How do you deal with the threat of being copied, particularly in countries that don’t honor intellectual property rights?
When you enter countries that tend to completely ignore intellectual properties, there’s nothing you can do. Should you stay out of those countries at all costs and not manufacture products there? Decisionmakers have to consider such questions when expanding their business.
In fact, although our strength is developing technology to create something out of nothing, I think we could improve on actually commercializing it in a world that is changing at a much faster rate than it did even a few decades ago. We have had a successful core business, that has indeed changed and adapted well, which is how we have been able to try out various things and small endeavors in R&D with a long-term view. However, I think we could do more to try to turn a single seed of an idea into 100 products and businesses. Our researchers are always pursuing technologies so advanced, that could be profitable in the future, but the timeline is sometimes 10 years down the line. This means many ideas may be developed, but if you don’t turn them into businesses, they are useless. If the new technology isn’t implemented into society, you can’t call it innovation. It’s just complacency.
A business strategy needs to consider how the seed exits from the R&D phase, otherwise it just won’t grow. When bringing a product to market, you have to accept that someone could copy it, so speed becomes key. The R&D cycle needs to be fast enough that you already have the next new thing waiting right after a product is released, and that is not easy to do.
Instead of targeting big markets from the start, we aim for rapid social implementation, starting in smaller markets. We then expand the scale, keeping an eye on the next target market. We think about when and who we should partner with and look for synergies in areas such as technology and raw material supply chains. As part of that, we sometimes don’t hesitate to do M&As. All of that is part of our goal to strategize R&D for market entry according to one single company-wide plan. This is a major transformation from an operational, as well as an investment point of view.
You’ve talked in terms of partnerships, co-creating with Japanese businesses, particularly in the manufacturing industry, that develop many in-house technologies.
We attempted a merger with Sanyo Kasei last year, which unfortunately didn’t work out, but that was truly the strategy we were aiming for. I think of integrations and partnerships as forming a platform in a sense.
Done well, they can be more than the sum of their parts—a multiplication of assets to make an even greater company. That then gives you a different perspective in terms of risks and the next investment. The Japanese market itself has limited prospects for growth, which is an issue in itself, and our ambition is not just to survive, but to grow and thrive globally with our peers.
Does this mean that you’re not limiting partners to Japanese companies?
That’s correct. A so-called “all Japan” way of thinking will only result in your own satisfaction, it doesn’t give you a true competitive edge. In terms of innovation, it’s probably better to have a diverse range of ideas as well. In Europe, for instance, you need the appropriate market knowledge, so we need to work with local firms there.
As you move forward, how do you see Nippon Shokubai responding to social challenges?
I think we’ll need to shift our management and thinking to a manner that considers the company’s raison d’etre, including its social contribution. And, partly as a result, I think the current norm of mass production and mass consumption will change drastically. I believe that the value individuals place on consumption will change to quality over quantity—this is happening dramatically due to the COVID-19 pandemic. Also, the move toward a carbon neutral society is a major factor in the changes in individual consumption trends, such as taking care of our possessions, minimizing food waste, recycling, living in a healthy environment and maintaining good personal health.
At Nippon Shokubai, we need to dig deeper into areas where we can apply our technology in this regard. We should always be aware of how new products can contribute to society. No matter how good a product is, it’s pointless if the manufacturing process requires a lot of energy and produces a lot of CO2, so I think we need to be highly aware of that in our efforts. On the other hand, if our profit falls, numerically speaking, but we see an increase in the sense of social contribution, I think that’s fine.
Solely pursuing profits is sure to hurt somebody.
Daisuke Tsuchiya is a Partner and Head of the firm’s Japan practice, leading a team of more than 20 Japan experts and bilingual advisors in Tokyo and around the world. Ayumi Ban is an Executive on the Japan team. Both are based in London.
Illustration: Lincoln Agnew