those challenges, let me know what kind of resources and advice you wish you had access to back then. I’ll need your help to really make this work. So, what does all this mean for Disrupting Japan? Well, good things mostly. Google is being very supportive of the show, and with the audience as large and engaged as it is now, I don’t think I could stop even if I wanted to. However, my travel schedule for the next few months is absolutely crazy — even by my standards, so interviews will be hard to arrange. But we’ll make it work. I might be able to squeeze in interviews on the few days I’m in town and edit them on airplanes. Or maybe I’ll get a chance to interview Japanese founders in the countries I’ll be visiting. Or maybe I’ll bring my microphones with me, make a little pillow-fort studio in my hotel room and record some shorter solo shows on the road. I don’t know, but I’ll make it work. I haven’t missed an episode in the five and a half years since I started Disrupting Japan and I’m not going to miss one now.  Format-wise,  content-wise, things will return to normal in a few months. So I’m incredibly excited about this new opportunity. I mean its a chance for me to work full time with Japan’s startup founders to further develop Japan’s startup community. And that’s pretty much a dream job for me. But there is something else here, and it’s something that I don’t think anyone looking at Japan’s startups from the outside is quite ready for. You see over the past 10 years, and the past five years in particular, I’ve watched Japan’s startup ecosystem transform from a small group of innovators trying to figure out how to make things work into a dynamic and growing community of startups that are truly world-class. I mean sure, there is still a lot that Japanese startups can learn from global innovation and global startup strategy, but we are at a point now where there is also a lot that Japanese startups can teach the rest of the world. Long-time listeners know about my ongoing frustration with the foreign media coverage of Japanese startups. Far too much of it will feature a Japanese startup in an “oh this is cute and interesting” kind of way and either miss or ignore the potentially transformative ideas that underly the basic concept.    There are some truly amazing things going in Japan in AI and robotics, and machine learning, and minimal UI design that are either radically different from what is happening anywhere else in the world or years ahead of it. And oh yes, you will be hearing more about the Evocative Machines project since I will now have the time and resources to breathe new life into it. You know, in the very first episode of Disrupting Japan I talked about the fact that Japan is innovative and that, once change begins to happen, no country can change as quickly and as completely as Japan.  Well, here was are over five years and over 150 episodes later, and the rest of the world is now starting to see that this is indeed the case.  Ten years from now, Japan is going to be seen as every bit as innovative as she was in the 1950s and 1960s. But it’s not going to look like Silicon Vally. The end result is going to be something very, very different. It’s going to be a new model of innovation.  And so yeah, I admit there are all kinds of things we haven’t figured out yet. And I’m not exactly sure what the end result will look like.  But that’s OK. I’m looking forward to working with Google and working with you to figure it all out. But most of all thanks for listening, and thank you for letting people interested in Japanese startups know about the show. I’m Tim Romero, and thanks for listening to Disrupting Japan.

Technology is global, but ideas are local. The same IoT technology is being deployed all over the world, but a small Japanese startup might be who helps us make sense of it all. There is amazing work being done in user experience design, but most designers are operating with the contract of keeping users engaged. This is a fundamental shift from the traditional user-centered and functional design approaches. Today we sit down with Kaz Oki, founder of Mui Lab, and we talk about user design can actually improve our lives and help us disengage. We also talk about the challenges of getting VCs to invest in hardware startups, why Kyoto might be Japan's next innovation hub, and what it takes for a startup to successfully spin out of a Japanese company It's a great discussion, and I think you will really enjoy it. Show Notes How Japanese design philosophy informs user interface design How UI design got so bad Who are the early technology adopters in Japan Why VCs hesitate to invest in hardware companies How to pitch corporate management to let you spin out a startup Why you should run a Kickstarter even when you have corporate backing Why a major manufacturer decided to outsource innovative manufacturing The secret to making corporate spinouts work in Japan How to convince Japanese employees to join a spinout How to get middle-management on-board with corporate spinouts What changed in Kyoto to make it one of Japan’s best startup hubs Links from the Founder Everything you ever wanted to know about Mui Lab Check out the Mui Kickstarter Keep up-to-date on the Mui Blog Check them out on Facebook Follow Kaz on Twitter @mui_labo Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for joining me. If you're a fan of Disrupting Japan, you know that I have a strong dislike for attempts to make Japan sound too exotic and this goes in both directions. On one side, we have consultants who claim that Japanese business practices are so unique, arcane, and confusing that the only way westerners can possibly understand them is by paying large sums of money to consultants such as themselves. And on the other side, of course, we have people insisting that foreigners can't really understand Japanese anime without a thorough and nuanced knowledge of Japanese language and history. It's all utter nonsense. I mean, there are differences, of course, and those differences should be acknowledged and respected, but whether an idea is coming from Japan or America, or Germany, one true measure of the value of that idea is its universality. The most important achievements might emerge out of cultural biases or sensitivities but they address something universally true, something deeply human. Today, we sit down with Kaz Oki of Mui Lab and we're going to talk about Mui's radical rethinking of how we should interact with computers and the different contexts for that interaction. The Mui itself is a tactile and visual user interface that literally fades into the furniture when you're not using it. Now, this interface is clearly informed by Japanese aesthetics. In fact, some of the deeper issues Kaz and I talked about kept bubbling up in my mind in the week following the interview, and Kaz and I are going to do a follow-up later over a couple of beers in Kyoto, but there's nothing about the Mui design that looks particularly Japanese. It's tapping into a deeper and more human design sense, and that's far more interesting. Oh, and Mui Lab also represents a very rare kind of startup, a creature far, far more rare than unicorns. Mui Lab is an innovative and successful Japanese corporate spin-out. We talk about how Kaz made that work, his valiant battles against multiple layers of middle management, and how he managed to recruit top startup talent into that company, but you know, Kaz tells that story much better than I can, so let's get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Interview Tim: So, I'm sitting here with Kaz Oki, the co-founder of Mui Lab, so thanks for sitting down with us. Kaz: Yeah, thank you for having us. Tim: It's great to finally have you on the show. So, Mui is a woodgrained control panel for the home but yeah, I think you can probably describe it better than I can. Kaz: Yeah, Mui is originally, the concept is coming from like, Chinese philosophy. Mui Shizen is original concept, so Mui Shizen is talking about lifestyle without intention, leading naturally. So, that concept for the coming IoT world, so IoT world at the next year, 20 billion devices will be connected to each other and it's more than the people or humans, so it's like a tremendous, like the technology is coming very soon, but we don't know what's going on yet. Tim: But you guys made really different choices than like, the rest of the world and I love people who are making different choices, so everything else is focusing on additional interfaces, additional functionality, additional features, but you guys really went the opposite way -- you tried to scale things back. Kaz: Yeah, we make the technology like a zen garden, so zen garden is like, expression of the world but the element is only stone, sound and like, plants. Tim: Yeah, and very much focused on touch. Kaz: Right, right, right, yeah. Tim: Whereas one of the things I felt was interesting with both Amazon Alexa and Google Home are really focusing on voice commands, but you guys very intentionally stayed away from voice, so what was your thinking in that decision? Kaz: So, there's a couple of reasons. One is synergy. We are a spin-out from a company called Nissha. Nissha is the largest touch panel company, and we also focused on visual aesthetics and the touch panel combination, so from that point of view, we focus on touch panel -- Tim: On the touch? Kaz: Display system, and at that point of view, we focus on what’s the essential value for the people or human, and then these just two measures of  value from like, a user's perspective, so that's visual and tactile feeling. Tim: Right. Kaz: So, that really matched to our technology. Tim: And I noticed, you've gotten -- I mean, this aesthetic, this design sense has gotten you a lot of attention and award overseas as well. You won like, the most innovative at CES this year and a Best of Kickstarter award. Do you think it's just because what you're doing is so different from everyone else or do you think there's like, something fundamental that we just want to interact with something simple? Kaz: I think we probably visualized the hidden problem, which we describe as like the relationship between technology and the people. In other words, user experience. Sometimes, we get smart speaker or smartphone coming up but it's always a technology-centered design, but our approach is human-centered technology design. Tim: Yeah, and I guess you're right. So much of design now is driven by the technology in that we have touch-sensitive displays, what can we do with this? We have smart speakers, what can we do with this? And as a result, it's just, it's a lot of innovation, it's a lot of creativity, but it's people just adding more and more and more, and more. Kaz: Right, right, it's like, more features. Tim: And you guys are actually trying to take things away. Kaz: Trying to remove from in front of us, but backend technology is actually the same. We use cloud or like the latest computing, but to deliver that technology to touch-based or certain like, a human relationship, we changed that delivery system. Tim: Okay, so tell me about your customers. Who's the target audience for Mui, is it homeowners or gadget geeks, or interior designers? Kaz: So, actually, we started targeting interior designers or architects, so that's our original concept, and in extension to that, we made a Kickstarter for the smart home or those like, those early adopter users, but in the meantime, we've been piling up our technology platform. It's a very niche platform, but we have patent and we have like, UX system, we have like a cloud structure, so we make that a very small platform, and now licensing to other companies. Tim: But most of the current interest, is it coming from Japan or from the international market? Kaz: International market, yeah. Tim: Why do you suppose that is? Because this has such a strong Japanese design sense to it. Kaz: I think that wood material, it's like common sense for everybody, so from that, like a traditional or authentic behavior point of view, sometimes, people love our technology. Tim: Well, I think so. I mean, wood, we humans have been working with wood for the last 15,000 years. It's pretty fundamental, but do you think it's just the foreign companies have been more willing to try new things than the Japanese companies? Kaz: I think Japanese are most of the time, we follow the concept from overseas, especially like, technology, but those leading countries like the US, it's technology-driven but also, there is a certain amount of people focusing on the issue of technology. Tim: Yeah. So many Japanese startup founders have told me that they first got interest overseas and when the Japanese companies saw the overseas interest, then they became interested. Kaz: Yeah, it's exactly that! Tim: The same thing happened? Kaz: Yeah, yeah, yeah. Tim: That's got to be a little frustrating though. Kaz: Right, right, right, yeah, Japan is not a trendsetter, yeah. It's actually more like a follower. Tim: At least, the large companies. I think there's a lot of really amazing things going on in startups and tiny companies. Actually,

Technology develops differently in Japan. While US tech giants have been grabbing artificial intelligence headlines, a business AI sector has been quietly maturing in Japan, and it is now making inroads into America. Today we sit down again with Miku Hirano, CEO of Cinnamon, and we talk about how exactly this happened. Interestingly, Cinnamon did not start out as an AI company. In fact, when Miku first came on the show, the company had just launched an innovative video-sharing service. Today, we talk about what lead to the pivot to AI and why even a great idea and a great team is no guarantee of success. We also talk about some of the changing attitudes towards startups and women in Japan, the kinds of business practices AI will never change, and Miku give some practical advice for startups going into foreign markets. It's a great discussion, and I think you will really enjoy it. Show Notes How Miku invented TikTok before TickTok and why it didn’t work How you know when  its time to pivot a startup Why companies will never go digital and will always use paper Who will benefit most from AI The four categories of AI How AI will change the legal profession How japan is actually ahead of US and China in some kinds of AI What's really driving business innovation in Japan Can AI actually reduce overtime? How enterprise clients treat women founders Links from the Founder Everything you ever wanted to know about Cinnamon Follow Miku on Twitter @mikuhirano Friend her on Facebook More about Cinnamon Miku's original Disrupting Japan interview Eliminating Repetitive Office Work through Disruptive AI Miku on the John Batchelor Show - Part I Miku on the John Batchelor Show - Part II Leave a comment Transcript  Welcome to Disrupting Japan, straight talk from Japan's most successful entrepreneurs. I'm Tim Romero and thanks for joining me. Today, we're going to sit down and talk about artificial intelligence with Miku Hirano of Cinnamon. Now, Cinnamon is actually a great example of a successful Japanese startup pivot. When we first sat down with Miku four years ago, she had an innovative micro-video sharing company called Tuya and really, you should go back and listen to that episode. I've put a link on the show notes and it was really a good one. Anyway, Miku basically started TikTok a few years before TikTok and we talk about why things didn't work out, why even with the same idea, one startup will become a multi-billion dollar brand and the other will pivot. Of course, the pivot to AI and the rebranding to Cinnamon has led this to their current success in using AI to read and to understand common business forms. In fact, for reasons that Miku will explain during the interview, Japan is actually ahead of the US and China in the area of business AI. We'll also talk about how attitudes towards women are changing here and how Japanese men at traditional companies treat women founders, particularly women founders with children, and I think it might surprise you. I mean, it surprised me and it surprised Miku as well, But you know, Miku tells that story much better than I can, so let's get right to the interview. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] Interview Tim: So, I'm sitting here with Miku Hirano of Cinnamon and it's great to have you back on the show again. Miku: Yeah, thank you so much for having me here again. Tim: Well, so much has changed since -- it was three years ago, right? Miku: Yeah, yeah, and I had a totally different business at the time. Tim: Well, not only a totally different business but you've gotten married and you've had two kids. Miku: Yeah, yeah, and at the time, I think I was living in Taiwan and now, my business is in Tokyo, so everything has changed. Tim: And so, we're not even going to cove what we talked about last time even though in the intro, I've told my listeners to go back and listen to the old show, I know some of them won't do it. Miku: So, please listen to the last audio show. Tim: Okay, so guys, listen to Miku. It was a great show. But let's just pick up where we left off because it's been a busy three years. Last time we talked, you were working on Tuya which was this great seven-second video sharing startup. So, what happened? Miku: Tuya was a video sharing app but unfortunately, that business didn't go well, so we couldn't get enough users to raise a fund, so I called the Taiwan office at the time and... Tim: Let's get back to it because I mean, the mechanics of what happened are important, but I think what's more interesting is the idea, the seven-second videos, it was a great idea. It was basically TikTok a couple of years before TikTok, and this is something that happens so often, so for example, like Uber and Lyft were not the first companies to try that business model. AirBnb certainly wasn't the first company to try that business model. There is so much more involved than just having a great idea and a great team, and we'll get to how you're executing now, so we know it's a good team. Miku: Thank you. Tim: But why do you think that Tuya didn't take off where TikTok became a worldwide craze? Miku: I see, so we lost some users and some of the users used Tuya, our app, every day. They took a video, it's just a seven-second video maybe seven times or eight times a day, so there are some active users, but I think Tuya doesn't have a power that our users want to tell to other friends. So, for example, TikTok, sometimes, you find some very interesting hilarious videos, right? And sometimes, you show it to your friends, but on my app, we didn't have that part. Tim: So, was the key innovation, the key driver at TikTok, you think, was that integrated sharing mechanism? Miku: Yes, yeah, to other friends. Tim: Alright, and what was the trigger? What made you decide to say, "Okay, we're shutting down Tuya and we're moving to AI"? Miku: So, that pivot didn't go that quickly. It was very ugly, to be honest. Tim: It usually is. So, what were the steps? How did it roll out? Miku: Okay, so our company was almost going bankrupt, so we found that our company will have no cash in two or three months, so we needed to change our business. Tim: And you were a pretty big company at that point, right? How many employees did you have? Miku: We did have around 20, but I need to restructure maybe one-third of the company, and then I need to come back to Tokyo to survive some of the members, I need to earn money, so I came back to Tokyo. So, in that point, I had two options. One is to raise enough fund and the other is to get cash, I mean, from sales, but for the first option, I guess, I thought it wouldn't go well. We just had a failed business, so both me and Hajime, my co-founder Hajime are serial entrepreneurs but we couldn't make the second business wait. Tim: Yeah, I think especially in a business model like yours, raising funds at that point would be extremely difficult because the investors would say, "Well, look, you tried it, it didn't work, try something else." Did you try to raise funds or did you just --? Miku: Actually, I didn't try. Tim: Just figured that this is time to... Miku: Yeah, just finding, I mean, just doing sales would be better. Tim: What kind of sales did you do? Miku: Just system development. So, at that first point, we didn't think about AI at all. Tim: So, just we'll develop apps, we'll do javascript programming app development business? Miku: Yeah, with somebody else to get money. I think most of entrepreneurs having engineering background have this kind of idea, that if our business doesn't go well, we can do systems development business and then we can survive, so we have that kind of fault, but actually, it didn't go well. Tim: It did not? Miku: No, no. Tim: What happened? Miku: It was really difficult. Yeah, so I did not have any sales experience and also, another reason, most companies have experience, have system development company that they have already used, right? So... Tim: Right, so they need a reason to start looking for a new vendor. Miku: Yeah, yeah, so yeah, I improved the sales material that there was a page, things that we can make, and actually, one of them was AI. The reaction of the potential clients got changed. Tim: You found something that their current vendors couldn't do. Miku: Yeah, and at that point, we totally forgot that both me and Hajime didn't research about AI when we were students. We totally forgot about it. Tim: You did your Masters in AI, didn't you? Miku: Yeah, yeah, and even my co-founder had phD in AI deep learning, but we totally forgot about it. Tim: Just too much stress of trying to keep the company going? Miku: Yeah, and then to increase what we can do, I just wrote AI, then their reaction changed, so I thought it might be a chance. Tim: So, you started getting contracts, and then you just started re-tooling the company around AI? Miku: I started to get contracts from a couple of companies, so that is how we could survive. Tim: And I guess from that interest, eventually developed the Flax Scanner product. Miku: Exactly, so the idea of Flax Scanner which is our flagship product came from one of our projects. So, one of the projects was extracting the information from resume. Tim: And so, who's using it now? What kind of companies? Miku: Yeah, so now, more than 50 companies use Flax Scanner, mostly insurance companies and banks, and manufacturers, including Toyota, Daiichi Insurance, Nihon Insurance, so that kind of top tier Japanese huge enterprise. Tim: And what kind of documents are they using this on? Miku: For example, in an insurance company, the receive tons of documents, so for example,

Ari Horie has always had a different approach to supporting women entrepreneurs. She doesn't talk about "empowering" women and ...

Japanese enterprises are their own worst enemy when it comes to innovation. In this live panel discussion, I talk about my experience driving innovation at TEPCO, and Ion and Jensen share their experiences running innovation labs. This panel was part of the btrax Design for Innovation event in Tokyo last week. We talk about the specific challenges that Japanese companies are facing and the strategies we've used -- with varying degrees of success --  to help overcome them. Of course, like everyone else, I always remember the most important thing to say ten minutes too late, so I've added those thoughts to the outro at the end of the podcast. It's a great conversation with four people who really care about innovation in Japan, and I think you'll enjoy it. Links from the Panel Brandon Hill (moderator) Connect on LinkedIn Follow on Twitter @BrandonKHill the btrax homepage Tim Romero (me) You've already found me here, but we can connect on LinkedIn if you like. Or follow me on Twitter @timoth3y, but my Twitter game is pretty bad Jensen Barnes Connect on LinkedIn Ion Nedelcu  @frogdesign.com Check out Frog Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. I’ve got another live show for you today. I’ve gotten some great feedback on the past couple I’ve put out, so while I finish up the big solo show I’m working on about how to raise money in Japan, I thought I would bring you another live show today. But this one is a bit different. Last week, at the BTrax Design for Innovation conference, I was part of a panel where we talked about the challenges a lot of large companies face in driving innovation internally. I talk about some of the specifics from my work at TEPCO and my fellow panelists share their experience running innovation labs for Japanese enterprises. And, I’m sure you will not be surprised to learn that Japanese companies are pretty bad at innovating this way.  At least so far. Most have good intentions, of course, but almost all of them are making the same core mistakes in their innovation programs. We go over a few of the big ones in our conversation, and in my comments at the end of the show, I’ll give you my closing thoughts on the problem with what I call the "innovation market." But for now, lets get right to the discussion. Interview Brandon:          So let's see the topic innovation labs. So sounds really Silicon Valley, isn't it? So I like to start by getting a poll from the audience about Silicon Valley. So how many of you guys have visited Silicon Valley in the past, but few, one third maybe? I live in San Francisco and I see many Japanese companies visit Silicon Valley looking forward to some ideas or methods for innovation. And I feel like every single week there's one company visiting from Japan trying to find some ideas. However, I feel like result-wise and output wise, I haven't seen a clear results least. So I like to open up discussion here to ask your opinions about while we did some of the challenges that Japanese companies are facing when it comes to creating innovation, even though they do come to the second Valley very often. What's, what's wrong with it? What's, what, what do they need to do? Anybody JV, go ahead. Jensen:            Well hi, I'm Jensen Barns. I'm from California, lived in Japan for six years. Basically opened up, well co founded the innovation lab here in Japan. Been active in many institutions and I kind of brand myself as doing new things, always doing new. So I think the, the issue I see in this in California is Japanese key Japanese companies coming, but then not really setting with Tim has, both Ian and I have, we've talked about is like setting objectives, setting the right objectives and coming for the right reasons. As a, as someone who opened up a lab here too, it's, it's sort of a trophy to have a innovation system or innovation process within the company. And I think there's a lot of mid sized companies that could really, you know, use great, great innovation lab to prop up the brand of the institution and, and the employees without hiring, you know, expert maybe Toyota some, you know, today we heard about Yamaha Toyota, you know, I mean Honda rather. And you know, without hiring, you know, expert researchers or engineers transforming their own people more into innovation experts. Brandon:          So how about the from the viewpoint of expert TEPCO Ventures yourself then? Tim:                 I guess should I should introduce myself a bit? I, I'm my name is Tim Romero. I'm CTO of TEPCO ventures where we work with both Japanese startups and foreign energy startups to develop new business models and energy here in Japan. Before I joined TEPCO, I've started four startups here in Japan over the last 25 years. Sold to bankrupted too. So 50/50. That's not bad as far as startups go. Yeah. I also work with some other large Japanese companies on their startup outreach and innovation programs. But I'm probably best known for a podcast I run called Disrupting Japan, where we sit down and we talk with Japanese startup founders about not so much their specific company, but what it's like to sell to big enterprises as a tiny startup. How they managed to convince their wife to let them leave Mitsui and start this crazy, you know, side project. Just what it's like to be an innovator in a country like Japan that prizes conformity. To answer the question, I think the single biggest mistake that large Japanese enterprises make when creating an innovation program, it's a lack of a specific goal. So innovation is not a goal. It is a means to an end. So when a company says they want innovation, they're, they're still a little bit confused. So do you want to create new business models within your existing industry? Do you want to create new products that can be sold to consumers? Do you want to streamline existing businesses taking technology and best practices from other companies? So all of those are reasonable and achievable goals. But the single biggest mistake I see most companies make is saying, well, go outside and find some of this innovation and bring it back and that that doesn't work. Cause innovation is a, it's a process. It's not the goal. Brandon:          So speaking of with the goals how to major innovations maybe on can start introduce yourself and you can add some of the ideas or? Ion:                  Happy to. Hello. Good afternoon. My name is Ion. I'm general manager for Frog. Frog is a global design and strategy consultancy. We've just celebrated our 50th anniversary and are in our third year a partnership together with Dentsu to help Japanese companies grow basically and stay relevant in the future by designing experiences that people love. Thank you. I, I agree with what everybody else has said. Innovation is, is complex and is not anything magical. It requires a lot of planning. Before answering the question, how to measure innovation. If you don't have objectives, you don't have an innovation strategy. If you don't have an a plan to actually see how whatever comes out of your innovation activities will be embedded into the organization, you are going to fail or you're going to shut it down, which is not obviously the purpose of making investments. Innovation should never be measured by return on investment in day one, year one. It should always be a long term thing. If you look at the horizon that McKinsey basically works around horizon one, two and three. Horizon one is the known horizon two is the partially known and horizon three is the unknown. What's innovation can influence all the three horizons. The one you should be focusing on is the third one, the one that is furthest away. So it's five years plus. Anything else that you expect from innovation coming to the business sooner is going to be a failure. Brandon:          So where do you think of like the, the last session I had a Nick with Honda says their measurement is number wows or devolving over that I'm not going to, to have that the wows that they get from the audience. Is that a good measurement for innovative at least Jensen:             Well, like I think Tim and Ion, you know, the system that you have within the company and how you measure it. I think it's just very important. If the company uses OKRs, which I, you know, measuring what matters. I don't know if you know this, this book Measuring Which Matters Most, it's one of the, you know, prime books of how to structure objectives within your company. And I'm sure they do, many companies do, but somehow I think innovation teams are just exempt. A lot of teams just simply don't do them because of this worry of, of watching them. And I differ a little bit from the KPI. I think all innovation teams should have KPIs and I think there should be carefully watched. I don't think it should just be this kind of, you know, open-ended thing that we don't watch. I mean, it's like this, it's like a seed. I mean, it's like you wouldn't just plant the seeds and run away and not, you know, and just like, Oh, just grow somehow. I think this is like really important that you, you, you care your Nutri nurture this thing. But you like all controlling things, you can't just obsess and control it and stifle it by shutting it down for example. I think, I think that's what you're getting to. Maybe it's just like, you know Brandon:          So  at TEPCO Ventures. Do you guys have any KPIs or goals set? Tim:                 We do, and again, it depends on the team. So we have a CVC team and we've got several different project teams. And I think the, I mean, KPIs are essential and it's important to set them in line with whatever your goals are. So if the goal is new business creation,

This year at CEATEC, I worked with Plug & Play Japan to bring on stage founders from two very different hardware startups. We talk in-depth about what it takes to be a hardware startup in a world where venture capital seems fixated on SaaS companies and software platforms.  Although their startups seem very different, Tomo Hagiwara and Keith Tan had very similar core experiences. Tomo and Keith share some great advice about raising money as a hardware startup, how to give large companies confidence that your product will meet their quality standards, and some pretty surprising answers to questions about the best way to go global. It's a great conversation, and I think you'll enjoy it. Links Everything you ever wanted to know about Crown Digital Learn about Aquabit Spirals Follow Tomo on twitter @hagi_w Friend him on Facebook Leave a comment

The promise of AI is easily understood by anyone with an imagination, and for 40 years, venture capitalists have been enthusiastically investing in that promise. However, it's been significantly harder for founders to turn that investment into sustainable business models.  Today we are going to look at why that is, and go over what might be a blueprint for startups to create business models around artificial intelligence. Tatsuo Nakamura founded Valuenex in 2006 with the goal of using artificial intelligence to supplement the work being done by patent attorneys, and their software was instrumental in the resolution of one of Japan's most famous, and most valuable, lawsuits.  the Blue LED patent case. We also talk about how to sell to large companies as a small startup, the challenges in trying to make product strategy based on technology, why staying private longer is not always a good thing for startups, and how Valuenex technology accidentally discovered a secret collaboration between Honda and Google. It's a great discussion with the founder of one of Japan's most successful AI companies, and I think you will really enjoy it. Show Notes Why AI can understand patents better than lawyers can Why the market should drive technology rather than the other way around How Valuenex helped resolve one of the biggest patent lawsuits in Japanese history How a new law if forcing change in Japanese universities How Valuenex discovered a secret collaboration between Honda and Google How to create sustainable business models in AI Why quantum computing will both break AI and save AI Why Valuenex IPOed early instead of staying private and growing Some unusual advice about when to do a market entry Why Japanese VC often make market entry difficult Links from the Founder Everything you wanted to know about Valuenex Connect with Tatsuo on LinkedIn Friend hin on Facebook Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today, we're going to be talking about something that's frankly difficult to talk about on an audio podcast. Tatsuo Nakamura founded Valuenex in 2006 to use Artificial Intelligence and modern visualization techniques to help clients make sense of their patent portfolios and to keep an eye on what the competition is doing. In fact, this technology uncovered some of the core evidence that decided the famous blue LED case. It's highly effective but highly visual, so let me try to explain it. Valuenex creates a kind of topographical map that shows companies where in the market, their IP is strong and where it's weak. This can let them spot new market opportunities or learn what their competition is about to do. It's all pretty intuitive when you see it, but today, we'll have to use our imagination as a kind of screen simulation. Tatsuo and I also talk about Valuenex's US market entry - well, their two US market entries, actually. We cover what he sees as the best overall strategy for AI startups for them to find their product market fit, and Tatuo explains how he was accidentally able to discover a significant collaboration between two world-famous companies six months before the project was announced. But you know, Tatsuo tells that story much better than I can, so let's get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Interview Tim: I'm sitting here with Tatsuo Nakamura, the CEO and founder of Valuenex. So, thanks for sitting down with me. Tatsuo Nakamura: Thank you very much. Tim: Now, Valuenex is a leader in visualization and big data analytics and it's so hard to talk about visualizations on an audio podcast. Tatsuo: Yes. Tim: But we're going to try. So, what's the best way to explain? What does Valuenex do? Tatsuo: Valuenex is a predictive analytics company using big data analytics. So, the main purpose is finding the future situation and making the strategy for our client. Tim: Okay, and you specialize in intellectual property and patents, right? Tatsuo: Because patent documentation is very, very good and useful for data source, because there's many fields in the data and they have a very clean documentation, so it is easy to analyze. Tim: Patents, especially, are interesting. I've heard from a few people in AI that right now, AI can read patents better than humans can because the language is so specialized and unusual that's it's really well-suited to AI. Tatsuo: Yes, so at first, when the people entered the IP field, "Oh, this is confusing because this is not language." It's a special words. However, when you apply machine learning technologies, it is easy to understand it because it is a very clear some kind of mechanism for the sentence. So, it is easy to transfer to the machine languages. Tim: Okay, so once the algorithm goes through hundreds of thousands of patents and uses machine learning and AI to understand the contents, it builds kind of clusters of meaning around it, right? Tatsuo: Mm-hmm. Can you imagine? It was a 400 documents are there so how many relationships each side? Tim: Well, it is geometric, right? So, it will quickly get into the tens of millions of... Tatsuo: Yes, it is huge relationships. Tim: Right, so a human being cannot possibly understand that from text information. Tatsuo: Yes, we use a very special person to try reading each by each, so probably, it takes over 10 years. Tim: Have a bunch of patent attorneys, put them in a room. Tatsuo: Yeah, but either he or she is in the Japanese major company, IP chains with over 50 people working for the reading for the analytics. After five years, good. So, that, of course, this is the old style. Now, the people are using the analytics tools. Tim: And so, Valuenex creates the visualization. The output is sort of like an IP heat map, so the users can see where the IP is clustered. Tatsuo: Basically, it's three layers. When we think about the next products or next markets based on the technologies, at first, we describe the technology mapping, technology landscaping, and finding the significant technology and connect it to the product, either the competitive product or service, so if there's no products or services, or this is a good opportunity. Tim: Okay, so you could use the visualization to say, "Okay, we've got a hot cluster of technology in this space, but it looks open in terms of products in the market"? Tatsuo: Well, most of the cases are market-driven analytics, so the people who want it have a lighter device, then they try to change the materials, but along this side, everybody is trying to make a new idea, so they want to know where is the market? Tim: Oh, wow, yes! So, I guess it can go in both directions. So, tell me a bit about your customers. How are your customers mainly using this? Tatsuo: At first, we started, our service is R and Design, so my original company is R&D division and IP division, they have many projects, many ideas, so I guess 99% idea in technology was not released. However, I think that there's more opportunities and more good services, then they have to use the panoramic view analytics describing, oh, this idea, this technology is very similar and they can be combined. Tim: So, is that the most common use case where your customer is using it bottom-up? Tatsuo: Ideally, it is a very good way. However, any company has divisions and they make a wall, secret walls, so they can’t reach into other fields. Tim: I could see that, yeah, the technology, it seems ideal for just looking and saying, "Hey, you have an opportunity," but the different divisions in the company force them to have more of a product focus. Tatsuo: So, if someone thinks about, "Oh, this technology is very good for the battery technologies," however, they are just materials, so they have to collaborate with electric filed persons. They can't work that. Tim: So, for example, let's say I was the division chief at a big database company and responsible for the automotive industry, could I say, "Let's look at all of our patents and see what might be suitable for the automotive industry, what blank spaces there are that we could exploit?" Would that be a good use of Valuenex? Tatsuo: Yes, although a concrete case is a chemical company, Asahi Kasei. At first, they rejected us because they had an analytics genius, but when they used our methodologies, this is good work for the Asahi Kasei president - company president - because the big company's president has some kind of image for each division's relationships. So, our or radar chart is almost the same with the president's idea. So, we can easily point out, oh, this division should be the collaboration or both divisions have white space, so collaborate on the bridge technologies. Tim: This is really interesting. It sounds like you took the customer's biggest objection to your product that was bottom-up and we hit all these walls, and you said, "Oh, well, let me explain these walls to you." That's great. Tatsuo: Yes, I established in 2006 this company, so always, the starting point is a negative start. Tim: Well, actually, I want to drill down deep into the marketing and to the technology in a minute, but before that, let's step back a bit and talk about you, and when you founded Valuenex, so at Stanford, you and I were talking and you mentioned the importance of the blue LED case, and can you tell me? I think that's really interesting. Tatsuo: So, this example case is very famous in Japan and this is a very big event for the society and also me. However, some parts are very confidential, but I can say I was the project leader at these court issues, I belonged to the Nichia Chemical Companies. At the time, 2005,

Education is very hard to disrupt. That’s both good and bad. Education is so important to both individuals and society, it should not be changed on a whim, but over time it seems that our institutions of higher education have drifted away from meeting students real needs. Yoshito Hori, founder and CEO of Globis, is making radical changes. He turned a small training school into Japan's first independent and fully accredited business school with an MBA. Less than ten years later, Globis became Japan’s most popular MBA program. We talk about the need for change in education and about the successful, real-world pilot program Globis is running to modernize Japanese higher education. Yoshito also shares insights on how to teach innovative thinking and explains why such a high percentage of Globis MBAs go on to found starts or join them. It's a fascinating discussion and I think you'll really enjoy it. Show Notes Why most Japanese do not want to attend full-time MBA programs How to make an advanced degree both exclusive and inexpensive How to groom MBA students to start startups How Sumitomo missed out on a multi-billion dollar business Why Japanese higher education is so resistant to change This difference between SPOCs and MOOCs, and why it's important How drinking in front of your computer might save higher education Links from the Founder Check out Globis Yoshito's blog on entrepreneurship in Japan Follow Yoshito on Twitter@YoshiHoriGLOBIS Connect with him on LinkedIn Yoshito's article on 100 Actions to revive Japan The G1 Global Conference [shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Disrupting Japan. Straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero, and thanks for joining me. I’ve got another great select show for you today. I really like this particular episode because it highlights that disruptive innovation does not have to be about the technology, If fact, even when disruption seems to be about technology, it’s really not. It’s about changing systems, changing the way people and businesses interact with each other. Of course, that often does involve technology, but when it does, the technology is only the conduit. Nowhere is that more clear than in my conversation with Yoshito Hori, the CEO, and founder of Globis. In fact, I would say that at least so far,  Globis has brought far more genuine change to Japan’s education market than all Japan's edTech startups combined. So please enjoy the episode and I’ve got some important updates to our story for you after the show. ----- You know, education is hard to disrupt. And as long-time fans know very well, that’s both a good thing and a bad thing. It’s good because education is so important and foundational not only to how well a given child will do later in life but also because in the large developed nations, the educational system forms the basis of society itself. It provides us all with a shared set of experiences. So the fact that we don’t change the rules every few years is a good thing. On the other hand, this lack of disruption leads to educational systems that don’t really meet the needs of today’s students and today’s societies for that matter. So clearly, there must be a better way of doing things than what we’re doing now. Well, today, I’d like to introduce you to someone who’s found a better way. Yoshito Hori founded Globis as a small business training school and grew it into Japan’s first independent and fully accredited business school offering MBAs. And then, Globis became Japan’s most popular MBA program. Yoshito’s strategy for innovation is fascinating. Unlike similar schools in the US, Globis does not compete on cost. In fact, the Globis MBA is more expensive than similar degree programs at Todai or Hitotsubashi. No. Globis is doing something unique and something that is making a lot of people rethink how university and post graduate education is done in Japan. But you know, Yoshito tells that story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Interview  Tim: So we’re sitting here today with Yoshi Hori of Globis. Thank you so much for sitting down with me. Yoshi: Thank you very much as well. Tim: Globis has about 7,000 students per year. It’s the most popular MBA in Japan. It always does well in the national business school rankings here. But what seems most unusual, it’s a truly international MBA program. You have students both from Japan and overseas now, right? Yoshi: Yeah. Tim: What sort of ratio? Yoshi: Well, we have English MBA program and Japanese MBA program. Japanese MBA program is a part-time program. English MBA program, we have part-time, full-time, and online. We have roughly about over 100 English MBA program students. We have about 800 Japanese MBA programs. Tim: That’s interesting. So you have more Japanese students but it sounds like there’s a lot more flexibility in the English language courses. Yoshi: That’s right, yeah. Tim: Why is that? Yoshi: Well, our vision is to become number 1 business school in Asia. In order to become number 1 business school, we need to have full-time English MBA program. But in case of Japanese, we don’t need to have full-time in Japanese MBA program because not many people quit jobs to get MBA in Japan. Therefore, in Japanese side, we have Japanese MBA program in five locations with Mito and Shin-Yokohama at Yokohama station for hop campuses and also online.  Most of Japanese students participate and enroll into MBA program as a part-time MBA program. In case of English, we need to have full-time MBA program so that quite a few students come from overseas. There are roughly about more than 50 different nationalities within Globis MBA. More than 90% of Futa MBA program is non-Japanese. So it’s a very truly international MBA program. Tim: Moving forward, do you think there will be more and more international students fueling the growth or more Japanese? Yoshi: We feel that there will be more and more non-Japanese international MBA students coming in. The reason is that we have not been into English MBA programs until 2009. We have been around only for about 8 or 9 years and we just started full-time MBA program in 2012. We have a lot more room to grow. Tim: MBA programs in the US tend to be quite expensive and Globis as about 4 million yen per year. How does that compare with MBA programs at Waseda or Keio? Yoshi: Well, Waseda and Keio are almost about the same. But difficulties in Japan is that we have national universities like Hitotsubashi and Tokyo University which is roughly about one-quarter of tuition compared to Globis and they are highly reputed as well. So therefore, it’s difficult for us to raise our tuition simply because we are dragged down by those national good university in Japan as for tuitions. Tim: Are their tuitions so low just because of the government subsidies towards those universities? Yoshi: Yes. 70% of those revenue for those national universities are tax payers’ money. So it’s highly subsidized, mostly run by the tax payers’ money. Tim: Okay. It does make it difficult to compete. Yoshi: Well, you know, we cannot raise our tuition higher and we have to appeal to our potential students that our quality of education is three times or four times better than those who are run by tax payers’ money. Tim: Before we get too deep into the program and the school and Japan, you’ve got a traditional MBA and you became an entrepreneur. What percentage of your MBA students go on to become entrepreneurs and what percentage would you say take the more traditional career path? Yoshi: I would say roughly about 10% becoming entrepreneur and 20% more are joining entrepreneur companies. And then roughly about 20% will be changing jobs to consulting or other foreign affiliate companies. I think roughly about half remain in their companies. Tim: Are those numbers pretty similar for both the Japanese students and the non-Japanese students? Yoshi: In case of non-Japanese students, it’s difficult to compare because quite a few of them come from overseas to study here in Japan and most of Japanese students are living here in Japan, and therefore it’s difficult to compare. But in case of non-Japanese students who come to Japan, some start their own companies here, some change their jobs, and some go back to their home countries. Tim: So that 30% of Japanese Globis MBAs are either starting a new company or joining a startup company? Yoshi: Yeah. Tim: That’s fantastic. That’s really high. Yoshi: It’s quite high. Tim: Excellent. Well, listen, before we talk more about Globis, let’s take a step back and talk about you. Yoshi: Okay. Tim: So you went to Harvard Business School. This was back in 1992, when you were graduating, and this was before the last internet bubble. What made you decide to start a new company rather than just join a consulting firm or going to a very high-paying job at a Japanese firm? Yoshi: I was sponsored by Sumitomo Corporation to get my MBA. I feel thankful for my sponsor company, Sumitomo that I had never thought about changing my jobs. I was planning to come back and I did come back to Sumitomo but I really wanted to start up mu own companies and I want to become an entrepreneur. So I came up with 30-40 business ideas and I shortlisted it into 2, and I raised 2 business plans within Sumitomo Corporation for the new businesses to be done and executed by Sumitomo Corporation. But those two business plans were rejected by Sumitomo and therefore I had to do either of them by myself and I chose this Globis idea. I raised capital from my friends, small capital only about $8,000 and I started Globis from scratch.

Ad-fraud is one of the most profitable activities for organized crime today. The scammers are sophisticated, disciplined, and numerous, and they might be using your IoT devices to rip people off. Over the past decade, there has been relatively little of this kind of cybercrime in Japan, but that's changing as the ad-fraud crime networks go global. Japan has to catch up and catch up fast. Unfortunately, Japan defenses have been rather poor. Today we sit down and talk with someone who is fixing that.  Satoko Ohtsuki is the founder and CEO of Phybbit, Japan's largest ad-fraud prevention network, and she's going to explain the biggest scam you've probably never heard of. Of course, we talk about the different kinds of ad-fraud and what is being done to combat them, but we also talk about how she was pushed into entrepreneurship, and the challenges of raising money (and raising children) as a female founder in Japan. It's a great discussion with one of the most interesting founders in Japan,  and I think you will really enjoy it. Show Notes The global scale of ad-fraud How to bluff your way into starting a leading software company The main kinds of ad-fraud Google & Facebook's conflict of interest in solving ad fraud How scammers try to get around the fraud countermeasures Who exactly are the ad-fraud scammers and where are they located? How your devices and home electronics are helping the scammers The challenge of raising venture money as a woman in Japan Satoko’s advice for women raising money in Japan Balancing the demands of a growing startup and growing children How Japanese VCs stop Japanese startups from going global How the 2020 Olympics are affecting venture investment in Japan Links from the Founder Everything you wanted to know about Phybbit Phybbit's 2019 Whitepaper on Ad Fraud Check out Satoko's blog Follow Satoko on Twitter @satoko90 Friend her on Facebook Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today we are going to be talking about ad-fraud. Ad-fraud is a multi-billion-dollar problem that a lot of people don’t really want to see get solved. You see, when you run an internet ad campaign or participate in an affiliate network, some of the clicks or installs you pay for are from real people interested in your product or service, but a lot of them are bots that are simply scamming money for the site owners. In fact, a surprising number of ad-clicks are bots. Internet advertising is a $280 billion global business and it's estimated that somewhere between 25% and 50% of it is fraud. Well today, we are going to sit down with someone who is doing something about that. Satoko Ohtsuki founded Phybbit to combat ad fraud, and it has now become the largest ad fraud detection service in Japan. Satoko and I talk about how Phybbit is using artificial intelligence to combat the seemly endless stream of online ad fraudsters, the challenges she faced raising money as a woman founder in Japan, and how you, yes you in particular, might be helping out the ad fraud scammers without even knowing it. But you know, Satoko tells that story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1411"  info_text="Sponsored by"  font_color="grey"  ] Interview Tim: Cheers! Satoko: Cheers! Tim: So, I'm sitting here with Satoko Ohtsuki of Phybbit, so thanks for sitting down with me. Satoko: Thank you too. Thank you for your time. Tim: Phybbit makes Spider AF. Satoko: Yes. Tim: And the AF stands for 'Anti-Fraud'? 'Ad Fraud'? Satoko: Ad Fraud. Tim: Ad Fraud. Satoko: So, let me introduce what is Ad Fraud first. Ad Fraud is exactly as it is written, it’s advertisement fraud. For example, if I was a blogger, I will put some advertisement spot inside of my blog and if you saw my blog and clicked us, I will get some, like 10 Yen or $1, or something like that. If I was a malicious actor, I will try to abuse it to steal the revenue, right? Tim: Right, so Ad Fraud is basically people clicking on online banners and things but not real customers? Satoko: Yeah. Tim: Bots, things like that. Satoko: Exactly, to steal revenue. This is Ad Fraud, and now, our service, Spider AF, Ad Fraud prevention tool. Tim: Okay, and you guys released a white paper recently where you're saying that in Japan, a huge amount of traffic is ad fraud and it was almost like 20%, so does that mean like, in Japan, 20% of advertising clicks are bots and fakes, and scams? Satoko: Of course, 20% is very big, but compared to global market has kind of the same amount of ad fraud or even more. Tim: Okay. Well, we'll get to the details of how the fraud works and the different kind of scams later, but before we do that, tell me about your customers. So, are you selling to ad networks and affiliate networks, or are you selling to people running websites to make sure that they're not getting scammed by their advertisers? Satoko: Our service is especially for ad networks and affiliate networks, yes, and also advertisers. Tim: Okay, so it's both sides, it's the ad networks themselves and the people who buy ads, and what is your monetization model? How much does it cost? Is it like a monthly SaaS service? Satoko: Yeah, monthly SaaS service based on the traffic. Tim: So, like, about how much would it cost? Satoko: For networks, from 200,000 Yen to 700,000 or something. Tim: So, about $1,600 to around $6,000 for a network, per month? Satoko: Yes. For advertisers, it's going to be a little bit cheaper. Tim: And it's quite a range for individual sites, so I guess the idea is they save much more than that by reducing the ad fraud? Satoko: Yeah, exactly. Tim: Okay. Well, listen, before we get into the details of Ad Fraud and the different kinds of scams, let's back up a bit and talk about you. Satoko: Me? Tim: You. So, when you started Phybbit, you were getting your Master's in Atomic Physics at Tokyo Metropolitan University, right? And you actually started Phybbit while you were still in school? Satoko: No, just when we finished university, I graduated in March, and then I started Phybbit in April. Tim: And you started it with a lot of your friends in university, right? Satoko: Yeah. Tim: And a bunch of Physics majors? Satoko: Not everyone is from Atomic Physics. Some people are from space area …some people are from several types of Physics. Tim: And at first, you were just doing like, contract development for other companies? Satoko: Yeah, because at the time, we never work in other companies or we didn't know what is a business card or email, right? Tim: Well, and it's hard to get a job in Physics. I was a Physics major myself. Satoko: Oh! Tim: Yeah, yeah, undergraduate, but Physics is sort of like, it's almost like the Liberal Arts of the Sciences - you know a little bit about everything - Satoko: Yeah, so most of my friends, they are still working in the university. Tim: So, why did you and your fellow Physics majors decide to start a software company instead of doing Physics? Satoko: It's a very funny story. It was 2011. At the time, the Japanese Government decided to start to make not so much budget for not only Physics, Scientists, or Mathematics - everything, so many friends, PhD friends, lost jobs because of that. While we were drinking alcohol and we had just joked and complained, but like, they cut it. Tim: Well, yeah, Japan had always funded a lot of basic research. They funded fundamental research really, really heavily and they've cut back in the last 10 years. Satoko: Yes, that's right. So, we complained about it, but some of our friends who already worked at the time, he said, "Okay, you guys could get money for what you want to do." Of course, we were drunk so we said "Okay, let's do it!" So now, we are here. Tim: So, did you all have basic programming skills from university? Satoko: Unfortunately, …  usually, well, yeah, we have very basic programming skills, but not that much. Tim: So, how did you get your first contract? If you have a bunch of very smart people with some basic like, hacking skills and some really solid Physics knowledge which is useless outside of the laboratory, how did you get your first contract? [pro_ad_display_adzone id="1652"  info_text="Sponsored by"  font_color="grey”  ] Satoko: First contract is we need to make some iPad application for education for kids, I think. Tim: But like the iPad programming environment, that must have been brand new to you guys, so did you just start studying again? Satoko: Yeah, but please remember that 10 years ago, just iPhone came or Android came in Japanese market, so nobody can do anything. Tim: That's true. It was new to everybody. Satoko: Exactly, so that's why. Tim: That is one thing I do think Physics teaches you: it teaches you how to learn continuously. Satoko: Yeah, that's right, exactly. Tim: And so, you're obviously successful that you have more and more contracts, so what made you decide to watch an ad fraud prevention tool? Satoko: By chance. Tim: By chance? Satoko: Honestly, like three years ago, one of my friends, he gave me an advice: "Why don't you use it for ad fraud?" because ad fraud is also Big Data. Many people need such an automation tool. Tim: What was the initial reaction? I mean, did people understand that ad fraud was a problem or did you have to go to the networks and the customers and educate them about ad fraud? Satoko: In this case, everyone knew the problem. Not only that, at that time, we have some contract development with an advertisement company already, so we knew this problem as well. Tim: Okay,

The robotics ecosystem in Japan is amazing. And confusing. It's a collection of crazy ideas, odd creations, and true breakthroughs. And despite the combination of fawning prise and snide skepticism that Japanese robotics evoke in the international press, only time can really separate the true breakthroughs from the dead ends. Today, we sit down with Tez Sawanobori, the founder of Connected Robotics, and we talk about how robots are being adopted in the restaurant industry here in Japan. Connected Robotics already has two lines of consumer-visible robots being used in restaurants in Japan, and the reaction from the owners, the employees, and the customers has been overwhelmingly positive and quite a bit different than similar experiments run in America. We talk about the strong economic and social pressures affecting the adoption of robots in restaurants and discuss the changes he had to make before chefs and robots can really work side by side. It's a great conversation, and I think you will really enjoy it. Show Notes The real reason we need robots chefs The unlikely founding of Connected Robotics Why the restaurant business is so hard to disrupt Looking at the real economics of food prep robots What’s holding back robotics in restaurants Can robotics really solve the labor shortage in Japan? How Japanese employment practices make it harder to use robots but increase the need for them How Japan can catch up to the US and China in robotics research The best way for American and Japanese robotics engineers to work together The future of foreign workers in Japan Links from the Founder Everything you wanted to know about Connected Robotics Watch a video of the OctoChef in action Follow Tez on Twitter @tezsawa Friend him on Facebook Connect on LinkedIn Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for joining me. Today, we’re going to be talking about the OctoChef. “What the hell is the OctoChef?” you might ask, and that would be a good and quite reasonable question. The OctoChef was created by Connected Robotics and it’s a robot that makes Takoyaki, and we’re going to sit down with founder Tez Sawanobori and talk about why it’s important. It’s important to understand that the OctoChef is not just some crazy side project of Tez and the team, although I guess it was the very first time I met them, but no, now, the OctoChef is being used in both small scale, single restaurant installations and industrial scale factory installations. Tez and I talk in detail about how Japanese react to robotics and work with robots very differently than westerners do. We also sit down and eat some pretty good robot-cooked Takoyaki and take a hard look at the question of whether the OctoChef is just a novelty or a fad, or if on the other hand, it’s solving a real problem. The answer turns out to be yes but the reason why is pretty surprising. But you know, Tez tells that story much better than I can, so let’s get right to the interview. [pro_ad_display_adzone id="1404"  info_text="Sponsored by"  font_color="grey" ] Interview Tim: So, I’m sitting here with Tez Sawanobori from Connected Robotics, the maker of the OctoChef, so thanks for sitting down with me. Tez: Yeah, thank you for having me in this great show. Tim: Thank you. What is the OctoChef? Tez: OctoChef cooks Takoyaki. Takoyaki is octopus ball popular in Japanese festivals, you see a lot of Takoyaki stalls. Tim: Yeah, the round little – and they’re awesome, it’s great food. Tez: Yeah, yeah, it’s a popular Japanese fast food, and a robot cooks Takoyaki and it’s from pouring oil to serving to the dish, all the process the robots do. Tim: Okay, so in the process, the humans still have to create the batter? Tez: Yes. Tim: And, I guess deliver the cooked Takoyaki to the customer. Tez: Yeah. Tim: The robot handles everything else? And you actually launched the first commercial use of this in Nagasaki a while ago, so how’s been the reaction of the customers to the robot Takoyaki chef? Tez: Customers look very pleased to eat Takoyaki cooked by robots and this is a special occasion for them, and especially in Nagasaki, there’s a theme park called Huis Ten Bosch, so they enjoy looking at robots working. Tim: Okay. Yeah, I want to talk about like the business model in detail in a few minutes, but before that, let’s back up a bit and talk about you. Tez: Okay. Tim: So, you founded Connected Robotics in 2014 but before that, you started a restaurant right out of college, right? Tez: Yeah, right. I studied Robotics and Computer Science in the University of Tokyo and later, I went to Kyoto University and researched Computer Science, but when I graduated, I wanted to start my own business. Of course, I tried some web services, but I didn’t get satisfied with this kind of IT. Tim: Really? Tez: So, first thing I wanted to do was making a cool restaurant. Tim: It’s a lot of work! What kind of restaurant was it? Tez: Oh, at first, I really liked jazz music so I wanted to make like a jazz club, but at the same time, I want to make some family-friendly restaurant with good music. I really want family and small children to come to our restaurant and enjoy our food and atmosphere. Tim: So, what happened to the restaurant? Tez: Oh, actually, I didn’t have much money, obviously, because .. – Tim: You just graduated, right Tez: Yeah, yeah, I just, yes, started working after grad school, so I planned several restaurants and brought my idea to many presidents of restaurant chains, and one of them was very interested in me and the plan, so I joined this company and set up several restaurants, including Italian, American, Japanese food restaurants. Tim: Oh, wow. Tez: Yeah. Tim: Why did you decide to leave the restaurant business? Tez: Until then, I had several experience in restaurants, like during summertime, I worked in izakaya and my grandparents owned their restaurant, and I thought I know a lot of restaurants, but actually, I worked in the restaurant and found that, well, all the work are very hard, very long. Tim: It’s hard, hard work. Tez: Yeah, yeah, so I found myself working like, 100 hours per week. Tim: Oh, wow. Tez: And exhausted. So, I wanted to come back to technology side. I belonged to a robotics club in the University of Tokyo and won a competition called RobotCon for the first time for the university. Tim: How many years were you working with the restaurants? Tez: Oh, just one year. Tim: Oh, just one year? Tez: Exactly one year, yes. Tim: Okay, and so during that time, you’re still active and interested in robotics? [pro_ad_display_adzone id="1653"  info_text="Sponsored by"  font_color="grey”  ] Tez: Oh, yeah, yes. Yes, for sure. Tim: So, did the idea for food robots come to you while you were working at the restaurant and that’s why you quit or you just had to get out of the restaurant? Tez: Oh, yes, yes. Many people, while I was working in the restaurants, recommended me to start this kind of business, robot restaurant, but at that time, I thought it was too difficult to deploy robots in restaurants because all the operations are so complicated. It’s really difficult. Tim: Yeah, yeah, cooking is an incredibly complicated process and kitchens are tiny. Tez: Yeah, usually, tasks are not so organized and oh, yeah, so I couldn’t find any good work for robots. Just, I felt overwhelmed. Tim: But you gave it a try anyway. Tez: Yeah, yeah, yeah. Tim: Actually, I saw you guys at Maker Faire a couple years ago. Tez: Oh, yeah, yeah, yeah, yeah. Tim: And it was the same – I mean, it has gotten a lot better since then, but it was the same Takoyaki-making machine. Tez: Yeah, yeah, yeah. At that time, we showed our first prototype. Tim: Maker Faire is actually, it’s a really fun place to go. There’s so much creativity in robotics and automation in Japan right now. Tez: Yeah, yeah, that’s true. Yeah, everybody is trying and challenging something new. Some of them look very strange, but – Tim: Yeah, there’s a lot of strange crazy stuff, but to be fair, when I first saw you guys there, I was thinking, okay, Takoyaki-making robot, that’s kind of strange, you made a business of it. Tez: Yeah, at first, my ex-colleagues always told me that, “It’s really strange,” and “You shouldn’t do that,” and “It’s crazy!” and something like that. Tim: Yeah, and I’m sure you still hear that occasionally, but let’s talk about the business model. So, what is the revenue model? Are you selling robots or selling services, or selling Takoyaki? Tez: Okay, basically, we don’t make the robot itself. We integrate this robot and make it as a package and sell this to our customers, that is restaurants. Firstly, we sell this package, but from the second time, we will lend this robot and charge monthly. Tim: Okay, and what does the OctoChef cost monthly? Tez: ¥250,000 per month. Tim: Okay, so $2000 a month? Tez: Yeah, roughly. Tim: Okay, I know the OctoChef makes Takoyaki, but does it do the work of like, a full-time staff? $2000 a month is not much compared to what you have to pay employees and things to do same work, but how much work does it actually do? Tez: Actually, Takoyaki requires high skill, and Takoyaki restaurants usually train the employee, and it costs a lot. It takes time and costs a lot. With the robots, they can save this training and hiring process. Tim: For the restaurants that are buying this, is the motivation saving money or is the motivation the novelty, the kind of the cool factor of people watching the robot make Takoyaki? Tez: Yeah, of course, at first, their first purpose is to get novelty and show this robot,