I have not been in Tokyo for a little more than a year, summer is not the best time of the year but this week the weather is good. But the economy is not. Japan's economy has suffered its worst quarterly performance since records began more than five decades ago. Their economy struggles as structural changes continue. The Japanese economy has long been known for its unique business traditions such as keiretsu, "main bank" system, lifetime employment, promotion by seniority, and memorization-oriented education. These practices once functioned well to facilitate Japan’s rapid economic growth in the postwar era. However, after the bubble burst in the early 1990s, these traditional business practices quickly became the focus of criticism and barriers to innovation.
Many young Japanese who lost their jobs were in precarious “temporary” positions that were the product of a decade-long deregulation. This year alone, Toyota replaced its bosses, halted all skunk projects and temporarily cut production in Japan almost in half. Sony plans to cut 50% of its suppliers this year alone. Most companies have cut back on employees who had only ever been promised a paycheck, not a job for life. Japan is never going to the same again. I used to travel to this country every month for many years, that Japan was very different.
Over the years, It has gotten better at the art of responding to a slow-growth environment. There are a few bright spots. Video gaming industry is doing well such as Nintendo. Another thriving business sector is the love hotels, or in our world it is the equivalent to what we called the “Third Place”. There are estimated around 25,000 in the country and they charge $30 for a brief stopover for two. So far sales have gone up and you need to book a few days in advance I was told.
Who’s doing well? Kirin created an innovative free product - Kirin Free. An innovative new product by Japan's second-biggest brewer Kirin Brewery that claims is the world's first truly alcohol-free beer. The 0.00 percent alcohol beverage became an instant hit with pregnant women, professional drivers and even with teachers and hospital patients. That reduces drinking and drive. They have quickly reached the initial sales target of 1.6 million cases. They simply discovered a latent need that was lying dormant for a long time. This free innovation is an instant success.
This is a process innovation as much as a product innovation. Skipping the usual yeast fermentation process, which normally creates alcohol and instead they invent and employ some new technologies. The company is filing a few patents on those technologies. Kirin has managed to reproduce the full-bodied malt presence, the hops flavor and the caramel color with enough white foam to throw off even real beer lovers. The entire market for low-alcohol beer is estimated to expand to nearly 7% in 09 to 2.7 million cases, more than half of which it expects to dominate with Kirin Free while the overall beer industry is struggling to galvanize new demand. Another good example of how innovation can change a game.
There are plenty other opportunities for innovation in Japan, they need to quickly convert their advanced industrial technologies to the civic use. The Japan's robotics technologies in the manufacturing sector have unique capabilities that can translate into new industries supporting general office or the aging consumer market. Take the field of elderly care, Dr. Yoshiyuki Sankai, Professor of Tsukuba University, has commercialized the robotic suits for the elderly care. May be Gundams can help create the next Microsoft.
According to the Economist, they predict that all four (US, China Japan and Sweden) leading innovators will retain their rankings in 2011, but that China, which has already overtaken Japan to become the world's second-largest investor after the United States in research and development in absolute terms, is a country to watch in terms of acceleration in the innovation market. And Shanghai is the world's next innovaiton hot spot.
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