The on-and-off affair between Silicon Valley and Japan can be said to now be on its third round. The first round came in the 1980s and early 1990s when the affair centered on the personal computer and hardware. The second round was all about the Internet in the late 1990s and early 2000s with the dotcom bubble. When the bubble burst and the market crashed, many of the Japanese companies that had set up shop in Silicon Valley quickly turned around and sent their employees packing back to Tokyo.
Now, the Japanese are back with a vengeance. Companies such as Panasonic, Dai Nippon Printing, JCB, Mitsubishi Heavy Industries and Dentsu are adorning the walls as partners at startup incubators such as Plug and Play and 500 Startups. Other companies not traditionally associated with the IT industry such as Yamaha, Denso, Mazda and Nissan are establishing beachheads in the Valley. Prime Minister Abe’s 2015 Silicon Valley visit, which was soon followed by Toyota’s announcement of a $1 billion investment in a local artificial intelligence laboratory, showed the current depth of commitment of Japan Inc. to the pursuit of innovation in Silicon Valley. With all of this, many Japanese execs are booking trips to see for themselves what is happening here, a trend bemoaned by the local staff who have to put together their itineraries as “innovation tourism.”
All of these brings up the question: Should the oft-rumored collapse of the current Silicon Valley economic boom happen, will these companies stick around or will the flights back to Tokyo fill up once again?
“Committed to Silicon Valley”
At a Silicon Valley event that introduced local startups to Japanese corporate types, Kenji Kushida, researcher at Stanford University, said in his remarks that “Japanese companies understand open innovation very well and are committed as never before to Silicon Valley.” In a later interview, Kushida mentioned several factors behind his statement. First, the internal R&D activities Japanese companies have traditionally relied upon are now hitting walls and need outside help. Second, the fact that the Japanese government allowed the sale of the electronics giant Sharp to the Taiwanese company Foxconn (a company that in previous times would have been derided by Japanese manufacturers as a mere “assembler”) showed that the government could no longer be counted on to rescue domestic companies. “There is now no guarantee against disruption,” said Kushida.
Kushida’s third reason shows how Silicon Valley has changed. Companies in Silicon Valley are now pursuing technologies and businesses that directly affect the mainstream businesses of many Japanese corporate giants. Recent trends such as fintech (technology applied to financial applications), artificial intelligence, IoT (Internet of Things) and autonomous vehicles are all aimed squarely at the mainstays of the Japanese economy. A particularly apt example is how the success of electric car manufacturer Tesla Motors in the luxury car market is disrupting automobile manufacturers such as Nissan and Toyota. For Japanese corporates, Silicon Valley is no longer just a place for IT-related companies to play in, but a place they have to pay attention to.
Less than One Year to Onboard a Startup
In Silicon Valley, Japanese companies typically have a reputation for demanding huge amounts of information and then taking a long time before coming to any sort of decision. This generally makes them not the most attractive partner for startups obsessed with the need to scale quickly.
However, at the same event, the Japanese construction equipment manufacturer Komatsu gave a presentation which showed that things just might be changing. During a panel discussion at the event, Ryoichi Togashi, general manager at Komatsu’s Technology Innovation and Planning Agency, pinpointed how Komatsu brought services to market using technology from Skycatch, a San Francisco based startup, less than one year after their first meeting. By Japanese corporate standards, this is near light speed.
The timeline for Komatsu's onboarding of Skycatch (credit: Phil Keys)
Skycatch provides a number of products using data captured from commercial drones. Komatsu uses their aerial surveying product to inform 3D models of the current state of a construction site. This model is then compared to a model of how the construction site is supposed to look after excavation is finished. By analyzing the difference between the two, Komatsu is able to send instructions to excavation equipment working on the site to help guide them in their work. While it’s not a fully automated solution, according to Togashi it can help inexperienced equipment operators perform more complicated tasks with their equipment and increase productivity for more experienced operators.
One major factor said to be behind Komatsu’s speed was the interest of Komatsu’s top management and multiple face-to-face meetings throughout the onboarding process. “We were traveling a few times a month,” said Togashi. The fact that top management at a company like Komatsu would show direct interest in this level of engagement with a Silicon Valley startup bodes well for future relations between Japan Inc. and Silicon Valley.
