An interview with Bill Magnuson, CEO and Cofounder at Braze and Masayuki Kikuchi, Representative Director & Country Manager at Braze Japan.
An interview with Bill Magnuson, CEO and Cofounder at Braze and Masayuki Kikuchi, Representative Director & Country Manager at Braze Japan.
It’s my pleasure to introduce Akinori Shibata, CIO of JP Digital, to our global audience. Shibata-san leads the digital transformation of the Japan Post Group, a massive endeavor given the scale and complexity of its operations. Innovating and transforming the Japan Post Group while staying true to its public mission is a commitment of a lifetime.
Shibata-san was a colleague of mine at Oracle Japan in the late 90s. He moved to the Japan Post Group in 2012 after more than 15 years at Oracle. His reason for doing so is a source of inspiration for me.
The interview has been edited for clarity.
Yasu: Could you give us some background on Japan Post Group?
Shibata-san: Japan’s postal service has been in existence since 1871, but when talking about the Japan Post Group today, we’re talking about three companies－Japan Post, which is the postal service, Japan Post Bank and Japan Post Insurance－as well as Japan Post Holdings, a listed company which owns 100 percent of the postal service. Japan Post was privatized and reorganized into its current structure in 2007. The bank and insurance companies are publicly traded entities. The Japan Post Group has approximately 400,000 employees.
The key to understanding the Japan Post Group is that we had been a public service, so we have a strong sense of mission even to this day, but we also need to be accountable to shareholders.
While leveraging digital technology and transforming ourselves into a Post Office of the future, we must also continue to serve as a lifeline for all people throughout Japan, from the elderly to the physically challenged.
Japan Post Group employees play an important role in their communities. This is especially true in rural areas. We have a legal obligation to provide public services, but our employees’ sense of duty is also deeply rooted in our corporate culture and embedded in our DNA.
So the perennial challenge for us is to balance the need to run a business with what cannot and probably should not change.
Yasu: Going from Oracle Japan to the Japan Post Group is a huge leap. What was the transition like?
Shibata-san: The Japan Post Group was a customer of ours at Oracle so I knew the organization and its challenges very well. But I wanted to do more than sell software. Oracle is an amazing company with great products and services. At the end of the day, though, the goal was to drive sales and generate revenue. I wanted to do more. I wanted to play a part in changing Japan for the better. And since the Japan Post Group is in many ways a part of Japan’s social infrastructure, I believed transforming the Japan Post Group would be akin to changing a part of Japan. I thought it was a job worth dedicating my career to. This was my honest feeling.
Yasu: That’s amazing and truly admirable. Thank you. In a previous interview, you mentioned your DX strategy consists of three pillars: merging online and offline, enabling mobile and leveraging data. What role does the cloud play in your overall strategy? The Japan Post Group was early to the cloud…
Shibata-san: If you’re referring to our Salesforce deployment in 2007, yes, you can say we were early to the cloud for a very large organization. We use Salesforce for the front end of our postal services. The cloud enables us to take a trial and error approach, to innovate our customer engagement, workflow and knowledge sharing across more than 24,000 post offices in a flexible way.
But, like many large organizations, the Japan Post Group operates a plethora of systems. We’re totally hybrid. We have our own data center. We use mainframes for our bank and insurance company－though these companies are looking to leverage the cloud more as well as new FinTech solutions.
Overall, I think we’re still too rigid, and there are regulatory issues as well. We need to become more flexible and open. We need to do a better job of integrating new solutions with our legacy systems. We have already begun implementing Zero Trust. I think this is where cloud companies can do a better job of helping us.
Yasu: What challenges do you face in transforming the Japan Post Group?
Shibata-san: Our biggest challenges are changing the mindset of our employees as well as recruiting and training next-generation talent. I’m not saying we abandon the past. There’s a great deal that’s good about it. But we can’t adhere to the established way just because it’s the way we’ve always done things.
Increasingly, we’re executing based on a shared understanding of benefits and possibilities. We’re aligning on the “why” and the “how” and executing to create new value.
That said, the current infrastructure is huge and complex. And there are a myriad of rules and regulations. Just maintaining our network and PCs across our post offices can be incredibly costly and time consuming. By law, we can’t just reduce the number of post offices like a mega-bank might do with their retail branches. So we need to be realistic and we need to focus on areas where we can deliver the greatest impact in terms of customer value.
I should also add that, like many large Japanese companies, we depend too much on vendors. This defeats the purpose of deploying the cloud which, again, allows for a more iterative, DIY approach. We need to take ownership of outcomes. This is one of the reasons why JP Digital exists.
Yasu: Leveraging data is a key pillar of your DX strategy. Where are you on this initiative? Also, your customer base is extremely broad. How do you engage with your customers to better understand and address their needs?
Shibata-san: Yes, we do have access to massive amounts of data through interactions with customers across our three companies. The goal is to leverage this data to better understand our customers and offer more personalized services. Our data strategy is totally customer-driven. We’re in the midst of building a new data lake across our three companies based on this strategy.
As for engaging our customers in our design and development process, we have an internal team that’s focused entirely on a design “with” approach. The Japan Post Group has always had a culture of customer engagement. Again, we’re an integral part of rural communities. But to date our relationships with customers have been informal. We’re now implementing an iterative method that will allow us to involve our customers in the design process. This is a key initiative for us.
This doesn't mean we’re designing all services to be online. The Post Office exists for everyone and we want to make it convenient and attractive for everyone. We need to continue to provide services that are useful to society as a whole, not online or mobile services that are useful for only a certain segment of the population. Providing universal services is the whole point of our design thinking initiative.
Yasu: A question that I often ask CIOs is how they stay abreast of new technologies? What is your approach to learning about new technologies and trends?
Shibata-san: That’s a great question. Take Zero Trust, for example. If we’re going to implement the latest cloud solutions and break down barriers between internal and external processes, we need a Zero Trust model.
So we’re talking to vendors constantly about building a highly secure architecture that is still flexible enough to accommodate differences across our regions, some of which are so remote that they don’t have the bandwidth that we need.
The days of going to seminars and being lectured to are of course over. I believe taking part in user communities and learning from other users is the way to go.
Also, I’m a strong believer in partnering with vendors and building solutions together, not simply outsourcing to them. It’s a form of OJT that allows us to learn about new solutions and ways of doing things while also taking ownership of outcomes. This way we can benefit from the latest solutions while developing our internal talent as well. The Zero Trust model that we’re implementing is a case study for this approach.
Yasu: This ties into my next question about acquiring and developing new talent. How are you developing the talent that you need to pursue DX?
Shibata-san: We’re taking a two-pronged approach. One approach is to partner with the training organization within the Japan Post Group. The focus is less on building technical knowledge, say, educating employees in Python, and more on understanding our customers and how to design and develop with them in a design thinking sort of way.
The other approach, which we’re taking within the JP Digital team, involves hiring specialist freelancers whom our junior members can partner with, solve problems with and learn with in a trial and error fashion. We feel this OJT approach is more productive than working with expensive consultants. Again, it’s about owning outcomes.
Yasu: What is your vision for the Japan Post Group five to ten years into the future? And what advice would you give global cloud companies that want to work with you?
Shibata-san: First of all, I truly appreciate the passion that cloud innovators have, the belief that they have in their products and the innovation they bring to companies. I felt the same way when I was at Oracle. I used to be in their shoes.
Where they can improve is in understanding the needs of large, complex organizations like the Japan Post Group. We’re focused on innovating and trying new approaches, but we still have to address fundamental issues around security and integration with legacy systems. There are many organizations like us, and not just in Japan.
So in addition to promoting their products, cloud vendors need to make an effort to understand their customers and the very real challenges that they face day in and day out. We can’t innovate without getting the basics right.
Our vision is to keep innovating while continuing to serve as a lifeline for local communities throughout Japan.
The cloud can play a key role in enabling the Japan Post Group to realize this vision.
Aruna: As you know, at Japan Cloud, we're in the business of bringing leading SaaS companies to Japan. How much global market knowledge do the startups that you work with have?
We’ve been waiting for the opportunity to interview Byron Deeter for a while.
Byron is a Partner at Bessemer Venture Partners and one of the preeminent investors in, and authorities on, the enterprise cloud industry. We spoke at length about the state of the cloud, the venture capital industry, startups going global and, of course, Japan. I’m sure you’ll find Byron’s views interesting and inspiring.
The interview has been edited for clarity and divided into two parts. Part Two will be posted in a couple weeks.
Disclosure: Byron Deeter is an investor in Japan Cloud.
Aruna: Before we delve into the state of the cloud, I thought it would be helpful if you could give us some background on Bessemer and on yourself, how you got to where you are today, what drives you and what your vision is as a venture capitalist.
Byron: Sure. Bessemer has claimed the longest standing venture practice in North America and potentially the world. We go back to 1911. There are some family offices in Europe that I think have had some claims to being the oldest as well, but we're arguably the longest standing venture capital practice in the world.
And the consistent theme has been hyper growth tech through the years. Today, we have nine offices around the world. We have about $10 billion of active assets under management which in terms of portfolio value is several multiples of that.
We try to be in several of the core tech markets and then service the other tech markets from these launch pads, so we have several offices across the US on the east and west coast, India, China, Israel, Western Europe, and then certainly for markets like Japan, our strategy has been to provide support remotely and through partners.
My connection to Bessemer goes back 22 years when I was a CEO of one of the portfolio companies, an early cloud computing company that I founded, and Bessemer led our Series A. They became our anchor partner so I got to work with them from the other side of the table, so to speak. I had worked in venture a little bit before that, but this was really my entree into entrepreneurship, the cloud and then to Bessemer specifically.
Aruna: And how has the venture capital industry changed over the past 20 years in Silicon Valley?
Byron: I think people would correctly say that the industry over the past few years has seen more transformation than the prior decades combined. The size of rounds, the speed of rounds and scale of outcomes have all dramatically changed, for the good of entrepreneurs and for creativity and business innovation. It's never been an easier or a better time to be a founder. It's never been a better time to scale software businesses.
And the foundational layers, both in terms of technology and services, are more robust than ever. And so you’re seeing just a flood of great businesses and also a wealth of capital to support them.
I would say in terms of the art of venture, or the romanticism of it, what you see less of is collaboration between and among firms early on. It used to be that you'd have two or three top-tier firms that would partner on early-stage deals, share deals with each other and work on the best deals together.
Now, because there's so much capital available, you see less of that. And typically each round will be led by one firm, but there usually is competition to put dollars in and get larger ownership positions. And you see less of the syndication, or sharing of those deals, along the stages.
Aruna: And what inspires you most as a venture capitalist?
Byron: Getting up every day and speaking with optimistic, awesome people who are trying to change the world. I just love the nature of this job, working with innovators and people who have big ambitions and crazy ideas. And often they have the ability to pull it off, which is just a shot of optimism and happiness every day.
And from my side, having seen the very early days of cloud computing back in 1999 and 2000, I had conviction early on that what we were seeing was the fundamental re-platforming of business and that there was a better way.
In the years prior to that, as a consultant at McKinsey and as an early investor, I'd seen a lot of crappy software out there that made business process painful. There was a lot of shelf-ware sitting around that was inefficient, wasted money, caused a lot of frustration and required a lot of professional services and implementation work.
And so I absolutely became convinced that this replatforming was possible and needed, and that's really been an underpinning of both my entrepreneurial journey and now my investment journey. And I love seeing that take hold. I love seeing innovation from entrepreneurs, how they are really making that happen for the software industry and for the customers that we serve.
Yasu: So where's the cloud industry now, in terms of its evolution, and what do you see out there that's inspiring and has potential?
Byron: Well, I can give you the state of the businesses, and the state of the market, which are different right now. In terms of the businesses, they've never been stronger. Adoption rates continue to scale. The transition from on-premise to cloud is happening. We are on pace to have that crossover point in the coming years, where a majority of software will become cloud delivery-based. And, fundamentally, we're seeing faster adoption rates and what were headwinds early on for these trends are now tailwinds and the inevitability of cloud adoption is becoming true.
Now, the short-term dynamics are that the rotation of the capital markets starting with public markets away from hyper-growth into value and into defensive stocks has caused an immense pullback in the multiples of these companies. What we’re seeing is an immense rerating of the category that is independent of the fundamental businesses and long-term cash flow.
And so we're going through a digestion. I was on CNBC this morning and the host asked, “Is this another Amazon moment?” He was of course referring to how Amazon separated itself from the rest of the dotcoms back in 2002. I think it's a prescient question.
We’ve seen the two waves of internet and mobile roll through, creating massive value over the last two decades. Several of the world's most valuable companies, including Google Alphabet, Apple, and Amazon, were really birthed in those waves.
My belief is that cloud computing is going through that same digestion period now where we're getting this rerating and some separation of the names. The first step is that the whole industry gets hit. And then you'll see, over time, the separation of the names and some leaders emerge as real flag-bearers for the new economy.
Aruna: I'd love to know where the separation is happening and where you think we should be looking.
Byron: The sectors that have held up best have been those that are a little bit more resilient to supply chain or geopolitical issues, sectors like security, data, infrastructure, etc. I certainly think that those are interesting categories, but I would also include vertical SaaS. I would certainly include DevOps. I would put in some of the platform as a service, API-economy businesses. We're seeing just massive, repeatable companies and category creation. We see it happen time and time again within the sub-sectors.
And so there is a time statement to this, that the first waves of cloud really happened in the pure play application space for SaaS and then the infrastructure as a service layer for AWS, Google Cloud and Azure.
And what we're seeing now is that this middle is starting to emerge where you get the API economy layer, the next-generation infrastructure emerging and immense innovation coming from the top and the bottom.
We’re very cautious about the IaaS layer, given the incumbents and the billions that they're playing with. And so I certainly tend to have a mid- to upper-stack bias in terms of long-term defensibility and opportunity. However, I'll certainly note that several of the most interesting businesses have come out of slices of infrastructure where they've been able to navigate that.
We added 20 companies to the BVP NASDAQ emerging cloud index in the last couple of weeks. And there'll be another 20 coming in the quarters behind them. There's an explosion of super high-quality companies.
There are 150 private cloud unicorns that hopefully represent the next wave of IPO candidates. So your answer to that question of who's most likely to be successful here is going to be fascinating because you do have the opportunity to try to stack-rank that list in an interesting way.
This concludes Part One of our interview. Part two of our interview with Byron is now live here.
After a 23-year career at SAP Japan that culminated in his serving as company President, Yuzuru Fukuda took on his current role in April of 2020 as CIO and Deputy CDXO (Chief Digital Transformation Officer) at Fujitsu, Japan’s largest information and communications technology and services provider with more than $30 billion in annual revenue.
Fukuda-san and I have frequently discussed in public forums the role of IT and digitization in making Japanese companies more globally competitive. I sat down with Fukuda-san to get the latest on Fujitsu’s great redesign and his view on the state of digital transformation in Japan.
Yasu: It’s been about a year and a half since you joined Fujitsu from SAP. You’ve spoken about the Fujitsu Transformation initiative previously. Could you share with our readers the progress you’re making?
Yuzuru: I would love to. As you may know, Fujitsu Transformation is not just about deploying the cloud and digitizing everything. It’s about redesigning Fujitsu and establishing our competitive advantage. Apple may become a car manufacturer. Tesla may compete with electricity companies. Toyota is building cities. IT companies like Fujitsu need to evolve and redesign themselves as well.
What’s truly remarkable about Fujitsu is that our employees are religiously customer-focused. They will do anything for our customers. This can be both good and bad, of course. But it is our core. Where we’re changing is how we create value for our customers. Keep in mind Fujitsu used to be a “monozukuri” company, a maker of hardware, which we supplemented with services.
We’ve of course turned this model on its head. We’re now shifting to becoming a services company. But obviously we need to do more than provide services. Our customers are asking us to help transform their business as well as build new ones. They’re often starting from a clean slate. We’d like to guide them. We need to redesign Fujitsu for a world without RFPs. We need to ideate, as well as integrate. Sustainability is increasingly important to our customers as well.
Yasu: How are you securing buy-in from your employees in your new direction? This is where many companies stumble…
Yuzuru: Indeed. We’re all about leading with a sense of purpose. Sustainability is key for us. Trust is essential. As is innovation. We’re currently in the process of engaging all 130,000 of our employees, beginning with senior management, so they can openly share their individual sense of purpose for working in the IT industry and at Fujitsu. We call this initiative “Purpose Carving” and we’re taking a “Top First” approach. I myself host an internal radio show every week to foster greater openness and communication among employees!
I’m delighted to say they’re responding positively. The number of employees who feel the company is changing in a real way was 24% in June of 2021. It’s currently 42%. My goal is to take us to over 60%.
Yasu: What role do cloud solutions play in Fujitsu’s transformation?
Yuzuru: The cloud for us is all about speed. It’s about achieving rapid time to value. Cloud solutions are a key part of our overall operational strategy. We’re simplifying our operations, and we’re becoming more global and data-driven.
But we also want to empower our front lines, the “genba,” so they can focus on the customer and have a sense of ownership and purpose. We want all our employees to participate in the company’s transformation and success.
Yasu: Are other Japanese companies pursuing a similar model?
Yuzuru: In terms of their cloud usage, some are more disciplined than others about standardizing across their businesses. Overall, though, Japanese companies are looking to balance globalism with the Japanese genba-oriented way of doing things. Call it Japanese-style digital transformation. Call it “glocalism.” The intent is to be both global and local.
Yasu: As you know, Japanese companies differ from global companies in that they outsource most of their development work to SIers. Is this changing? Are Japanese companies bringing more of their systems development in-house?
Yuzuru: Great question. I do think the shift toward in-sourcing is real, and that it will continue to gather momentum, especially among larger, more progressive Japanese companies.
One of the impediments to bringing development in-house, I believe, has been the relatively low status of IT departments within companies, although this is also changing with the pandemic elevating and accelerating the need for digitization.
Yasu: What advice would you give global cloud companies looking to do business in Japan?
Yuzuru: They need to put themselves in the market and understand local behaviors that are reflected in business processes. They need to understand what is unique about Japan.
I’m not pounding my chest about what’s great about Japan. I’m being open and fair. Some processes should change. But some are obviously desirable. Japan is different from the U.S., just as the UK is different from France and France is different from Germany.
Global cloud companies need to be glocal in their thinking as well, just as their customers need to figure out for themselves what they should keep and what they should do away with. Or how they might optimize existing practices with global features. Enabling this balance is essential.
When I was at SAP, I took executives from Germany to a major supermarket chain so they could see for themselves how Japanese housewives rode their bicycles to the market every day to shop for fresh fish and produce. In Japan, wholesalers play an important role in ensuring the timely, fresh delivery of these products.
It took me five years to persuade the development organization back in Germany to build an order management module that accommodated Japan’s distribution system. It turned out that this module could be used in China and Korea as well. This shouldn’t have taken five years.
In addition, partnering is essential for global cloud vendors. Japanese companies the size of Fujitsu need 30 to 40 solutions to function, and they all need to be integrated. They also need to be customized to a certain degree.
At the risk of sounding self-interested, it’s imperative that cloud companies partner with local service providers to build their implementation capacity, and to build credibility with customers as well.
Yasu: Finally, what keeps you up at night?
Yuzuru: My biggest worry is that we don’t put our sense of purpose into action. Japanese companies don’t have a very good track record when it comes to driving transformation, globalization and innovation. We’ve been painfully slow.
But the pandemic has, without a doubt, accelerated positive change in Japan. We’re moving in the right direction on all fronts at a rapid pace. Japanese companies are becoming more open and global by the day.
This presents a huge opportunity for Fujitsu and Japan’s IT industry as well as the world’s cloud innovators. We need to redesign ourselves. We need to act. We need to keep up the momentum. There really is no finish line to digital transformation.
As 2021 comes to a close, on behalf of my partners Allen Miner, Yasutaka Fukuda and the entire Japan Cloud team, I’d like to express my heartfelt gratitude to our portfolio partners, their customers and our investors for another remarkable year of learning and growth. The disruptions created by the pandemic have accelerated positive change in Japan, and thanks to all of you, Japan Cloud was able to stay true to its mission of transforming Japanese business – through the innovative companies we introduced, the next-generation leadership we recruited and developed and our relentless pursuit of operational excellence and customer success. I’m delighted to share with you the highlights from this year.
Signed in April, Coupa is a leader in Business Spend Management. Coupa’s platform enables companies and its suppliers to manage all of their business spend in one place. The parent company is showing exceptional growth globally. Takashi Ozeki will lead the company in Japan. Takashi was formerly senior director at Japan Cloud and will continue to serve as an advisor to the firm.
Although Braze entered Japan and was signed in October of last year, its growth this year has been truly remarkable. The company will hire close to 25 employees by year’s end! Braze is led by Masayuki “Max” Kikuchi, whom we recruited from the Japan Cloud talent base. Previously, Masayuki held sales leadership positions at INTEC, Adobe and SAP Japan. Braze provides a comprehensive customer engagement platform that powers relevant and memorable experiences between consumers and their favorite brands. The company completed a blockbuster IPO on the Nasdaq last month.
We signed Xactly in November. A leader in intelligent revenue solutions, Xactly enables companies to forecast beyond the short-term and secure revenue streams for long-term growth. The company is growing at a rapid clip. We welcomed Soichiro Fukuma as Xactly’s country manager last month.
Our current partners are also winning exciting new customers and growing their presence in Japan. Together they hired over 80 employees in the past year!
The Japan Cloud team continues to grow as well. Kazuyo Kawakami joined us to advise partners on Go-To-Market strategy and sales operations. Kazuyo came to us from Salesforce where she spent 17 years running sales operations and sales program development.
We have two more employees joining us in January to bolster our talent acquisition and Go-To-Market marketing efforts. With the addition of our new team members, I’m proud to say that the Japan Cloud team is more diverse than ever!
I’d like to thank my colleagues from the bottom of my heart. Shuji, who leads organizational strategy, talent acquisition and development was involved in evaluating most of our partners’ new employees.
Teppei, who’s in charge of Go-To-Market strategy and the implementation of our playbooks, which we continue to expand, led the launch of Braze, Coupa and Xactly, and worked closely with other partners throughout the year.
Our head of PR and events Sachie consistently drove coverage for our partners in top publications including high-impact features in the Nikkei and Toyo Keizai.
An employee who recently joined BlackLine told me that, when she spoke to her parents about possibly going to work for the company, her mother immediately identified it as a Japan Cloud partner and that it would be an excellent choice for her. Apparently, her mother, a freelance trainer for software companies, knew people who had joined Coupa and New Relic and spoke highly of Japan Cloud. So nice to hear such stories!
Japan is changing fast. Companies are betting on a hybrid future – and they are counting on the cloud to get them there. By staying attuned to the changes taking place in Japan, Japan Cloud will continue introducing world-class cloud solutions that enable Japanese companies to be more productive and global. A new generation of leaders is also emerging in Japan. They are more independent, proactive and less tradition-bound. They appreciate diversity. They want greater flexibility. Japan Cloud aims to empower Japan’s new leaders with the skills and growth mindset that will enable their ongoing success.
As travel restrictions ease further, I look forward to traveling with Fukuda to meet with our global partners and investors more frequently. The more we travel together, the more our thoughts align on how to enable our partners’ success in Japan. I could not imagine having a better partner than Fukuda.
We look forward to meeting with all of you again soon. Until then, please have a safe and happy holiday season!
If partnering is a recurring theme in conversations about how to succeed in enterprise software in Japan, it’s for a good reason: systems integrators, or “SIers,” employ 70 percent of software engineers in Japan.
Catering to the development needs of Japanese companies for the past 30 years, SIers have built trusted relationships with their customers across all industries. They know their customers’ IT environments. They know their corporate cultures and protocol. It’s not hyperbole to say that SIers are the extended development organizations to Japan’s industrial giants.
So partnering with SIers is key for global cloud companies to build trust – as well as service capacity – in Japan. While cloud companies should sell directly to – and own – their customers, they need to make partnering with SIers an essential part of their go-to-market strategy for Japan.
The emergence of SIers is a story that is unique to Japan. Unlike American and European companies that have done most of their software development work in-house, Japanese companies have delegated the lion’s share of their systems development to SIers, a practice that dates back to the early 90s when companies slashed their IT budgets, or spun off their IT departments entirely, in reaction to the collapse of Japan’s economic bubble.
Although a handful of companies are moving toward developing more of their software in-house – the trade media are quick to highlight internal teams that leverage modern development tools to build innovative apps – the reality, again, is that SIers employ 70 percent of Japan’s enterprise software developers. A 2021 survey revealed that more than 60 percent of Japanese companies believe SIers are “absolutely essential” for implementing their digital transformation strategies.
It’s also noteworthy that only 40 percent of Japanese companies employ CIOs. The CIOs that do exist are often corporate managers. They may know their companies, but they are not necessarily IT specialists.
Filling the lack of deep IT expertise at Japanese companies are a plethora of SIers. They include affiliates of major hardware companies, independent SIers and cloud-native SIers as well as industry-specific SIers bearing the names of Japan’s largest banks, power companies, logistics companies and even advertising firms whose origins can be traced back to the IT departments that were spun off in the 90s. Traditional trading houses also localize, distribute and implement various software products, often through multi-tier subcontracting relationships with SIers and resellers.
As affiliates of the country’s iconic hardware manufacturers and telecommunications giant, Japan’s largest SIers have benefited from access to a massive installed base of on-premise systems – hence their potential as a channel for global companies looking to augment their more strategic, direct sales engagements.
Although the advent of the cloud has impacted their top line, SIers are still trusted advisors to their customers. They are, after all, cut from the same cloth. So it’s definitely in the interest of global cloud companies to turn to them for post-sales services and support.
Japan Cloud’s partners work closely with SIers. Business consultancies, both local and global, are also valued partners. Together, they engage deeply with IT departments and end-users. SIers are also a source of referrals, though deals are always signed on our partners’ paper.
Companies should reach out to partners early upon their arrival in Japan. A show of partner support, in specific deals as well as at public events, goes a long way in gaining the confidence and trust of customers. Training and certifying partners also requires time as product content needs to be translated.
Cloud companies should also invite partners to global events and meetings with executives. They should be kept up to date on the latest product innovations and global customer stories. Exposure to a company’s global momentum and brand power are key.
It’s important that companies treat their partners with great care and respect. Despite its size, Japan’s IT market is extremely dense and centralized. News of bad deals or unsupportive vendors spreads quickly. Everyone talks to everyone. Japan’s IT landscape is littered with global companies that alienated their partners.
Japanese customers have embraced the cloud. They view digital transformation as critical to their success in a hybrid world. They must succeed, and they are depending on the cloud to enable their success. Global cloud companies need to hire and develop the best local leadership. They need to demonstrate operational excellence and build a local customer success culture.
But cloud companies cannot enable customer success on their own. They need the support of local SIers. Cloud companies need their scale. They need the credibility that local SIers have with customers.
To quote from my previous interview with Naoki Togawa of Nikkei BP, customers do not want to work with “fly-by-night foreign software firms.”
And neither do SIers. Global cloud companies need to earn SIers’ trust and respect as well. They need to select a few valued partners whom they can commit to and utilize fully. They need to invest in partner training and certification.
They need to enable their partners’ success long term – just as they do their customers’.
It’s with great pleasure that I introduce Prof. Tomoko Kawakami of the Waseda Business School to our global audience. Prof. Kawakami is a leading scholar of innovation and marketing in Japan. In addition to her work at Waseda University, she is an affiliate professor at the Foster School of Business at the University of Washington and a visiting scholar at the INSEAD Blue Ocean Strategy Institute in France.
Prof. Kawakami’s interests are expansive. She is currently working on a crowdsourcing project in France, researching digital transformation in the retail industry, studying the potential of AI in creative marketing and exploring sustainable product development for the circular economy.
Prof. Kawakami has also been a key supporter of cloud-based marketing automation in Japan. Our collaboration began in 2017 when she spoke at Marketo’s annual customer event. She has since invited me to serve as adjunct lecturer in B2B marketing at Waseda, which also happens to be my alma mater.
Prof. Kawakami definitely has more interests than time, so I’m so very grateful that she has agreed to join us for this interview.
Yasu: Thank you so much for joining us today. Before we delve into the current state of marketing in Japan, could you please tell us about your background? What inspired your interest in marketing?
Prof. Kawakami: Certainly. I joined Minolta Camera (currently Konica Minolta) straight out of college. I had the opportunity to work in new product development and launch the company’s new copier to the global market. This experience inspired my interest in marketing and, with child in tow, led me to pursue an MBA and then a doctorate with a specialization in innovation and marketing.
Through my corporate experience and research, I’ve learned that Japanese companies have great technology but are not very good at marketing it. While CMOs have a tough time in any company, they tend to struggle even more in Japanese companies－if they exist at all. Only around 10 percent of Japanese companies have CMOs. As a result, Japanese marketing tends to be very sales-driven and fragmented.
In order for Japanese companies to build global brands and remain competitive, they need to implement another layer of marketing. Promotional marketing is fine, but they also need to pursue more top-down, innovation-oriented marketing－spanning research, planning, development, production and sales－as a company-wide strategy. Most Japanese companies still have a way to go.
Yasu: Frankly, I vacillate between believing Japanese companies are different from global companies and thinking that they’re really not that different. It seems organizations have similar challenges globally. How exactly are Japanese companies unique or different, especially when it comes to marketing?
Prof. Kawakami: That’s a good point. Large organizations everywhere share a lot of the same issues. Many companies, especially in manufacturing, still push products the old fashioned way. In Japanese companies, however, the horizontal marketing function, or corporate marketing if you will, is especially weak. Again, a large majority of companies still don’t have CMOs.
Keep in mind Japan has a deep-rooted manufacturing, or “monozukuri,” mindset, where companies tend to believe that if they build good products, they will sell.
As a result, the “genba,” which could be translated as “shop floor,” “frontline” or “sales,” or even “business unit” wields a great deal of power internally. A lot of marketing in Japan is driven by the business unit. They have their own marketing teams that push out promotional content. The tail wags the dog, so to speak. This fragmented structure impedes strategic brand-building, especially globally.
Yasu: But open innovation, design thinking and digital transformation, not to mention branding, have been around in Japan for a while. Isn’t this the kind of innovation-focused marketing you are talking about? Aren’t these initiatives bearing fruit?
Prof. Kawakami: Sure. There are companies that are hiring Chief Digital Officers to develop new online, data-driven businesses in partnership with tech startups. But again, from an organizational standpoint, CDOs, like CMOs, have a hard time securing buy-in from business units and subsidiaries. In short, the genba insist on doing their own thing.
As for design thinking, many executives participate in workshops. They observe and interview customers, and they make ample use of Post-its (laughs). But they tend to be overly methodical and analytical in their approach. They tend to be very left-brain. Or they do things their own way. Or they just quit after a few sessions. I don’t think the situation is that different globally.
Businesses need to be more holistic and human-centered. They need to be more right-brain when trying to understand customers.
Such a holistic understanding of customers is largely missing from Japanese companies. And because they lack innovation and brand leadership at the senior management level, company leaders tend to be out of touch with customers, and so they delegate decisions about innovation and marketing to the business units. This further strengthens the genba and impedes strategic brand-building.
Yasu: What role can global cloud providers play in enabling Japanese innovation and more strategic marketing?
Prof. Kawakami: I think they have a huge role to play. In addition to introducing new concepts and innovative marketing automation solutions, they need to introduce cutting edge case studies from around the world. Japanese are always eager to learn what other companies are doing, though implementation is another matter.
Cloud companies can also educate and lead Japanese companies through their example. User communities are a perfect example of what Japanese companies need to build in order to learn more about their customers and co-develop totally new customer-centric products.
Cloud providers also do an incredible job of turning their customers into “heroes'' and promoting their successes at events and in the media. This form of co-marketing is so persuasive and impactful. This is the kind of marketing Japanese companies need to do more of. They need to rely less on ad agencies and collaborate more closely with their customers (laughs).
Yasu: On the flipside, what are Japanese companies’ strengths in terms of their ability to innovate and market? What potential do you see? What are the opportunities?
Prof. Kawakami: There is so much great technology in Japanese companies. They just need to do a better job of engaging customers and communicating the value of their products in a strategic way. There needs to be more top-down leadership, not just bottom-up activity from the genba.
And it’s imperative that Japanese companies think globally. Japan’s population will shrink to three-fourths to its current size in the coming decades. Japanese companies can learn a lot from Korean and Scandinavian companies whose domestic markets are so small that they have no choice but to be global.
I also believe that Japanese SMBs are truly remarkable. Many of them are global leaders in key components. They are closer to their customers and their decision-making process is more top-down. Their success depends largely on their leaders. While they may lack resources, they can now leverage cloud-based IT solutions to do more with less.
In addition, as mentioned, I believe Japan has an opportunity to lead the world in sustainability. Japan has the most 100 and 200 year-old companies in the world! They’ve experienced the downside of rapid growth. They’ve survived natural disasters. Japanese companies need to codify and market their vision of a more sustainable world. I believe they can, but they need the help of global innovators and communicators.
Yasu: Finally, what advice would you give to cloud providers that want to sell to Japanese companies?
Prof. Kawakami: They need to continue doing what they do so well. Selling at a high level to economic buyers is of course important. But it’s also important that they engage executives on the frontlines, the genba, and get them on their side. Make them heroes. Help them promote their successes internally, as well as to the market.
If frontline executives believe in your product, are ambitious and have passion, they will go above and beyond their call of duty and be an advocate for you with senior management.
Although the genba may give their own CMOs and CDOs a headache, they can be invaluable to global cloud companies looking to close deals.
Nice write-up in the Nikkei (Japan's WSJ) on Coupa's participation in Japan's E-Invoice Promotion Association, a business council committed to the standardization and dissemination of e-invoicing based on JP Peppol, Japan's version of the international e-invoicing standard. Coupa's participation in the association will make its BSM platform compliant with Japanese regulations and enable it to address local business needs. Great work, Ozeki-san, in taking an important step toward further adapting Coupa to the local market!
Customer success has been around in Japan since the arrival of Salesforce in 2000, but only a handful of companies get it right. Although their intentions are good, many companies succumb to elephant hunting and end up relegating customer success to a mere function, when it should be a key value that permeates the entire business.
Japan is the second largest enterprise software market in the world and home to more $100 million companies than any other country next to the U.S. If companies want to engage these customers, retain them and drive recurring revenue, they need to get customer success right.
But hiring Customer Success Managers is only part of the solution. Enterprise cloud companies need to address fundamental operational issues － around talent acquisition, reporting structures and internal communications － that are unique to field organizations. Realizing customer success-driven growth in Japan, or anywhere else in the world, is predicated on achieving company-wide operational excellence.
Following are a few tips on building a customer success culture in Japan based on my 20 years of leadership experience at Salesforce and Marketo.
Customer success, of course, is not just a function within a SaaS company. Nor is it the same as customer service or customer satisfaction.
If customer service is about resolving customer issues, customer success is about building a company culture that puts a premium on seamless alignment － across global product development, sales, marketing, training and service and support, as well as the customer success team － to enable customers to maximize use of their product and realize business outcomes.
The reward to vendors: lasting customer loyalty in the form of annual recurring revenue. In the SaaS model, when your customers succeed, you succeed.
Although this is so commonsensical that it might not be worth mentioning, the first step in building a customer success culture is to hire the right leader. Customer success must be implemented from the top, from day one.
The right leaders are not “know-it-alls.” They are “learn-it-alls.” They are passionate about engaging with customers and learning about their business. They are open and collaborative. They believe in innovating with customers.
The right leaders align employees around the hard work of retaining and growing existing customers. They have a service mindset, as well as sales skills. They of course pursue big opportunities, but they are not easily blinded by the glamor of elephant hunting. The right leaders pursue companies that fit the target customer profile. They value customer success over short-term wins.
Once at the helm, the new country manager should move quickly to embed customer success practices company-wide. The country manager needs to hire a cloud-savvy post-sales leader who can build the service and customer success teams as well as forge partnerships with local service partners. Building the post-sales team should take priority over hiring a cadre of sales people. Customer success must come first.
Prioritizing customer success over bolstering sales capacity rarely sits well with global sales leaders who are in a hurry to close deals. But putting customer success first is essential to securing employee buy-in internally, as well as building credibility externally, as a company that is committed to supporting customers long term, beyond the deal.
At Marketo, we established a user community within six months of launching in Japan. We supported our customers with education and customer success resources as well as office space. Our customers shared best practices and early successes so they could learn from each other and make full use of their products.
Putting customer success first can also help close deals. Our partner Kyriba won their first customer in Japan in part because they involved their newly hired Customer Success Manager in customer meetings.
In general, Japanese customers are pragmatists. They are extremely patient and loyal once they commit to a vendor. But in order to commit, they need to see evidence that they will get the support they need. They prefer to work with mature, service-oriented companies over startups that lay tracks as they go along. They need the assurance that they can get up and running quickly, without complications, and be successful over the long term.
In addition, the country manager should be empowered to align local teams around customer success. While corporate leadership may champion customer success, global reporting structures often prevent the local organization from doing what is right for customers.
Local functional leaders, including sales, alliances, services and marketing and customer success, should report directly to the country manager with dotted-line responsibilities to corporate teams.
Trust in the country manager is essential for such a reporting structure to work. Transparency is key. But the Japan business cannot put customer success first if its teams are pulled in different directions by corporate initiatives.
Take global go-to-market campaigns, for example. It makes little sense to launch a product suite or platform in Japan, or any region, if customers are still getting acquainted with a single product. It’s confusing for customers and can freeze opportunities. But this happens time and again, impacting both local sales and credibility.
Local leadership should be empowered to decide when and how to engage and innovate with local customers. They should be empowered to put customer success first.
This isn’t to say that the local business can isolate itself from the global organization. Far from it. The local entity should take full advantage of the global resources available to it. Absent the global company, the local entity would relegate itself to the status of a domestic SMB. Japanese companies are avid consumers of global knowledge. Local teams should be able to provide it.
Japan Cloud partners nCino and Braze hired local product managers to collaborate with their global product development teams. They explained local business processes and pushed for Japan-specific features early in the customer success value chain.
Local sales people should also leverage corporate product experts and sales resources. Corporate visits and global events are obvious examples of how local teams can tap global value.
Dreamforce was the highlight of the year for many Salesforce Japan customers. They gained visibility into product roadmaps. They took in best practices from product experts and other customers. They also experienced the momentum and power of the global brand. Dreamforce helped transform Japanese customers into Salesforce loyalists.
Local employees should focus on local customers, but they should also be active members of the global team. Why work for a global company if they have no interest in being global?
Finally, although the local marketing team should spend most of their time on demand generation and sales enablement, they need to do more than market to external audiences. The need to communicate internally as well.
In addition to leveraging corporate content and developing customer stories so customers can learn from each other, they need to communicate internally to align local teams. They need to promote customer success as a unifying value within the organization. They need to inspire employees to sing from the same customer success playbook.
At Marketo, the marketing team took the lead in developing a colorful internal newsletter, or shanai-hō, called Marketo Life. The bulletin highlighted individuals and teams who best exemplified the company’s customer success culture. It provided overviews of global events. It introduced new hires and celebrated the personal interests of employees.
Marketing in the field should create internal content and forums for employees to come together as a team, build trust and share knowledge on how to make customers successful. Employees need to learn from each other as well.
Building a customer success culture requires thinking beyond short-term wins. It requires optimizing local operations for long-term success. It requires hiring and empowering mature, collaborative leadership. It requires working with global teams. It’s about instilling a sense of mission and pride in employees.
Salesforce is a $1 billion company in Japan. The main reason behind its remarkable growth is that Marc Benioff empowered the local team to focus on customer success while making sure they leveraged all the assets that the global organization had to offer.
Japan is a huge market. Businesses are clamoring for the cloud as we speak. They are pursuing digital transformation to adapt to a hybrid world, to become more intelligent and more employee- and customer-centric.
If global cloud companies look to capitalize on Japan’s hybrid opportunity, they need to be connected to their customers “for life.” They need to live and breathe customer success.
They need to keep reminding themselves that if their customers succeed, they succeed.
A heartfelt congrats to the Daikin and New Relic Japan teams for a truly innovative implementation of the New Relic One observability platform. Daikin Industries, a leading, global manufacturer of air conditioning and refrigeration products, recently deployed the New Relic One observability platform to develop, test and optimize a cutting-edge remote support and maintenance solution that empowers the company's “connected workers” to serve customers anytime, anywhere via their wearable “THINKLET” devices. The solution will also enable Daikin to address the shortage of maintenance service engineers by training service professionals around the world. The solution was developed at The Technology Innovation Center, an open innovation initiative between Daikin and the University of Tokyo. Congrats again to Daikin and New Relic Japan!
This is the first in an infinite number of interviews we plan to do with opinion leaders in Japan’s IT and business circles. Our hope is that these conversations will yield valuable insights for enterprise cloud companies and investors with an eye on Japan--the second largest enterprise software market in the world.
I recently had the opportunity to chat with Mr. Naoki Togawa from the Intelligence Group at the ICT Innovation Research Institute at Nikkei BP. Previously an editor and reporter for over 20 years, Togawa-san covered the nexus between business and IT for Japan’s leading publications such as Nikkei Business and Nikkei Computer. He is known for his in-depth features on massive software deployments at companies such as Toyota, NTT, Panasonic and consumer products giant Kao, among many others. More recently, as a producer and researcher, Togawa-san launched The IT Innovators Conference, a highly curated annual event bringing together Japan’s top Chief Information Officers and Chief Digital Officers. Togawa-san also compiled The DX Surveys, a two-volume compendium of survey responses from over 900 Chief Information Officers on how they are leading digital transformation at Japan’s most influential companies.
Aruna: Thanks so much for your time Togawa-san. Moments earlier we were chatting about the ideal profile for country managers at global enterprise software companies in Japan. Global firms struggle with hiring good people. What is your take on the ideal profile of country managers?
Togawa-san: I understand what you are saying, and yes, hiring good country managers is a big problem for global software companies in Japan. It’s hard to attract good people to companies that few people have heard of.
Over the past 20 years, many country managers were alumni of IBM Japan, and more recently you see people from Salesforce and Microsoft. These executives tend to be hard-charging sales and marketing people. They can sell high to senior executives. They themselves do the selling, not just their teams. They’re salespeople to the core. Some last a couple years at one company and then move on to the next. Companies like SAP, Oracle and Salesforce, which were all run by ex-IBMers in their early days, are exceptions.
This seems so obvious that it may not seem worth mentioning, but global companies can’t just hire good salespeople and leave the rest up to them. It comes down to balance. They of course need to hire country managers who can sell to senior executives but they also need to attract good people and develop them. How do they expect to scale? This is true for all companies. I don’t know if you can find one person who can do all these things, but I do think there needs to be more balance in the type of people they hire.
Aruna: I think it comes down to long-term commitment. Companies can’t gain the trust of Japanese companies if they keep hiring and firing, which is often the case. Which brings me to my next question. There is a perception that Japanese companies are very risk averse when it comes to working with global vendors. Do you think this is true? If so, how can global cloud companies prove their commitment and build credibility with customers early on?
Togawa-san: Japanese companies are perfectly justified in being cautious about working with global software companies. As you point out, churn at the country manager position is one of the reasons why. What company would put their trust in a fly-by-night foreign software firm? The fact is, Japanese companies have been burned so many times by companies that promise everything but don’t deliver! You need to look at things from the customer’s point of view.
If companies want to build credibility with customers, they should partner with established systems integrators, like NTT Data, Hitachi or Fujitsu, as well as with emerging cloud specialists such as Uhuru or Classmethod, that have trusted relationships with Japanese companies. They should work with them not just for sales but to really understand their customers’ needs and provide solutions. They need to leverage partners to provide post-sales support and make sure their products integrate with their customers’ environment. They need to sell and support “with” them, not just “through” them.
I realize this may be a hard pill to swallow for cloud vendors that are accustomed to working directly with customers. I understand that they may be reluctant to bow down to partners and give away margin on top of that.
But I’m not saying global companies should depend entirely on partners to establish themselves in Japan. They absolutely should develop a direct sales strategy and work directly with customers as well. I’m just saying global companies need to work with Japanese systems integrators and become a part of the local ecosystem in order to overcome the trust deficit they have with customers. Sometimes you have to “sip the muddy water,” so to speak, in order to succeed.
Aruna: How about localization? Do global vendors need to localize everything, even training materials, marketing content and contracts, to show their commitment to customers?
Togawa-san: There’s no question that companies have to adapt their product to local business processes. Global providers need to get their product right before anything. That’s a given.
As for the other content you mention, I believe they should be localized, the training and marketing content especially. Global companies need to put themselves in the market and see things from the customer’s point of view. They need to understand the issues. Some global issues are relevant to Japan, some are not.
Everything should be in high-quality, idiomatic Japanese. There’s nothing worse than bad translation. It’s easy to tell which vendors know what they are doing and are really committed to the market just through the quality of their materials and programs.
Aruna: What are Japanese companies investing in, by industry, over the next couple of years? What are they willing to put their trust in, so to speak?
Togawa-san: I’d rather have you purchase the DX Survey, but I will give you a high level overview (laughs). Digital transformation-related investments will remain steady overall, with some industries, especially those with distributed work environments, investing more aggressively. COVID has been an accelerator in these industries, of course. I’m sure this is the case in the U.S. as well.
Manufacturing is the weakest in terms of investment. Of the 285 companies we surveyed, approximately 20 percent will increase their budget. Around 45 percent indicated their investment level will remain unchanged, while 20 percent said they will reduce their spend. Manufacturing is struggling. Keep in mind, though, that 45 percent will maintain their current budget, which is still significant. It comes down to selling to the right companies.
Industries like Financial Services, Logistics/Distribution and Construction and Real Estate will increase their spend on digital transformation. They are investing in workplace solutions, Ecommerce and security as well as ERP. Both large and medium-sized enterprises are investing in cloud solutions. No surprises here either.
Companies are also looking for ways to gather and analyze data, although AI and IoT are low on their list of priorities, which is a bit puzzling. Not many companies are interested in Blockchain.
Overall, the survey results indicated that companies are focused on the basics. I’m sure the situation in the U.S. and elsewhere is similar.
Aruna: Are systems integrators doing all the development work? As you know, Japanese companies are known for keeping few engineers in-house, and outsourcing most of their development work, despite the growing need for speed and agility. Do you think Japanese companies are overdependent on systems integrators?
Togawa-san: My thinking is pretty clear on this matter. For core systems such as ERP, or Systems of Record, I think it makes perfect sense to work with systems integrators. Companies shouldn’t outsource indiscriminately, but they should delegate transactional work. In fact, this is key in allowing them to be more agile.
Development work for Systems of Engagement like CRM, Marketing, Content Management or AI is another matter. This should be done internally. There’s a great deal of knowledge to be gained. Companies should also partner with startups to move more quickly. Open innovation is important. It’s probably cheaper too.
The problem with many Japanese companies is that they are unbalanced in how they outsource. There’s nothing wrong with outsourcing but many companies delegate too much to systems integrators and become overdependent on them. This of course is not good.
Aruna: My last question has to do with Customer Success, which is practically religion for enterprise cloud companies. Do you think Japanese customers understand how Customer Success works and how it benefits them? I think Customer Success is also one of the keys to building trust with customers.
Togawa-san: I know how important Customer Success is for cloud companies, but frankly, I don’t think Japanese customers know the difference between Customer Success and customer satisfaction. My understanding is that Customer Success is all about vendors enabling customers to use their products more effectively so they can derive value from them. If this is indeed the case, then these companies should dedicate more resources to telling stories about how customers succeed with their products. They need to show evidence. They need to walk the walk.
And yes, telling customer stories is the surest way to build trust in Japan, or anywhere else. Customer stories were all I did throughout my career. Maybe this is because I don’t really trust vendors much (laughs).
Aruna: I will let all our partners know that they need to engage their customers in their marketing. I will also suggest that they purchase your DX Surveys!
Togawa-san: Thank you. I’d appreciate that (laughs).