Entrepreneurship in the Asia-Pacific: Case Studies [1st ed. 2020] 978-981-32-9361-8, 978-981-32-9362-5

Table of contents :
Front Matter ....Pages i-xiii
Introduction (Jing Wang, Michitaka Kosaka, Ke Xing)....Pages 1-17
Front Matter ....Pages 19-19
Shigenobu Nagamori and Nidec Corporation—Realize No. 1 Motor Company Through Developing a Knowledge-Creating Company (Michitaka Kosaka, Yong Nie)....Pages 21-46
Jun Lei and Xiaomi—Build Amazing Products with Honest Prices and Let Everyone Enjoy the Fun of Technology (Qi Qi, Lijuan Cheng, Jing Wang)....Pages 47-70
Guotian Liu and Jinsida Group Co., Ltd.—To Keep Lucid Waters and Lush Mountains for the Next Generation (Hua Bai, Jing Wang)....Pages 71-91
Kenny Lin and Thermaltake—Branding Strategy and Product Innovation (Lung Chieh Chao, Jing Wang, Jing Hua Qi)....Pages 93-110
Qian Wang and Taibei Environmental Protection Equipment Ltd. Co.—Environmental Entrepreneurial Road of Shandong Taibei Limited Company: The Importance of Forecasting Industry Development (Ning Ding, Jing Wang)....Pages 111-130
Front Matter ....Pages 131-131
Dato Michael Tio and PKT Logistics—A Knowledge Creating Service Company Growing into a Global Logistics Company (H. M. Belal, Quamrul Hasan, Norani Nordin, Michitaka Kosaka)....Pages 133-151
Airlock Digital—Australian Information Security Systems Startup to Scaleup—Where Trust is a Must (Michelle Leanne Oppert, Tristan Haines)....Pages 153-170
Toshikazu Saito and RENAISSANCE—A Company for Creating Something to Live for Through a Fun and Active Lifestyle (Daisuke Sugiyama, Michitaka Kosaka)....Pages 171-190
Shigemi Kawahara and IPPUDO—Having People All Over the World Taste the Japanese Ramen (Shunichiro Morishita)....Pages 191-211
Front Matter ....Pages 213-213
Tri Nguyen and MimosaTEK—Supercharging Agriculture in Vietnam with IoT (Minh Chau Doan)....Pages 215-232
Daisuke Teshima and TRIFE Inc.—Creating a New Business to Support the Elderly and Handicapped (Michitaka Kosaka, Yong Nie)....Pages 233-252
Masanori Kamiguchi and Kayotei—Harmonizing a Japanese-Style Inn with the Local Culture and Environment for Social Innovation in a Hot Spring Area’s Revitalization (Shunichiro Morishita)....Pages 253-271
Summary and Discussion (Michitaka Kosaka, Ke Xing, Hua Bai)....Pages 273-287

Citation preview

Jing Wang · Michitaka Kosaka · Ke Xing · Hua Bai Editors

Entrepreneurship in the Asia-Pacific: Case Studies

Entrepreneurship in the Asia-Pacific: Case Studies

Jing Wang Michitaka Kosaka Ke Xing Hua Bai •

•

•

Editors

Entrepreneurship in the Asia-Pacific: Case Studies

123

Editors Jing Wang School of Economics and Management Beihang University Beijing, China

Michitaka Kosaka Japan Advanced Institute of Science and Technology Nomi, Ishikawa, Japan

Ke Xing School of Engineering University of South Australia Adelaide, Australia

Hua Bai School of Economics and Management Beihang University Beijing, China

ISBN 978-981-32-9361-8 ISBN 978-981-32-9362-5 https://doi.org/10.1007/978-981-32-9362-5

(eBook)

© Springer Nature Singapore Pte Ltd. 2020 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Preface

This book is part of a series of case study books on business innovation in the Asia-Pacific region. In the twenty-first century, the Asia-Pacific region has been playing an increasingly important role in the global economy. As the most populous nation in the Asia-Pacific region, China has been the second-large economy in the world on GDP basis since 2010 and still developing rapidly in various industry sectors including manufacturing, IT services, and infrastructure, with many entrepreneurial enterprises emerged from start-ups to scale-ups and ascended to global leading players. As more developed nations in the region, Japan and Australia still have been maintaining their steady pace in developing knowledge-based and service-oriented economies. They are especially successful in fostering business innovation and entrepreneurship among small and medium enterprises, leveraged on advanced digital, material, biomedical, health, and rapid prototyping technologies. Meanwhile, in the Southeast Asia, economic modernization and industrialization in countries such as Malaysia, Thailand, Vietnam, and Indonesia over the past decade have seen growing interest in and stronger focus on cultivating social innovation and social entrepreneurship that benefit the resilience of communities and the environment. There are many novel venture companies and inspirational entrepreneurs in these countries. The drive for improving the capability for value creation and competency in the competitive market has instigated governments and businesses across the Asia-Pacific region to accentuate their growth strategies more on enhancing quality and sustainability. There has been significant emphasis, both in policy and in investment, on incubating innovation and accelerating productivity transformation with new technology drives and novel business models. Although there have been abundant case reports and research on business science in the literature, to date, most of them focus on successful business practices in the European Union and North America, with only very limited Asia-Pacific cases studied. With unique sociocultural, political, and economic situations, the characteristics of industries and enterprises in the Asia-Pacific are very much different from their American and European counterparts in terms of their states of development, business strategies, v

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management approaches, innovation, and hence their paths for value creation in business. Therefore, it is deemed necessary to have a book series on case studies investigating state-of-the-art business practices in various industrial sectors and nations across the Asia-Pacific region. Following our first effort to investigate “Manufacturing servitization in the Asia-Pacific,” this book is the second of this series and dedicated to examine business activities on innovation and entrepreneurship across the Asia-Pacific. Through in-depth case studies, the book aims to explore main drives for change, to examine key factors for success and to identify novel strategies, which can help to inform and inspire other entrepreneurs and companies within the region to develop or transform their own business processes and models. With this in mind, this book presents 12 business examples of successful entrepreneurship and entrepreneurial businesses from China including the region of Taiwan, Japan, Australia, Malaysia, and Vietnam. Also, the case studies cover a broad range of sectors, including the manufacturing industries, the service industries, as well as new technology and social innovation business ventures. Following the consistent methodology as applied in the previous book, in this book, each case study presents detailed information of a company’s internal and external environments collected through a series of fieldwork and structured interviews. Then, the collected data are further analyzed through the theoretical lenses of entrepreneurship, knowledge and culture management, organizational management, new business development, service science, management of technology (MOT), and innovation management. It provides insight into the entrepreneur’s aspiration and vision, the journey of personal and business developments, the factors of success, and the inspirations drawn from the analysis. These cases are analyzed and compared from the viewpoints of entrepreneurs’ motivation, ability of foreseeing changes and opportunities in the future business environment, core resources and innovation, knowledge management and culture for the company, determination, and ethos. These are critical factors in value creation for customers and the society, especially in the future business environment. Finally, commonalities and uniquenesses in entrepreneurship relevant to industry sectors and social–economic– cultural contexts are clarified and a typical entrepreneurship model in the Asia-Pacific is proposed. By looking into different case examples of the similar category and comparing those across categories, readers can gain insight into and draw inference from what to do, how to do, and what opportunities to catch for creating new business and developing new companies. For business leaders and entrepreneurs in the region, the firsthand information from fieldwork presented in the book may help them to develop informed business strategies and policy decisions can be made for effectively fostering business innovation. We also hope that this book can provide practical research materials for scholars focusing on entrepreneurship, knowledge management, innovation management, and service science. The completion of this book will not be possible without a concerted effort by a multinational and multidisciplinary team of researchers, practitioners, and graduate students who conducted the case studies and contributed greatly to the writing and

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translation of the case reports for the book. The names of the authors are acknowledged in the respective chapters. We are also grateful to Springer for providing us with the opportunity to publish the result of our work. Not least, we like to express our sincere gratitude to all the companies and various people who participated in the case studies for assisting so willingly with data collection, case analysis, and case report development. We hope that this book can stimulate further interest and lead to more exploratory and empirical studies on this important topic for the development of new business and attractive companies across the Asia-Pacific region and beyond. Valuable critiques and approaches for collaborative work will be highly appreciated. Finally, we would like to give a special tribute to Prof. Jing Wang, who was Chief Editor of this book. To our great sadness, Prof. Wang passed away on September 16, 2018, and was not able to see the publishing of this book. Professor Wang was an excellent researcher and educator in supply chain management and service science. He was the initiator for this book series and played a leading role in the book development. We would like to dedicate this book to the memory of Prof. Wang and may his soul rest in peace. In the wake of Prof. Wang’s passing, his colleagues and students at Beihang University rendered their strong support to the completion of this book. We appreciate their contributions with great sincerity. The research reported in this book was partially supported by the National Natural Science Foundation of China (No. 71332003). Beijing, China Nomi, Japan Adelaide, Australia Beijing, China

Jing Wang Michitaka Kosaka Ke Xing Hua Bai

Contents

1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jing Wang, Michitaka Kosaka and Ke Xing

Part I 2

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Entrepreneurship in Manufacturing Industry

Shigenobu Nagamori and Nidec Corporation—Realize No. 1 Motor Company Through Developing a KnowledgeCreating Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Michitaka Kosaka and Yong Nie

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Jun Lei and Xiaomi—Build Amazing Products with Honest Prices and Let Everyone Enjoy the Fun of Technology . . . . . . . . . Qi Qi, Lijuan Cheng and Jing Wang

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Guotian Liu and Jinsida Group Co., Ltd.—To Keep Lucid Waters and Lush Mountains for the Next Generation . . . . . . . . . . Hua Bai and Jing Wang

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Kenny Lin and Thermaltake—Branding Strategy and Product Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lung Chieh Chao, Jing Wang and Jing Hua Qi

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Qian Wang and Taibei Environmental Protection Equipment Ltd. Co.—Environmental Entrepreneurial Road of Shandong Taibei Limited Company: The Importance of Forecasting Industry Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Ning Ding and Jing Wang

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Entrepreneurship in Services Industry

Dato Michael Tio and PKT Logistics—A Knowledge Creating Service Company Growing into a Global Logistics Company . . . . . 133 H. M. Belal, Quamrul Hasan, Norani Nordin and Michitaka Kosaka

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Airlock Digital—Australian Information Security Systems Startup to Scaleup—Where Trust is a Must . . . . . . . . . . . . . . . . . . 153 Michelle Leanne Oppert and Tristan Haines

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Toshikazu Saito and RENAISSANCE—A Company for Creating Something to Live for Through a Fun and Active Lifestyle . . . . . . 171 Daisuke Sugiyama and Michitaka Kosaka

10 Shigemi Kawahara and IPPUDO—Having People All Over the World Taste the Japanese Ramen . . . . . . . . . . . . . . . . . . . . . . . . . . 191 Shunichiro Morishita Part III

Entrepreneurship in New Business and Social Innovation

11 Tri Nguyen and MimosaTEK—Supercharging Agriculture in Vietnam with IoT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 Minh Chau Doan 12 Daisuke Teshima and TRIFE Inc.—Creating a New Business to Support the Elderly and Handicapped . . . . . . . . . . . . . . . . . . . . 233 Michitaka Kosaka and Yong Nie 13 Masanori Kamiguchi and Kayotei—Harmonizing a JapaneseStyle Inn with the Local Culture and Environment for Social Innovation in a Hot Spring Area’s Revitalization . . . . . . . . . . . . . . 253 Shunichiro Morishita 14 Summary and Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 Michitaka Kosaka, Ke Xing and Hua Bai

Editors and Contributors

About the Editors Jing Wang (1960/12/29–2018/09/16) received his M.S. and Ph.D. degrees in industrial and systems engineering from Hiroshima University, Japan, in 1987 and 1990, respectively. He was Professor and Vice-Dean of the School of Economics and Management, Beihang University, Beijing, China. His research covered production and service system analysis and optimization, service value creation, production planning and control, supply chain management, and JITP.

Michitaka Kosaka received the M.S. and Ph.D. degrees in applied mathematics and physics from Kyoto University, Japan, in 1977 and 1984, respectively. He is currently Emeritus Professor of JAIST (Japan Advanced Institute of Science and Technology, Japan) and Guest Professor of Fudan University (China). He had been with Hitachi Ltd. for 31 years, especially with Systems Development Laboratory, where he was General Manager from 2001 to 2005. Then, he joined in JAIST in 2008, where he was Dean of school of knowledge science from 2011 to 2014. His research covers knowledge science, service science, R&D management, financial information systems, and stochastic control theory including Kalman filter. He is Fellow of IEEJ, Fellow of SICE, and Member of several institutes in Japan.

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Ke Xing is Program Director at School of Engineering, University of South Australia. He served as Member of Professional Development Committee at Australian Life Cycle Assessment Society (ALCAS) and is Standing Committee Member of Ecological Development Union International (EDUI) (Australia) (2011 to date). In his academic career, Dr. Xing is particularly dedicated to incorporate social, economic, and environmental perspectives into tertiary engineering education and training programs to prepare graduates to become professional engineers with specialized knowledge and skills for achieving sustainability in engineering practice. In his research, he also has extensive projects and publications in the areas of resource-efficient product and service innovation, sustainable industry and community transformation, and low-carbon urban precinct system modeling. To date, he has authored over 80 research publications in books, refereed journals, and international conference proceedings. Hua Bai is currently Ph.D. Candidate at School of Economics and Management, Beihang University, China. She received her M.S. degree from Worcester Polytechnic Institute, MA, US. Her research focuses on supply chain sustainability management, consumer recycling behavior, and neuroeconomic-based consumer decision making. She has many research achievements including four SCI/EI indexed papers and book chapters in the above-mentioned field and serves as Reviewer for refereed journals such as Journal of Cleaner Production, Resources, Conservation and Recycling and The Service Industries Journal.

Contributors Hua Bai School of Economics and Management, Beihang University, Beijing, China H. M. Belal Liverpool Business School, Liverpool John Moores University, Liverpool, UK Lung Chieh Chao Lunghwa University Science and Technology, Taoyuan, Taiwan, China

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Lijuan Cheng School of Business Administration, Capital University of Economics and Business, Beijing, China Ning Ding School of Economics and Management, Beihang University, Beijing, China Minh Chau Doan Hoa Sen University, Ho Chi Min City, Vietnam Tristan Haines Industry Expert, Adelaide, Australia Quamrul Hasan Center for Global Initiatives, Osaka University, Osaka, Japan Michitaka Kosaka Japan Advanced Institute of Science and Technology, Nomi, Japan Shunichiro Morishita Kyushu Sangyo University, Fukuoka, Japan Yong Nie Japan Advanced Institute of Science and Technology, Nomi, Japan Norani Nordin School of Technology Management and Logistics, Universiti Utara Malaysia, Sintok, Malaysia Michelle Leanne Oppert School of Engineering, Asia Pacific Centre for Work Health & Safety and Centre for Workplace Excellence, University of South Australia, Adelaide, SA, Australia Jing Hua Qi Thermaltake Corporation, Taipei, Taiwan, China Qi Qi School of Economics and Management, Beihang University, Beijing, China Daisuke Sugiyama NCI SYSTEMS Integration, Inc., Tokyo, Japan Jing Wang School of Economics and Management, Beihang University, Beijing, China Ke Xing School of Engineering, University of South Australia, Adelaide, SA, Australia

Chapter 1

Introduction Jing Wang, Michitaka Kosaka and Ke Xing

1.1 The Objective of This Book The business situation has been changing dramatically overall the past two decades as results of supply chain globalization, manufacturing servitization, as well as advancement of information technologies and business model innovation. New industries, particularly Internet-based IT platform services, new energy and sustainability-oriented services, and data management services, have been developing rapidly. In this business environment, there are many innovative entrepreneurs and entrepreneurial companies emerging within the Asia-Pacific region. Currently, the Asia-Pacific region has been playing an importance role in the world economy. China has been the second large economic country on the GDP (Gross Domestic Product) basis since 2010 and its economy is still developing in various industries including manufacturing, IT systems and services, and social infrastructure. As advanced economies, Japan and Australia maintain their high levels of business activities, especially in developing various new service sectors in relation to information services, health and aged care, inbound tourism, and energy management due to the servitization of industries. In the Southeast Asia region including Malaysia, Thailand, Vietnam and Indonesia, their economics have been growing rapidly and are expected to play an important role in the world economy of the 21st century. There are many interesting venture companies and entrepreneurs in these countries.

J. Wang School of Economics and Management, Beihang University, Beijing, China M. Kosaka (B) Japan Advanced Institute of Science and Technology, Nomi, Japan e-mail: [email protected] K. Xing School of Engineering, University of South Australia, Adelaide, SA, Australia e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_1

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Overall, the Asia-Pacific region has demonstrated the highest contribution to and potential of economic growth in the world. With unique socio-cultural, political, and economic characteristics, the development of industries in the Asia-Pacific is very much different from their American and European counterparts in terms of their states of development, business strategies, management approaches, entrepreneurship and hence their paths for value creation in business. Given such a context, having close analysis on entrepreneurship in the Asia-Pacific from business science lenses, presents as an inspiring research topic and great learning opportunities. Although there have been abundant case reports and research on business science including entrepreneurship in the literature, to date, most of them focus on successful business practices in the European Union and North America, with only very limited Asia-Pacific cases studied. With this in mind, we consider that it is necessary to publish books of cases studies investigating state-of-the-art business practices in various industrial sectors and firms across the Asia-Pacific region. Entrepreneurship is one of such important business practices. Through in-depth case studies in this region, the book series is intended to explore main drives for change, to examine key factors for success, and to identify the business model innovation, which can help to inform and inspire other companies within the region for developing their own business and its process. Concerning on the case studies of entrepreneurship, there are many books on famous entrepreneurs such as Steve Jobs (Isaacson 2012), Jun Lei (Li 2014), or Shigenobu Nagamori (Nagamori 2005), which largely focus just on telling the stories about the targeted individuals and their life journeys. The objective of this book, however, is to examine entrepreneurship in the Asia-Pacific through comparing and analyzing various cases of successful entrepreneurial businesses in the region from the viewpoints of knowledge management, service science, and value creation in the future business environment. Such analysis can be of interest and benefit for readers, both professionals and academia alike, and can contribute to both knowledge and practice of entrepreneurship in the region.

1.2 Literature Review Related to Entrepreneurship Research on entrepreneurship has similar characteristics like those of other business science research in areas such as marketing, management, business model, drawing inference from theoretical analysis and analytical methods applied to extant and often successful business examples. To date, there have been many studies on entrepreneurship, which can be categorized according to their focus as: (1) definition, paradigm and research of entrepreneurship, e.g. Stevenson and Jarillo (1990), Shane and Venkataraman (2000), Phan (2004), Iversen et al. (2008),

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(2) relationship between innovation using new technologies and entrepreneurship, e.g. Scott (2006), Kenny and Goe (2004), Wong et al. (2005), Onetti et al. (2010), Baumol (2002), (3) business model and entrepreneurship, e.g. Honig (2004), Trimi and BerbegalMirabent (2012), George and Bock (2011), (4) opportunities and entrepreneurship, e.g. Eckhardt and Shane (2003), Shane (2000), Sarasvathy et al. (2003), (5) entrepreneurial management and sustainable development, e.g. Ahmed and McQuaid (2005), Schaltegger and Wagner (2011), King and Levine (1993), Bruton et al. (2010), Ireland and Webb(2007), Barringer and Bluedorn (1999), (6) psychological analysis of entrepreneur, e.g. Frese (2009), Hmieleski and Carr (2008), Chen et al. (2009). (1) Definition, Paradigm and Research on Entrepreneurship Stevenson and Jarillo (1990) introduced the following view of entrepreneurship: Entrepreneurship is a process by which individuals-either on their own or inside organizations-pursue opportunities without regard to the resources they currently control. ‘Opportunity’ is defined here as a ‘future situation which is deemed desirable and feasible.’ Thus opportunity is a relativistic concept; opportunities vary among individuals and for individuals over time, because individuals have different desires and they perceive themselves with different capabilities. Desires vary with current position and future expectations. Capabilities vary depending upon innate skills, training, and the competitive environment. Perceptions of both desires and capabilities are only loosely connected to reality. But, in any case, the essence of entrepreneurship is the willingness to pursue opportunity, regardless of the resources under control. It is typical of the entrepreneur ‘to find a way.’ Those ways are arrayed on a spectrum from the behavior of a pure promotor to those of stodgy trustees. Detection of the opportunity, willingness to pursue it, and confidence and the possibilities of succeeding-are key components in the process. Shane and Venkataraman (2000) described the necessity of entrepreneurship research as “We offer three reasons for studying the topic. First, much technical information is ultimately embodied in products and services, and entrepreneurship is a mechanism by which society converts technical information into these products and services. Second, entrepreneurship is a mechanism through which temporal and spatial inefficiencies in an economy are discovered and mitigated. Finally, of the different sources of change in a capitalist society, Schumpeter isolated entrepreneurially driven innovation in products and processes as the crucial engine driving the change process. Therefore, the absence of entrepreneurship from our collective theories of markets, firms, organizations, and change makes our understanding of the business landscape incomplete.” Thus, researches or studies on entrepreneurship, which can support any companies for realizing new products and services by discovering and utilizing business opportunities, are important for not only venture companies but also established companies.

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Phan (2004) claimed the entrepreneurship research should be a multi-disciplinary research as follows; The direction of entrepreneurship research moving toward more multilevel theories on questions of emergence. Entrepreneurship research is and should be breaking away from more applied economics, psychology, or sociology research and instead appropriate agnostically from the theories that can provide the greatest explanatory power. (2) Innovation Using New Technologies and Entrepreneurship Wong et al. (2005) analyzed the relationship among innovation, economic growth and entrepreneurship by using GEM (Global Entrepreneurship Monitor). They argued that technological innovation intensity is a significant and positive determinant of GDP growth. A high growth in developing potential entrepreneurship is found to have a significant impact on economic growth. Scott (2006) introduced the concept of creative field for analyzing innovation and entrepreneurship, which is represented by sets of industrial activities and related social phenomena forming geographicallydifferentiated webs of relationships giving rise to specific entrepreneurial and innovative outcomes. Baumol (2002) described a role of entrepreneurs in innovation using technologies as the entrepreneurial independent innovator continues to play a critical role. Revolutionary breakthroughs continue to be provided to a considerable degree by independent innovators, who can avoid the conservative propensities of the giant firm. Without the revolutionary entrepreneurial contributions there would be much less for the large firms to develop further. Kenny and Goe (2004) analyzed professorial entrepreneurship through a comparison of electrical engineering and computer science at UC Berkeley and Stanford. (3) Business Model and Entrepreneurship Onetti et al. (2010) reviewed business models for new technology-based firms and proposed the business model concept of “focus (the basis of the firm’s value proposition)”, “modus (business modes with regards to the internal organization and the network design)” and “locus (the location)” as analytical building blocks considering internationalization, innovation and entrepreneurship. Trimi and Berbegal-Mirabent (2012) investigated the business model for entrepreneurial new technology-based firms. They concluded that Open innovation, customer development processes, agile developments or lean methodologies have ushered in new ways to build products unlike anything we have ever experienced, facilitating the creation of technology-based firms. In addition, a new innovation paradigm, “co-innovation,” which incorporates convergence, collaboration, and co-creation in the innovation platform, presents a new horizon to entrepreneurs. George and Bock (2011) examined business models in practice and provided theoretical implications: The opportunity-centric reconceptualization of the business model presents a useful framework to assess impact on firm behavior and outcomes. A significant element of business model configuration lies in the relative dominance of business model

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structural elements, whether purposeful or emergent, with implications for organizational effectiveness, strategic fit, and structuration within the environmental context. (4) Opportunities in Entrepreneurship Opportunities in entrepreneurship is a very important factor. Eckhardt and Shane (2003) analyzed several typologies of opportunities and clarified the role of opportunities in the entrepreneurial process. They discussed the existence of entrepreneurial opportunities, particularly as they are related to the limitations of the price system. Davidsson (2015) focused on “entrepreneurial opportunities” and pointed out that Theoretical and empirical progress has been limited on important aspects of the role of “opportunities” and their interaction with actors. And he suggested a fundamental re-conceptualization using the constructs External Enablers, New Venture Ideas, and Opportunity Confidence to capture the many important ideas commonly discussed under the “opportunity” label. Sarasvathy et al. (2003) proposed three perspectives of entrepreneurship opportunity, which are opportunity recognition, opportunity discovery, opportunity creation. Shane (2000) surveyed prior knowledge and the discovery of entrepreneurial opportunities. He postulated that the finding that the discovery of entrepreneurial opportunities depends on prior knowledge has several implications for individuals seeking to become entrepreneurs. People will be more likely to discover opportunities in sectors that they know well than in sectors that are “hot” because the investment in the information necessary to recognize opportunities is likely to occur long before a particular sector is popular. Therefore, potential entrepreneurs should look to discover opportunities in what they know rather than in what is popular with other entrepreneurs. (5) Management in Entrepreneurship Ahmed and McQuaid (2005) described the importance of sustainable development in the management of entrepreneurship. They discussed about measuring sustainable development, Environmental sustainable index (ESI), and Global 100 most sustainable corporations in the world. Schaltegger and Wagner (2011) introduced a framework of sustainable entrepreneurship and explored its link to sustainability innovation. Barringer and Bluedorn (1999) examined the relationship between corporate entrepreneurship and strategic management. Ireland and Webb (2007) discussed the concept of strategic entrepreneurship and suggested that it is represented as a value-creating interaction between strategy and entrepreneurship. (6) Psychological Analysis of Entrepreneurship Chen et al. (2009) analyzed the positive relationship between entrepreneurs’ psychological capital and the performance of their new ventures from the viewpoint of venture investment decision making. Hmieleski and Carr (2008) suggested that “The emotions of entrepreneurs can have a significant bearing on their ability to develop and grow their new ventures. Psychological capital may endow entrepreneurs with the psychic resources necessary to meet the emotional challenges

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inherent to the entrepreneurial process. Further, the benefits of psychological capital appear to be as central to the success of entrepreneurs as more traditional forms of capital.”

1.3 New Viewpoints from Knowledge and Service Science to Entrepreneurship With regard to research on entrepreneurship in the Asia-Pacific region, there are several studies conducted by Japanese researchers, such as Kubo(2005), Baba(2014), and Mutoh(2015), reported in literature, which followed the perspectives similar to those of the entrepreneurship research in western countries. Overall, such research are still not highly active in Japan and in other Asia-pacific countries. Considering many successful and unique business cases in the Asia-Pacific, entrepreneurs really want to realize their aspirations through establishing their companies and creating values in the current as well as the future business environment. Also, creating new knowledge for creating values for customers appears to be a key activity in their entrepreneurship. Therefore, knowledge science for knowledge creation and service science for value creation are important foundation for analyzing the entrepreneurship in such a context. (1) Knowledge Science Viewpoint Knowledge science is a multi-disciplinary science and has been developing based on the knowledge creation process model: SECI model for knowledge creating company by Nonaka and Takeuchi (1995). In the 21st century, knowledge creation for solving various problems in business and social environment is strongly required. Organizational knowledge creation is effective for activating entrepreneurial organization through collaboration among all members in the organization (Nonaka et al. 2008, 2009). Furthermore, Nonaka argued that knowledge creation is of a higher importance than analytical and theoretical approaches in the book “The Essence of Innovation” (Nonaka and Katsumi 2004). It is stated that The essence of innovation is the knowledge-creating process and human beings are the main parts in knowledge creation. Innovation cannot come from rational, analytical methodology. The advancement of technology education alone is not enough for innovation. From the standpoint of a leader’s phronesis (prudence, practical wisdom), knowledge and experience and their development are very important for innovation, and a human being’s subjectivity and his initiative is the essence of innovation. The development of knowledge creators is the important point in generating innovation. We should recognize once again that the essence of innovation management is not logic or analysis but just his way of life projecting himself into the future, involving his colleagues. Nonaka combined innovation management with an innovator’s way of life. Also, he described innovation as knowledge management itself. Entrepreneurship seems to be similar as Nonaka’s essence of innovation. How does an entrepreneur realize this

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dream? What is the relationship between his way of life and his business success? These are key questions for successful entrepreneurs. (2) Service Science Viewpoint On the other hand, service science such as Service dominant logic (Vargo and Lusch 2004), (Lusch and Vargo 2006) has attracted attention as a new business science, where service is defined to create value for customers. The concept of service is considered as a basic business logic in the 21st century and has been applied to not only services industry but also various industry such as manufacturing industry (Wang et al. 2016). Kosaka et al. (2013) introduced the concept of field theory for service value creation, which described that customers’ business context, resources for service such as technologies, and its relationship are important for service value creation. Also, Kosaka et al. (2012) developed the KIKI model as a service value creation process model which is a similar mechanism as the SECI model as a knowledge creation process model. Furthermore, Kosaka and Wang (2016) pointed out the importance of IT technologies for service value creation. Of course, management is very important discipline for services business. (3) New Viewpoints for Analyzing Entrepreneurship in the Asia-Pacific Based on such service science research, various important factors in entrepreneurship can be mapped into the field of knowledge and service science. According to Stevenson and Jarillo (1990), opportunity, desires and capabilities are important factors in successful entrepreneurship. Opportunity is defined as a ‘future situation which is deemed desirable and feasible.’ And opportunity analysis in entrepreneurship analysis corresponds to business context analysis in service science. Desires are related to psychological capitals which are central to the success of entrepreneurs (Hmieleski and Carr 2008). This corresponds to Nonaka’s knowledge science view as “the essence of innovation management is just his way of life projecting himself into the future, involving his colleagues.” Capabilities are related to technologies, resources, and management, which are important factors for customers’ value creation and discussed in both entrepreneurship analysis and service science. In the 21st century, many academic researchers and business practitioners in the Asia Pacific region are strongly looking at knowledge science and service science for customers’ value creation which seems to be critical successful factors for their business. Therefore, we analyze successful cases of entrepreneurship in the Asia Pacific from the viewpoints of knowledge and service science, especially knowledge creation and value creation.

1.4 Case Study Approach In order to analyze the entrepreneurship in the Asia-Pacific, the case study approach is very effective and reasonable, as the truth of successful entrepreneurship exists and can be revealed only in real cases of successful entrepreneurial business. In case

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studies of entrepreneurship, we should consider that entrepreneurs or innovators generally want to realize their dreams or their visions through creating new knowledge which is necessary for their successes under current or future business environment. Nonaka and Katsumi (2004) described “The essence of innovation is the knowledgecreating process and human beings are the main parts in knowledge creation.” From this viewpoint, we aim to find out an entrepreneur’s knowledge-creating process through observation of behavior characteristics and in-depth analysis of psychological activities. Through interview with the entrepreneur and analysis of his/her background or personal characteristics, we also find out the intellectual journey and changes of thoughts while starting the business. First, we plan to collect information on the following items on the entrepreneurship of the targeted entrepreneur and company. (a) Achievements and honors of the target company in the recent years (b) Background of the company and the industry (c) History of the company (chronologically,including previous achievements, revenue, profit, number of employee and etc.) (d) Important turning point of the company (opportunity, challenge, reform), how did the entrepreneur identify the important opportunities (e) The arduous journey to develop the business (efforts made to achieve the company target) (f) Difficulties, frustrations and failures. Hardships experienced (g) Mental journey of the entrepreneur (description of the mental activities, objective, social responsibility, passion, craze, helplessness, confidence, etc.) (h) Joy from the breakthroughs (i) Pursuits of the entrepreneur. Cultural influence (source of motivation) (j) Further development, prospects of the industry. For each cases, detailed information about the company’s internal and external environments are collected through a series of fieldwork and structured interviews. Concretely, we plan the following procedure; First, authors of each chapter study literatures on target entrepreneurs including papers, books, news, government documents, etc. They check the webpage of the target company to understand the characteristics of its business, products, market and customers, as well as its goal, mission, vision, history, honors, organization structure, background of the key leaders, etc. They interview on the other people to understand the company’s reputation. Then, they visit to the company, especially, to key management departments, R&D department, production department, marketing department and others to get the operating situation of the company. Also, they visit the office of the entrepreneur and observed the working environment and find out his/her work style and behavior characteristics. They interview with the target entrepreneur and find out his/her journey of the heart and changes of thoughts while starting the business. It is important to carefully prepare the interview plan and outline before the interview. After collecting enough data, the collected data are further analyzed to reveal main factors of successful entrepreneur in the Asia-Pacific region by applying rele-

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vant theories related to entrepreneurship, knowledge science, service science. Especially, these cases are analyzed and compared from the viewpoints of entrepreneur’s motivation, ability of foreseeing changes and opportunities in the future business environment, core resources and innovation, knowledge management and culture for the company, entrepreneurs’ desires or motivations. In our case studies, we apply three hypotheses for analyzing successful entrepreneurship from the viewpoint of knowledge creation and value creation for customers in the future business environment, which appear to be critical factors in successful entrepreneurship. Finally, our hypotheses are verified and commonalities and unique-nesses in entrepreneurship relevant to industry sectors and social-economic-cultural contexts are clarified and a typical entrepreneurship model in the Asia-Pacific is proposed. For the case studies, 12 business examples of successful entrepreneurship are selected from China including the region of Taiwan, Japan, Australia, Malaysia, and Vietnam based on the investigations of entrepreneurs’ vision, history and characteristics. These cases cover a broad range of sectors and industries. The outline of cases studies is shown in Fig. 1.1. In order to analyze the entrepreneurship, the selection of 12 successful cases are based on the following criteria: (1) Entrepreneur has his/her own vision or dream (2) Currently, his/her business is successful and we can analyze the successful process of his/her entrepreneurship (3) The business field of entrepreneur is active in the area in the 21st century. In selecting cases, we categorize the Asia-Pacific region into three category, that is, (1) China including the region of Taiwan, (2) Developed countries such as Japan and Australia, (3) Developing countries of South-East Asia such as Malaysia and Vietnam. Cases in Industries

Manufacturing

IT business

Services(food, health)

Perspectives

Technology (IoT, etc)

Dream, Motivation

Business Model

Social innovation

Enabling Mechanisms

Background

Service and Product

Agriculture

Entrepreneurship in the Asia-Pacific

Service Value Creation Knowledge Management Business Model Innovation

Reflection

Fig. 1.1 Outline of case study for entrepreneurship in the Asia-Pacific

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(1) In China including the region of Taiwan, we select 4 cases of manufacturing companies, 2 cases belong to IT industry and 2 cases belong to environmental protection industry. (2) In developed countries such as Japan and Australia, major industry sector has been shifted from manufacturing to services. Also, social innovation attracts attentions. We select 1 case from manufacturing industry, 3 cases from services industry, and 2 cases from social innovation business in the developed countries. (3) In the developing countries of South-East Asia, various new business has been started and developing according to each country’s characteristics and situation. We select 1 case from logistic service industry in Malaysia and 1 case from agriculture innovation in Vietnam.

1.5 Hypotheses for the Successful Entrepreneurship in the Asia Pacific In order to support the case analysis, the following three hypotheses for the successful entrepreneurship in the Asia Pacific are adopted on the basis of knowledge management and service science, which provide the framework of knowledge creation for innovation and value creation for customers in new businesses. These hypotheses are verified and the results are summarized in the discussion part of Chap. 14 through analyzing the findings of 12 cases studies. (1) Hypothesis 1: Successful entrepreneurs realize their dreams and ways of life in their companies Nonaka and Katsumi (2004) described the following sentence about innovators in his book, “We should recognize once again that the essence of innovation management is not logic or analysis but just his way of life projecting himself into the future, involving his colleagues.” Nonaka considered that an innovator’s way of life is a key factor for innovation management. Also, he described the importance of knowledge creation for innovators as “The essence of innovation is the knowledge-creating process and human beings are the main parts in knowledge creation.” Successful entrepreneurship seems to have similar characteristics as Nonaka’s Essence of Innovation. How does an entrepreneur realize this dream? What is the relationship between his/her way of life and the business success? We verify “Entrepreneurs realize their dreams through pursuing their ways of life in their business” for all cases in this book. (2) Hypothesis 2: Successful entrepreneurs create value for customers in the future business environment Entrepreneurship can be considered as “value creation for customers or societies in the future business environment”. Therefore, we analyze and compare each case from the viewpoint of value creation for customers in the future business environment. New values can be created by the relationship between customers’ needs or requirements

1 Introduction Fig. 1.2 A process of value creation in the future business environment

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Step1: Objective Entrepreneur’s dream or goal

Step2: Context: Future business environment

Step4: Realization: Management of his business organization

Step3:Idea of Service & Product: Resource and technologies

in the future business environment (Opportunities) and provided services or products (Capabilities). Entrepreneurs utilize their core resources or technologies for the services or products. Then, entrepreneurs realize value creation for customers by managing their companies. This value creation process can be shown in Fig. 1.2. In the process of Fig. 1.2, the objective of the entrepreneurial company is determined based on the entrepreneur’s dream and goal, which is the first step. Then, business context is considered based on the objective in the second step. Here, the entrepreneur considers suitable business market and forecasts the future business environment of the company. At this step, there are important items to consider, such as insight of new era, global thinking, ICT’s impacts and so on. Then, the entrepreneur and the company develop suitable services/products by utilizing core resources and core technologies in the third step. As an entrepreneurial company, the originality of services/products is essential. At this step, Steve Jobs’s “connecting dots” concept (integrating various resources) is important for realizing suitable services or products to create customer value. At the fourth step, the entrepreneur realizes his/her aspiration and ideas through managing the business organization with knowledge management and/or community creation. From the above viewpoints, the following four attributes are crucial for an entrepreneurial company in order to create value for customers in the future business environment. These 4 attributes are related to three important factors, “Desires”, “Opportunities”, “Capabilities” in entrepreneurship respectively. (a) (b) (c) (d)

Objective: Entrepreneur’s dream and goal (Desires) Context: Future business environment (Opportunities) Idea of Service & Products: Core resources and technologies (Capabilities) Realization: Management of his/her business organization (Capabilities).

(3) Hypothesis 3: Successful entrepreneurs and entrepreneurial companies grow spirally through learning by reflection A successful entrepreneur and an entrepreneurial company grows spirally through learning by reflection. Figure 1.3 shows our Hypothesis 3 on the spiral growth model of value creation process for successful entrepreneurial companies.

12 Fig. 1.3 A spiral growth model of entrepreneurial company

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Objective: Entrepreneur’s dream or goal

Context: Future business environment

Spiral growth: His way of life Reflection and improvement Realization: Management of his business organization

Idea of Service & Product: Resource and technologies

This is a spiral growth model of the value creation process described in Hypothesis 2, which is similar as the KIKI model (Kosaka et al. 2012) of value creation for customers or the SECI model (Nonaka and Takeuchi 1995) of knowledge creation. Through reflecting the result of one cycle, the entrepreneur should learn something to enhance his business. The entrepreneur’s strong willingness or the way of life is important for this spiral growth and is a key factor for successful entrepreneurship. Therefore, the following attribute is also an important factor for entrepreneurship. (e) Spiral growth: His/her way of life, Reflection and improvement (Desires) From the above discussions of three hypotheses, the following 5 attributes are important for value creation for customers and spiral growth in the entrepreneurial company. These 5 attributes are related to three important factors, “Desires”, “Opportunities”, “Capabilities” in entrepreneurship respectively. In each case study, these 5 attributes are analyzed based on collected information on the target entrepreneur. Then, 5 attributes of all cases are compared and analyzed for verifying the hypotheses. (a) Personal aspiration and goals, or objective of entrepreneurial business (Desires) New services or products are developed for achieving his dream or goal. (b) Ability of forecasting the future business environment or future society (Opportunities) If developed services or products have valuable in the future business environment or future society, an entrepreneur can success in his/her business. Therefore, the ability of forecasting the future business environment is very important for entrepreneurs. (c) Core resources or core technologies (Capabilities) Core resources or core technologies are keys for developing services or products. It is important to strengthen core resources or core technologies by technology innovation, M&A, or others. (d) How to manage the company or proceed with the business (Capabilities) In order to establish and develop an entrepreneurial company, the ability of managing his/her organization is important. This ability is related to knowledge management methodology, community creation and so on.

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(e) The way of life and value sense (Desires) Usually, an entrepreneur makes effort to realize dream and goals based on his/her way of life and value sense. Therefore, these two aspects are critical factors for success in business.

1.6 The Contexts and Characteristics of Selected Cases We categorized these selected 12 cases into the following three categories. Part 1 is Entrepreneurship in manufacturing industry, Part 2 is Entrepreneurship in services industry and Part 3 is Entrepreneurship in new business and social innovation. From Chaps. 2 to 13, case studies are conducted as follows. In Part 1 Entrepreneurship in manufacturing industry, 5 cases of entrepreneurs and their companies are selected. Chapter 2 analyzes Mr. Shigenobu Nagamori and his Nidec Corporation, which is No. 1 motor company through developing a knowledge-creating company. This is a remarkable successful entrepreneurship in the Japanese manufacturing industry. Nidec was started by just four people in 1973 as a motor technology company and currently employs over 100,000 people globally. Chapter 3 analyzes Mr. Jun Lei and his Xiaomi. Xiaomi Corporation is a Chinese electronics company headquartered in Beijing. Xiaomi makes and invests in smartphones, mobile apps, laptops, and related consumer electronics. His dream is to build amazing products with honest prices and let everyone enjoy a better life through innovative technology. Chapter 4 analyzes Mr. Guotian Liu and his Jinsida which keeps lucid waters and lushes mountains for next generations. Guotian Liu is the chairman of the Jinsida Group of more than 10 companies in China. He is the former known ‘king of textile printing and dyeing’, the later ‘king of seeding and tree planting’ and the current ‘environment protection expert’. Chapter 5 analyzes Mr. Kenny Lin and his Thermaltake Technology Co. in Taiwan. Thermaltake Technology Co. Ltd. was established in 1999. When Kenny Lin established company, it was located in the car garage and only had one employee. While developing in the PC cooling system business, it gradually changed to an IT company integrating PC peripheral products R&D, production and sales. Thermaltake has become the leading brand in computer hardware & peripherals in the PC DIY and MOD market and the best choices for PC DIY enthusiasts worldwide. Chapter 6 analyzes Mr. Qian Wang and his Taibei Environmental Protection Equipment Ltd. Co.. One of successful environmental protection enterprises in China is Shandong Taibei Environmental Protection Equipment Limited Company which is a national designation innovative technology enterprise to produce pure water firstly and then change to produce sewage equipment and waste gas treatment equipment.

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In Part 2 Entrepreneurship in services industry, 4 cases of entrepreneurs and their companies are selected. Chapter 7 analyzes Mr. Dato Michael Tio and PKT Logistics, which is a knowledge creating service company growing into a global logistics company. PKT Logistics Group Sdn Bhd. is a leading logistics company not only in Malaysia but also in the Asia-Pacific region. To reach this position, PKT had to differentiate itself by changing its business philosophy from the standard to the service concept perspective. The leadership of Dato Michael Tio, Group Chief Executive & MD of the company, was behind this change and the eventual success of PKT. Chapter 8 analyzes Airlock Digital and an entrepreneurial journey of three Australians. Airlock Digital offers quality software and tailored cyber-security solutions. For over 5 years the company has grown incrementally with the product having found its product-market-fit across the globe. Airlock Digital has now expanded outside of Australia and is transitioning from a start-up to a scale-up. Chapter 9 analyzes Mr. Toshikazu Saito and his RENAISSANCE, which deals with sports club, a sport and health business to help people realize an active, healthy lifestyle. This case shows new values reflecting the transition in the demands of the times through an in-house venture business. This is also an interesting example of an advanced service model that provides people a place as a sports club and as a community. Chapter 10 analyzes Mr. Shigemi Kawahara and his IPPUDO. Shigemi Kawahara, the founder of famous ramen shop IPPUDO in Japan, shows eagerness with saying “I want to spread ramen from Japan to all over the world, and take the initiative to overseas deployment.” He opened their first shop in Fukuoka city Japan in 1985 and expanded to New York City in the United States in 2008. In Part 3 Entrepreneurship in new business and social innovation, 3 cases of entrepreneurs and their companies are selected. Chapter 11 analyzes Mr. Tri Nguyen and MimosaTek which is promoting Vietnamese agriculture by IoT (Internet of Things) application. Vietnam has a long history and tradition of doing agriculture. Its economics has been dominated by the agriculture sector. From the vision of changing the awareness of doing agriculture, MimosaTek provides the precision irrigation solution toward to successful and sustainable cultivation. By applying IoT on farming, the organization aims to form a strong foundation for promoting farming activities in Vietnam. Chapter 12 analyzes Mr. Daisuke Teshima and his TRIFE Inc. which is creating a new business to support the elderly and handicapped. This is a very unique new business targeting the elderly or handicapped people, who are generally referred to as “the weak.” Daisuke Teshima started the oral care product “ORALPEACE” (toothpaste and oral care gel, mouth spray and wash). The product is made from 100% natural raw ingredients and is even safe to eat, and is sold at elderly nursing homes, care facilities for the handicapped in which elderly or handicapped people are present. Chapter 13 analyzes Mr. Masanori Kamiguchi and his Kayoutei as a social innovation for regional activation. His concept of Kayoutei as a Ryokan (Japanese style inn) is “A ryokan is a place where local cultures gather together”. Kayoutei’s activ-

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ity is one of successful social innovation for regional activation, which is one of important issues due to aging problem in local areas in Japan. By looking into different case examples and comparing those across categories, readers can gain insights into and draw inference from what to do, how to do, and what opportunities to catch for creating new business and developing new companies. For business leaders and entrepreneurs in the region, the first-hand information from fieldwork presented in the book may help them to develop informed business strategies and policy decisions can be made for effectively fostering business innovation. We also hope that this book can provide practical research materials for scholars focusing on entrepreneurship, knowledge management, innovation management and service science.

References Ahmed, A., & McQuaid, R.W. (2005). Entrepreneurship, management, and sustainable development. World review of Entrepreneurship, management and Sustainable Development, 1(1), 6–30. Baba, S. (2014). A study on the component of the entrepreneurship: Correlation analysis of the entrepreneurship, and the interest rate (In Japanese). Rikkyo DBA Journal, 4, 79–95. Barringer, B.R., & Bluedorn, A.C. (1999). The relationship between corporate entrepreneurship and strategic management. Strategic Management Journal, 20, 421–444. Baumol, W.J. (2002). Entrepreneurship, innovation and growth: The David-Goliath symbiosis. Journal of Entrepreneurial Finance, 7(2), 1–10. Bruton, G.D., Ahlstrom, D., Li, H.L. (2010). Institutional Theory and Entrepreneurship: Where Are We Now and Where Do We Need to Move in the Future?. Entrepreneurship Theory and Practice, 421–440. Chen, X. P., Yao, X., Kotha, S. (2009). Entrepreneur Passion and Preparedness in Business Plan Presentations: A Persuasion Analysis of Venture Capitalists’ Funding Decisions. Academy of Management Journal, 52(1), 199–214. Davidsson, P. (2015). Entrepreneurial opportunities and the entrepreneurship nexus: A reconceptualization. Journal of Business Venturing, 30, 674–695. Eckhardt, J.T., & Shane, S.A. (2003). Opportunities and Entrepreneurship. Journal of Management, 29(3), 333–349. Frese, M. (2009). Toward a Psychology of Entrepreneurship – An Action Theory Perspective. Foundations and Trends in Entrepreneurship, 5(6), 437–496. George, G., & Bock, A. J. (2011). The Business Model in Practice and its Implications for Entrepreneurship Research. Entrepreneurship: Theory and Practice, 35 (1), 83–111. Hmieleski, K. M., & Carr, J.C. (2008). The Relationship between Entrepreneur Psychological Captal and New Venture Performance. Frontiers of Entrepreneurship Research, 28(4), 1–15. Honig, B. (2004). Entrepreneurship Education: Toward a Model of Contingency-Based Business Planning. Academy of Management Learning and Education, 3(3), 258–273. Ireland, R.D., & Webb, J.W. (2007). Strategic entrepreneurship: Creating competitive advantage through streams of innovation. Business Horizon, 50, 49–59. Isaacson, W. (2012). The real leadership lessons of Steve Jobs. Harvard Business Review, April 2012, 93–102. Iversen, J., Jorgensen, R., Malchow-Moller, N. (2008). Defining and Measuring Entrepreneurship. Foundations and Trends in Entrepreneurship, 4(1), 1–63.

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Kenny, M., & Goe, W.R. (2004). The role of social embeddedness in professional entrepreneurship: a comparison of electrical engineering and computer science at UC Berkeley and Stanford. Research policy, 33, 691–707. King, R.G., & Levine, R. (1993). Finance, entrepreneurship, and growth. Journal of Monetary Economics, 32, 513–542. Kosaka, M., Doan, M. C., Shirahada K., Wang, J. (2013). A Service Field Concept for Service Value Creation. Springer Proceedings in Complexity, The 8th International conference on Knowledge Management in Organizations, Springer, 13–23. Kosaka, M., & Wang, J. (2016). A Conceptual Model of Optimizing Service System for the 3rd Generation Service Innovation. Knowledge and Systems Sciences, Volume 660 of the series communications in Computer and Information Science, Springer, 68–81. Kosaka, M., Zhang, Q., Dong, W., Wang, J. (2012). Service value co-creation model considering experience based on service field concept. IEEE International Conference on Service System and Service management (ICSSSM2012), Shanghai, July. Kubo, R. (2005). Entrepreneurial Orientation: The Dimensions of Strategic Orientation” (in Japanese). Kyoto management Journal, 8, 71–84. Li, W. (2014). Sense of Participation [M]. Beijing: China Citic Press. Lusch, R. F., & Vargo, S. L. (2006). The service dominant logic of marketing, Armonk, New York: M. E. Sharpe, Inc.. Mutoh, N. (2015). Entrepreneur in the era of globalization” (in Japanese). Journal of Toho Gakuen, 44(1), 1–15. Nagamori, S. (2005). Management based on 「Passion, Enthusiasm, Tenacity」 (in Japanese), Japan: PHP Institute. Nonaka, I., & Katsumi, A. (2004). The essence of innovation (in Japanese), Japan: Nikkei BP. Nonaka, I., & Takeuchi, H. (1995). The Knowledge-Creating Company, New York: Oxford University Press, Inc. Nonaka, I., Toyama, R., Hirata, T. (2008). Managing Flow, Palgrave Macmillan. Nonaka, I., Krogh, G., Voelpel, S. (2009). Organizational Knowledge Creation Theory: Evolutionary Paths and Future Advances. Organization Studies, 27(8), 1179–1208. Onetti, A., Zucchella, A., Jones, M.V., McDougall-Covin, P.P. (2010). Internationalization, innovation and entrepreneurship: business models for new technology-based firms. Journal of management and Governance, Springer, published online:10 August 2010. Phan, P.H. (2004). Entrepreneurship theory: possibilities and future directions. Journal of Business Venturing 19, Elsevier, 617–620. Schaltegger, S., & Wagner, M. (2011). Sustainable Entrepreneurship and Sustainability Innovation: Categories and Interactions. Business strategy and the Environment, 20, 222–237. Scott, A.J. (2006). Entrepreneurship, Innovation and Industrial Development: Geography and the Creative Field Revisited. Small Business Economics, 26(1), 1–24. Shane, S. (2000). Prior Knowledge and the Discovery of Entrepreneurial Opportunities. ORGANIZATION SCIENCE, 11(4), 448–469. Shane, S., & Venkataraman, S. (2000). The promise of entrepreneurship as a field of research. Academy of Management Review, 25(1), 217–226. Stevenson, H.H., & Jarillo, J.C. (1990). A paradigm of entrepreneurship: Entrepreneurial management. Strategic Management Journal, 11, 17–27. Sarasvathy, S. D., Dew, N., Velamuri, S.R., Venkataraman, S. (2003). Three Views of Entrepreneurial Opportunity. Handbook of Entrepreneurship Research, Kluwer Law International, 141–160. Trimi, S., & Berbegal-Mirabent, J. (2012). Business model innovation in entrepreneurship. International Entrepreneurship Management Journal, 8, 449–465. Vargo, S.L., & Lusch, R.F. (2004). Evolving to a new dominant logic for marketing. J. of Marketing, 68, 1–17.

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Wang, J., Kosaka, M., Xing, K. (2016). Manufacturing servitization in the Asia-Pacific, Springer Science+Business Media Singapore. Wong, P.K., Ho, Y.P., Autio, E. (2005). Entrepreneurship, Innovation and Economic Growth: Evidence from GEM data. Small Business Economics, 24, 335–350.

Part I

Entrepreneurship in Manufacturing Industry

Chapter 2

Shigenobu Nagamori and Nidec Corporation—Realize No. 1 Motor Company Through Developing a Knowledge-Creating Company Michitaka Kosaka and Yong Nie

2.1 Introduction The Japanese manufacturing industry has many examples of successful entrepreneurships. For example, Hitachi, Ltd. (started by Namihei Odaira), Honda (started by Soichiro Honda), and Sony (started by Akio Morita and Masaru Ibuka) were originally small venture companies that expanded globally through their leaders’ entrepreneurship. However, there were few successful entrepreneurships in the manufacturing industry after the high economic growth period from the 1960s to the 1970s. Venture companies struggled to find new business in manufacturing because large established companies controlled the market with their advanced technologies and considerable amount of capital in Japan. In such a business climate, Nidec Corporation, established by Shigenobu Nagamori, became a remarkable example of successful entrepreneurship in the Japanese manufacturing industry. Nidec was started by just four people in 1973 as a motor technology company and currently employs over 100,000 people globally. How could Nidec grow successfully? There are several reasons for its success. Nidec focused on small precision motors for HDDs (hard disk drives) in information equipment such as PCs, which big companies did not notice initially. Therefore, Nidec could rapidly develop alongside the international growth of business for PCs and data storage. Moreover, the Nidec Group has expanded their motor business from information devices to various applications such as cars and robots through mergers and acquisitions (M&A). This shows Nagamori’s excellent ability to forecast business trends. An important factor to his success is that he has considered the global market since the beginning of Nidec. However, we feel that the essence of Nidec’s growth is “Nagamori-ism,” which is his philosophy and methodology of managing his company. M. Kosaka (B) · Y. Nie Japan Advanced Institute of Science and Technology, Nomi, Japan e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_2

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In this chapter, we investigate the essence of Nagamori-ism from the viewpoint of Nonaka’s knowledge science (Nonaka and Takeuchi 1995; Nonaka and Katsumi 2004; Nonaka et al. 2008) and conclude that Nidec is a knowledge-creating company. The content of this chapter was developed based on several pieces of literature listed in References and on the Nidec website, some of which were written by Nagamori himself (Nagamori 1998, 2005, 2008).

2.2 Nidec’s Current Business Situation First, we introduce the current business situation of the Nidec Group according to their website (https://www.nidec.com/en-Global/corporate/about/outline/). Their business ranges from small precision motors for information devices to larger motors for cars and industrial equipment, and includes various other parts and components such as machinery and electronic & optical components, as well as solutions related to their motor products. The total amount of sales in the fiscal year 2017 was nearly 1.5 trillion yen. The structure of their business is shown in Fig. 2.1. Currently, the motor business for automotive, appliance, commercial and industrial applications is larger than for small precision motors for HDDs or other information equipment, which had its greatest business in 2000–2009. In the fiscal year 2017, sales was 1.488 trillion Japanese yen, a 24% increase from the previous fiscal year. This is the result of them shifting their business into the growing business field of electric vehicles (EV) through M&A and technology development. The total number of employees was 107,554 at the end of March 2018. Nagamori is looking at the brilliant future of the motor business in the era of the internet of things (IoT), factory automation and robots and is aiming at sales of 10 trillion Japanese yen by 2030. Recently, he said that Nidec needs to improve productivity in order to achieve

Fig. 2.1 Business structure of the Nidec Group (FY2017)

2 Shigenobu Nagamori and Nidec Corporation …

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this objective. He thinks that reforming the company’s working style and improving global communication are essential for Nidec’s evolution.

2.3 History of Shigenobu Nagamori Before Starting Nidec Shigenobu Nagamori’s current photograph is shown in Fig. 2.2. He was born in August 1944, the youngest of six children in a poor farmer’s family in the Kyoto countryside. In elementary school, he had a friend whose family was very rich and whose father was a president of a company. His clothes and meals were completely different from those of Nagamori’s poor life. Nagamori thought that if he could become a president then he could eat delicious food as often as he wanted. For this reason, he strongly desired to become a president in the future. Also, his teacher praised him for making the best rotating motor in his fourth grade elementary science class. Due to this event, he became interested in motors and liked them very much; it made him want to know more about them. His desire to become a president and his interest in motors in his elementary school years became key to the development of Nidec. Fig. 2.2 Shigenobu Nagamori’s photograph

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Because his family was poor he was asked to work after graduating junior high school, but since he was an outstanding pupil and had the top score in his class, his teacher recommended that he go to high school. He enrolled in the electrical department of a technical high school with a scholarship. After graduating, he then enrolled in the Polytechnic University of Japan because its tuition fee was not high and he had a scholarship. He devoted himself to learning electrical technology there. At that time, he decided to start a company and become a president before he was 35 years old. He formed two important concepts during his school days, “hungry spirit” and “entrepreneurship.” During his school days, Nagamori had two important experiences that helped him learn about starting a company. One was earning money by managing a tutoring school for elementary and junior high school pupils. The monthly tuition fee was 400 Japanese yen and there were over 80 pupils, so he earned over three times the starting salary for university graduates at that time. Another was investing his extra money in the stock market. He studied the financial statements of companies for a good return on his investment. The money he earned became part of the 20 million Japanese yen used as capital to start his company. Through these experiences, he mastered the abilities to earn and invest money and to estimate management situations using numerical data, which are basic abilities for managing a company. After graduating from university, Nagamori joined TEAC Corporation, a big audio product manufacturer, after his supervisor at university recommended it. His goal was to study companies from the inside before starting his own business. He engaged in the development of motor technologies. Next, he was the youngest manager of the newly established motor section at Yamashina Seiki Co., Ltd. at 26 years old. He was greatly successful at this company and was confident that he could successfully develop new products with his motor technology experience. He decided to start his company in 1973. In Japan, there was an oil crisis in 1973, and that year was a turning point for the high-growth economy. Applying the Japanese proverb “a hero will arise in a troubled era” to Nagamori implies that he became a hero by starting Nidec successfully in a troubled era.

2.4 Development of Nidec Corporation In 1973, Nagamori and three colleagues established Nidec with the goal of becoming No. 1 in the world. It was a small venture company with just four engineers and no material assets. Figure 2.3 shows the prefabricated hut that served as a factory during the early days, which is displayed in the exhibition room of Nidec’s head office. Figure 2.4 shows young Mr. Nagamori (lower left side) and some of his colleagues. Nidec Corporation has grown into a large global company in the 45 years since its start. Now, the company has over 100,000 employees, and its consolidated net sales is close to 1.5 trillion yen. The headquarter building of Nidec Corporation, which is shown in Fig. 2.5, is located in Kyoto.

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Fig. 2.3 The prefabricated hut

Fig. 2.4 Mr. Nagamori (lower left side)

According to his message in his book, “companies need to molt to grow,” so Nidec has been changing its business portfolio depending on its business environment. The history and characteristics of Nidec can be categorized into the following four phases: Phase 1: Start-up period—from starting business to being listed on the stock exchange Phase 2: Growth period—entry into small precision motors business for HDDs and growth Phase 3: Acceleration period—acceleration of growth strategy by M&A Phase 4: Recovery and expansion period—recovery from the “Lehman shock” and expanding motor business into other growing business areas. Phase 3 (M&A) is still an important growth strategy and is executed concurrently with Phase 4.

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Fig. 2.5 The headquarter building of Nidec

(1) Phase 1: Start-up Period—From Starting Business to Being Listed on the Stock Exchange In 1973, Nagamori and three other engineers started Nidec Corporation making small precision motors. Nagamori’s way of thinking and Nidec’s experiences during Phase 1 were described extensively in the book (Nagamori 2008: new edition) he wrote in 1983. His way of thinking at the start is the foundation of Nidec’s prosperity. We summarize the content of this book as follows. There were several big issues in the beginning. Nagamori was confident that his motor technology was No. 1 in the world, but new employees hired during the startup period did not have enough knowledge of or experience with motors. So, a big issue was bringing unskilled people up to a high standard. Therefore, he came up with his human resources development policy that is described later. Regarding the business climate at start-up, the Japanese business practice of emphasizing successful achievements was very pervasive, so Nidec could not get any orders from Japanese customers due to having no record of success. Therefore, he started to find customers in the U.S.A., getting an order from 3 M for 1000 small motors for cassette tape duplicators. This was the first big business for Nidec. During the 1–2 years after start-up, 97–98% of sales were from exports. Then, orders from

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Japanese companies gradually increased after they found out that Nidec successfully did business with large companies in the U.S.A. Thus, Nidec’s reputation grew both inside and outside of Japan. In order to satisfy their many customers’ needs, Nidec built a new factory in Kameoka city 19 months after starting up. Another big issue at start-up was money. A bridging loan was necessary until company management got on track. Nagamori’s basic policy was to borrow from a financial organization that was the hardest to borrow from. In order to get loans from such a financial organization, good information and a good manager were necessary for persuasion. He experienced a lot and learned that “negotiations with banks might be hard now, but you must try tenaciously in order to get successful results.” During the painful first five years (1973–1978), there were many serious issues, such as human resources, facilities, insufficient funds, etc., although company management was starting to take off. He solved them as he went. After getting over the painful first five years, Nidec Corporation became a medium-sized company that had about 200 employees and 4.1 billion Japanese yen in sales in the fiscal year 1982. After that, the company name “Nidec Corporation” became well known to leading computer manufacturers because Nidec was the first in the world to commercialize spindle motors for HDDs. They had no rival in this technical field. In the 1980s, Nidec produced top-market-share products using this technology in a business climate where personal computers were widespread. During Phase 1, the two basic mainstays of the current Nidec Corporation were formed. One is their three management principles and the other is their human resources development policy. Three Management Principles When starting up, Nagamori studied established organizations and businesses and set the motto “do what others do not do.” He considered possible obstacles when people do what others do not do and came up with the following three management principles: (a) Manage the company while always thinking “a company is a public institution of society.” (Do not do family management. Do not use the company for personal gain.) (b) Develop technology by ourselves. Produce products by ourselves. Sell products by ourselves. Emphasize originality. (Do not be a subcontractor of large companies.) (c) Compete with global companies in the world market by developing world-class products. (Make efforts to realize Nidec as an international company.) These three management principles are unchangeable management guidelines in Nidec even now.

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Human Resources Development Policy Nagamori considered the following three things important for Nidec’s human resources development policy: human ability, time, and scolding. As a small enterprise, Nidec could only hire third- or fourth-class people with regards to their school records. What should Nidec do to bring third- or fourth-class people up to being first-class? This question was the starting point of Nidec’s human resources development policy. When recruiting new graduates during the start-up period, Nidec evaluated enthusiasm, motivation, and compatibility with Nidec’s values instead of school records. For example, they conducted a loud voice test in which people who shouted loudly were hired, a speed-eating test in which people who ate fast were hired, and a toilet cleaning test in which people who cleaned a toilet best were hired. After that, the issue was how to cultivate these people. Nagamori encouraged motivated people to feel they could do anything and to always make an effort. He also thought that time was important as well as enthusiasm to his job. Time was given equally to everyone and every company. He believed that if employees worked twice as long as rival companies, then development would be faster and the delivery date shorter. The final important point is to scold. In Nidec, an act of scolding means that the top managers point out insufficiencies or inappropriate approaches to objectives, which is usually difficult to be recognized by people working in projects. Nagamori also determined whether the person shared the same values or not through their responses to scolding. The basis of Nagamori-ism, “do it now; do it without hesitation; do it until completed” was the human resources development policy at start-up of Nidec. Nagamori had learned from his experiences that “passion, enthusiasm, and tenacity” are indispensable for creating the new knowledge required in the company. (2) Phase 2: Growth Period—Entry into Small Precision Motors Business for HDD and Growth The major reason for Nidec’s growth was the small precision motor business for personal computers, which was key to the growing information business and other new businesses that emerged. The characteristics of the small precision motor business were that there were short delivery terms and it was time-consuming. Therefore, other companies did not enter this business at the time. But this business has expanded rapidly from the global information business growth in the 1980s. Thus, although it can be said that Nidec was blessed by the times and luck, the company’s success owes a lot to Nagamori’s excellent insight into growing business areas. Currently, Nidec has an over 80% global market share in the small precision motor business for HDDs. Nidec motors for HDDs are shown in Fig. 2.6. The history of Nidec’s launching of spindle motors for HDDs in the late 20th century is as follows:

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Fig. 2.6 HDD base plates with Nidec motors

1979 1981 1984 1988 1992 1994

Start of production: spindle motor for 8 in. HDD Start of production: spindle motor for 5.25 in. HDD Start of production: spindle motor for 3.5 in. HDD Start of production: spindle motor for 2.5 in. HDD Start of production: spindle motor for 1.8 in. HDD and for 1.3 in. HDD Shipment: world’s first spindle motor with fluid dynamic bearing (FDB) for 1.8 in. HDD 1998 Start of production: spindle motor for 1.0 in. HDD 2000 Start of full-scale mass production: FDB motors. Thus, Nidec has been developing and producing small precision motors according to the miniaturization of HDDs. Yasuda and Sakazume (2011) analyzed the success factors of Nidec’s motor business for HDDs using product architecture theory. According to this research, there are two patterns in Nidec’s corporate behavior for the HDD motor business. One is adaptive behavior for customers’ requirements and is considered to be important during the high degree of the outer integral in product architecture theory, which requires adjusting with customers. This corporate behavior is based on Nidec’s corporate culture of “do it now; do it without hesitation; do it until completed” for customers’ requirements and adjustments with customers in the made-in market. The other is proactive behavior emphasizing technology as a motor product company during the low degree of the outer integral and a high degree of modularity. In this case, Nidec won HDD motor business over rivals through good insight into technology trends, technology integration by M&A, a low product price strategy, and a patent strategy. These corporate behaviors contributed to the 80% market share of the small precision motors business for HDD. According to such analysis, the following abilities are contributors to their business success:

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(a) Ability to adapt to accommodate customers’ requirements (corporate culture) (b) Excellent insight into technology trends in the motor business and M&A strategies based on top management’s insight into technical capabilities (c) Management’s ability to integrate both (a) and (b) to promote good business. (3) Phase 3: Acceleration Period—Acceleration of Growth Strategy by M&A Since the late 1990s, Nidec has been expanding their business through M&A. Table 2.1 shows the history of M&A and the consolidated net sales of the Nidec Group. There is a high correlation between the number of M&A and the consolidated net sales. It is believed that the success of M&A strategies strongly contributes to the rapid growth of the Nidec Group. Table 2.1 Number of M&A and consolidated sales Fiscal year

M&A number

M&A number

M&A

Consolidated

(Japanese)

(Foreign)

Total number

Sales (10B yen)

~1995

7

2

9

7.5

1996

1

0

1

9.1

1997

6

1

7

11.6

1998

1

0

1

13.3

1999

3

0

3

13.9

2000

0

1

1

24.9

2001

0

0

0

28.1

2002

0

0

0

29.9

2003

1

0

1

32.9

2004

0

0

0

48.6

2005

0

0

0

53.7

2006

1

2

3

63.0

2007

1

0

1

74.2

2008

0

0

0

59.3

2009

0

2

2

57.2

2010

0

1

1

67.6

2011

1

0

1

68.2

2012

0

6

6

70.9

2013

2

0

2

87.5

2014

0

1

1

102.8

2015

0

6

6

117.8

2016

0

6

6

119.9

2017

1

4

5

148.8

Total

25

32

57

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Yoshikawa (2010) analyzed the “M&A strategy of Nidec from the viewpoint of marginal profit type managerial accounting” and pointed out that the following 4 points are important for success in Nidec M&A: (a) Nidec considers technical capability (technical talent value) important. To meet the M&A criteria, it is determined whether it is better for Nidec to create highlevel technicians in the firm or if they should obtain high-level technicians through M&A. (b) Nidec expects a high level of synergy between technology and sales with M&A. This means that the synergy between current technologies and the sales channel of Nidec Group and those of M&A companies is an important criteria for M&A. (c) Nidec selects M&A targets that have advanced technology but have performed poorly in business due to inefficiently operating their factories. If a company has technical capability then it is not difficult to improve its profitability by enhancing its management ability. (d) Nidec has a clear standard for M&A acquisition costs. Nidec patiently negotiates until their requirements are satisfied for M&A. If the acquisition cost is higher than Nidec’s quote, then Nidec does not carry out M&A. Nidec aims for the following short-term synergy effects by M&A: (a) Increase consolidated net sales through a company acquired by the Nidec Group (b) Reduce procurement costs through joint purchases in the Nidec Group (c) Reduce fixed assets through efficient utilization of the Nidec Group’s fixed assets (d) Reduce interest rate by applying the standard interest rate of the Nidec Group. Nidec’s medium- and long-term aims for synergy are to increase consolidated net sales by making new products, gaining new customers, and entering new markets by integrating the technical capabilities of acquired companies with the management expertise of Nidec. In order to do this, it is necessary to change the corporate structure of acquired companies. Post-merger integration (PMI) after M&A is important for the success of M&A. This is an important corporate strategy of Nidec that is discussed in a later section. (4) Phase 4: Recovery and Expansion Period—Recovery from the “Lehman Shock” and Expanding Motor Business into Other Growing Business Areas The “Lehman shock,” as it is known in Japan, was a 2008 global economic crisis that significantly influenced Nidec. As shown in Table 2.1, sales decreased, business performance took a downward turn, and a temporary pay cut was enacted. Nagamori read literature related to the 1929 world financial crisis, “Black Tuesday” and started a new company-wide project called the “WPR (Double Profit Ratio) Project.” The aims of WPR are: (a) Conversion to a revenue structure that can make a profit even if the consolidated net sales are half the previous peak sales.

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(b) The revenue structure can achieve the profit of the previous peak sales if the consolidated net sales recover to 75% of peak sales. (c) The revenue structure can achieve double the profit of the previous peak sales if the consolidated net sales recover to the level of the previous peak sales. He considered the “Lehman shock” to be a good chance to change a struggle into an opportunity for Nidec. He thought, “If the sales return to 100% of peak sales and the profits are the same as the previous level, it means that we cannot make use of this chance provided by this great recession.” In order to achieve WPR, employees of Nidec Group all over the world proposed ideas that could reduce any cost. Then, effective ideas for achieving WPR were adopted and manualized. This corporate knowledge was shared within the Nidec Group internationally and there were active discussions on how to realize WPR. Through such activities, Nidec was able to recover from the “Lehman shock” and become a big business group with over 1 trillion Japanese yen of consolidated sales. Nidec’s growth strategy is accelerated by combining its organic growth and M&A strategy. Its automotive, home appliance, commercial, and industry motor businesses are expanding in particular, as shown in Table 2.2. At the announcement of the financial statement between April–June 2017 (The Nikkei), Nagamori showed great confidence in the growth of the automotive motors business and explained factors of revenue growth such as “the lead role has changed from small precision motors to automotive motors, industry motors, etc.” Though small precision motors for HDDs have been the main focus of Nidec’s business until recently, the current business climate is not favorable because the demand for personal computers has not grown. Therefore, because the demand for electric vehicles is expanding, Nagamori quickly shifted the chief axis of Nidec’s business from small precision motors to automotive motors. Figure 2.7 shows an example of automotive motors. Nidec’s recent exceptional business performance is the result of this diversification, reflecting Nagamori’s excellent insight into future business trends. Nidec is Table 2.2 Sales of small precision motors and automotive, home appliance, commercial, industry motors (10B yen)

Fiscal year

Small precision motor sales

Automotive, etc. new fields sales

2008

30.9

2009

35.4

9.4

2010

34.8

16.3

2011

33.1

20.9

2012

32.0

24.8

2013

36.3

34.5

2014

39.8

46.0

2015

44.8

55.5

2016

43.7

57.2

2017

45.2

81.4

7.7

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Fig. 2.7 A traction motor system for cars

also looking at new areas of business; that is, factory automation and robotics as prospective fields of business for supplying motors. The future business target is 10 trillion Japanese yen of consolidated sales. Another current target for Nidec is reducing overtime work to zero by 2020 by reforming their working style. This innovative working style aims at improving productivity as a global company. “Working hard and smart” is the corporate culture of Nidec. Nagamori explained that Nidec maintains this culture and that work productivity is more important than working longer (Nagamori and Iga 2017). Nidec is trying to become an excellent global company from the perspective of being highly profitable while having a highly productive working style.

2.5 Corporate Slogan, Investment into R&D and Approach to New Fields (1) Corporate Slogan Aiming at Dreams The corporate slogan of Nidec is “All for dreams.” The corporate statement is as follows: We begin with dreams. Dreams drive our motivation. Dreams are our future. The world’s dreams, people’s dreams, our dreams. Our passion creates ideas that make dreams come alive. Technology and products that were only dreams become reality. All for dreams. Dreams challenge and the Nidec-Group will continue to meet the challenge. For the world’s and people’s tomorrows, the world’s first, the world’s best technologies and products, we will continue our part in creating a better society (https://www.nidec.com/en-Global/corporate/about/slogan/).

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(2) Investment into R&D for Future Fields Currently, Nidec is investing into research and development (R&D) to realize its vision. To meet the goal of becoming the No. 1 manufacturer of comprehensive drive technology in the world, Nidec runs R&D bases in order to contribute to a wide range of industrial sectors through global collaboration. For example, Nidec Research and Development Center in Kawasaki, Japan was founded in June 2012 and aims to enhance and fortify basic research and expand their technologies into the following applied fields (https://www.nidec.com/en-Global/product/new_field/) in cooperation with other Nidec R&D centers in Singapore and Taiwan. (a) The Internet of Things (IoT) In the era of IoT, motors that are the backbone of the 21st century industry are used for production equipment as well as in everyday life applications and will assume a crucial role in the coming age of IoT, not only as actuators but also as sensors generating the data sets that constitute big data. In response to such global trends as Industry 4.0, Nidec is actively seeking to create new solutions by combining its hardware capabilities—centered on motors, motor-based modules, robots, and other manufacturing and inspection equipment supplied and used around the world—with big data analysis functions and other software making use of IoT. By promoting the emergence of IoT, the Nidec Group aims to help further increase the efficiency of the infrastructure of our society. (b) Service Robots A substantial increase in service robots that make up for the labor shortage caused by factors such as the declining birthrate and aging population is expected in the future. Service robots work in a wide range of everyday life settings, making it essential to ensure safe operation and compatibility with diverse situations that can arise from human interaction. According to the Japan Patent Office, the global market for service robots is estimated to reach 4.1 trillion JPY by 2020, while the Japanese domestic market alone is slated to grow to 3.6 trillion JPY by 2030, as reported by NEDO (New Energy and Industrial Technology Development Organization, Japan). The Nidec Group possesses a wide range of technologies for developing and producing the components, modules, and units that make up service robots. In addition to their lineup of motors, they are also capable of providing component-level, modulelevel, and unit-level solutions incorporating gears, sensors, drives, and controllers. Figure 2.8 shows examples of Nidec components for service robots.

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Fig. 2.8 Nidec components for service robots

(c) Motors for Cleaning Robots Although many of the drive motors in cleaning robots are brush motors, they are now increasingly being replaced by highly efficient, small, lightweight, low-noise, longlife, brushless DC Nidec motors. Brushless blower motors are particularly capable of absorbing dust during high-speed rotation. (d) Automatic Guided Vehicle Systems Although automatic guided vehicles (AGVs) are currently being used mainly in manufacturing-related applications, the market for AGVs is expected to grow significantly in the coming years. The capabilities of the Nidec Group allow them to supply both individual components and combined units, such as drive units, integrating brushless DC motors, high precision reduction gears, sensors, and other assets. Furthermore, we are also developing a new type of smart AGVs equipped with a number of advanced features, such as IoT capabilities. (e) Autonomous Driving Technology Advanced driver assistance systems (ADAS) have emerged as milestones in the pursuit of these objectives. As the functions that make up ADAS become more widespread, fully autonomous driving is the next innovation that will change the way we drive. With the advent of combined and integrated driver-assistance functions, ADAS-supported driving is expected to gradually reduce human driver participation and evolve into completely autonomous driving. The Nidec Group combines the capabilities of its individual companies to shape the future of autonomous driving with advanced sensing devices and recognition algorithms, the keys to bridging the gap between ADAS and fully autonomous driving. Nidec aims to achieve 2 trillion Japanese yen in consolidated net sales in 2020 and 10 trillion Japanese yen in 2030 by combining new technologies developed in its own R&D organization and acquired technologies through M&A.

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2.6 A Success Factor for the Growth of the Nidec Group—Knowledge-Creating Company 2.6.1 Nidec’s Growth Process and Nonaka’s Knowledge-Creating Company Model Nidec’s growth process can be considered a method of developing into a knowledgecreating company, shown in Fig. 2.9 from the viewpoint of knowledge science. The knowledge-creating company model for Nidec consists of the following four sub-models: (1) Phase 1: Knowledge-Creating Company Core Model The knowledge-creating company core model for Nidec is introduced in Nonaka’s model of the knowledge-based firm (Nonaka et al. 2008, Fig. 2.2). In this model, required knowledge is created in order to achieve driving objectives through repeating dialogue and practice. This knowledge-creating company core model has been formed as Nidec’s core asset from start-up. Many messages from Nagamori indicate how to develop Nidec as a knowledge-creating company, which is explained in Sect. 2.6.2. (2) Phase 2: Porting the Knowledge-Creating Company Core Model to M&A Companies Nidec’s current growth depends on the success of their M&A strategy. Transferring the knowledge-creating company core model of Nidec smoothly to acquired (2) Transferring the core model to companies by M&A

(1) Knowledge creating company core model Vision (What)

Vision (What) Tacit knowledge

Tacit knowledge Knowledge asset

B:Driving

Dialogue (Why)

D:Review by top managers

D : Review by top managers

process

Ba (Dynamical context)

A : Environment : Corporate culture, soil for knowledge creation

Ba (Dynamical context)

A: Environment : Corporate culture, soil for knowledge creation

Create tacit knowledge

(4) Review and suggestion by top managers

C : Knowledge creating process

Explicit knowledge

C:Knowledge creating Explicit knowledge

B : Driving objectives

Practice (How)

objectives Practice (How)

Dialogue (Why)

Knowledge asset

Learn and practice corporate knowledge

(3) Knowledge creating among Nidec group (SECI model) Socialization Externalization Transform to (S) (E) explicit knowledge

Internalization Combination (I) (C)

Fig. 2.9 Knowledge-creating company model of the Nidec Group

Systematize as corporate knowledge

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companies by M&A is considered the main reason for this success. By transferring the model, acquired companies can improve their productivity and business performance. This transfer process is explained metaphorically using the Yozan-Uesugi restoration in the Edo period, which is explained in Sect. 2.6.3. (3) Phase 3: Knowledge Creation among Nidec Group Companies (SECI Model) There are many companies acquired by M&A in the Nidec Group. The knowledgecreating company model SECI—socialization, externalization, combination, internalization—developed by Nonaka and Takeuchi (1995) has been carried out in order to share the companies’ best practices and increase the effects of synergy among group companies. A typical example was the WPR project after the “Lehman shock.” This is explained in Sect. 2.6.4. (4) All Phases: Reviews and Suggestions by Top Managers Nagamori checks the situation of a knowledge-creating company and controls the process of knowledge creation by scolding appropriately. His evaluation criteria seem to be based on the unbeaten philosophy “The art of war” by Sun Tzu. This is explained in Sect. 2.6.5.

2.6.2 Phase 1: Knowledge-Creating Company Core Model According to Nonaka’s model shown in Fig. 2.9, the knowledge-creating company core model consists of 4 parts (A, B, C, D). In Nidec’s case, (A) is to cultivate corporate culture and soil for knowledge-creation, (B) set the maximum driving objectives that can be reached, (C) create knowledge for achieving the driving objectives with emphasis on speed, and (D) have these three parts reviewed by top managers. Nagamori’s messages in his books (Nagamori 1998, 2005, 2008)—referred to as “Nagamori-ism”—can be categorized into the following 4 parts. These facts show that he has been aiming at a knowledge-creating company. A. Environment: Corporate Culture and Soil for Knowledge-Creation (Passion for Human Resources Development and Business) • • • • •

Passion, enthusiasm, tenacity. Letters of appreciation to employees, thanks to family, interest in employees. Corporate group that has over 100,000 colleagues with the same dream. Devote themselves to motors, stick to things that rotate. Through 3Q6S activities, understand the basis of cleanliness, the basis of quality management, and consideration of things that cannot be seen. • We do not rely on geniuses. One hundred people trying to make one step forward is more important than one genius making one hundred steps forward. • There are always pitfalls in too-good-to-be-true propositions. It is more important to act than to theorize.

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• Consciousness is more important than ability. Emotional quotient (EQ) is more important than intelligence quotient (IQ), and motivation can solve difficult problems. • Solving a problem creates pleasure and a sense of accomplishment. • Take care of your health—health is necessary for knowledge creation. When in poor physical condition, vitality is lost, decisions become dull, and judgment is easily mistaken. • Motivated people can do anything if they work hard. B. Driving Objectives • Do what others do not do. • Increasing employment is the largest social contribution of the company. Nagamori’s reason for living is to create the opportunity to work. • Belief that Nidec wins over the other companies in the same industry by the law of double and half. • To keep the company active is to continue to grow. • Achieving the highest possible value should be the goal at that time. Corporate management needs this repetition by raising the level of the goal. C. Knowledge-Creating Process (Focus on Execution and Speed) • • • • • • • • • • •

Do it now; do it without hesitation; do it until completed. Work hard and smart. Make sure that the times, and luck, are on your side. Be convinced that “I can do that, I can do that, I can do that.” Think while running. The delivery time should be reduced to half of that of other companies by working twice as hard as other companies. Human beings learn from failure. Nidec’s philosophy and corporate strategy was obtained through multiple successes and failures. Bring luck, seize fortune by the forelock, prepare for a good opportunity. Professionals do not miss practice 365 days a year. There are no shortcuts; in the professional world, you must practice steadily. The era of change is the turning point of the game. Past ways and knowledge cannot be applied; creating new knowledge is necessary in the new era. Change is an opportunity. Speed determines the game. Time is money.

D. Review by Top Management • The essential point in management is to do common practices according to principles. Perseverance is key to success. • In order to grow, you must be prepared to cast off your old clothes. • A common practice of successful companies is to do the things that are obvious right away and not leave them for another day.

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• Change top managers’ way of thinking. If top managers have a high level of consciousness and employees sympathize with it, then a revolution of consciousness can easily be achieved by the whole company. • At Nidec, employees are evaluated by adding, not deducting, points. • Nidec maintains the principle of long-term employment. Because the acquisition of technologies and skills takes place over long periods of time (i.e., 10 years or so) and such knowledge and skills are retained in employees’ brains. • Competition is indispensable—Nidec improved employment stability and gained high technological capabilities through introducing pay-perperformance and keeping lifetime employment system. • There are no excellent human resources in the beginning. They develop through knowledge-creating activities. • Employees education—change “lazy tortoises” to “diligent tortoises” who can go toe-to-toe with hares. • People who make good use of others are used well by others. Leadership and followership—employees who act proactively by foreseeing situations for their boss and preparing to take action. It is not until people work for others that they can understand the feelings of subordinates. • Scold subordinates depending on their characteristics. Scolding should come from leaders first. • Control organizations dynamically dependent on business situation. • The role of leaders is to give each and every subordinate clear instructions. • Make subordinates do what they are good at. • Made-in-market, factories have responsibility for profit. • Cost-consciousness, competitive quality, cost reduction through collaboration with parts providers (value co-creation viewpoint). • Draw a vision using numerical values according to the unbeaten philosophy “The art of war” by Sun Tzu. Thus, the corporate image of Nidec is just a knowledge-creating company proposed by Nonaka. According to Nonaka’s knowledge-creation theory, Nishida’s philosophy (Nishida 1950) is an important ideology for creating new knowledge. Nishida’s philosophy indicates that the following characteristics are important in creating new knowledge: (a) People must love subjects that they working on. (b) People feel happy when they lose themselves in finding solutions if they love the subjects or issues. (c) It is not until people actually do something that they understand the truth. These characteristics of Nishida’s philosophy are true in Nidec’s management. Nidec’s management principles such as “passion, enthusiasm, tenacity” and “do it now; do it without hesitation; do it until completed” show basic behaviors for creating new knowledge. Regarding Nidec’s behavioral patterns and corporate culture, 3Q6S’s penetration of organizations of groups with Nidec’s working style is clear. In

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the term 3Q6S, 3Q refers to quality workers, quality company, and quality products and 6S refers to the Japanese terms “seiri” (keep things organized), “seiton” (keep things easily available), “seiketsu” (keep yourself clean), “seiso” (keep things clean), “saho” (keep good manners), and “shitsuke” (keep good discipline). Nidec considers the importance of time in its knowledge-creating process. In addition to emphasis on execution—as in “do it now; do it without hesitation; do it until completed”—high-speed processing and several repetitions of knowledge creation are interesting characteristics of Nidec’s knowledge-creating process. The driving objectives are important for knowledge creation. Because new knowledge is required and must be created for achieving the driving objectives. Therefore, it is necessary to continuously set a higher target. In Nidec’s case, the goal is to maintain the highest possible value, and corporate management is responsible for maintaining it. This matches the driving model of a knowledge-creating company.

2.6.3 Phase 2: Porting the Knowledge-Creation Company Core Model to M&A Companies From the beginning, Nagamori has maintained 3Q6S as the basis of Nidec’s corporate management. The basis of Nagamori-ism has paved the way to Nidec becoming a blue-chip company by keeping to 3Q6S. Therefore, in PMI, 3Q6S is thoroughly fixed into an acquired company through severe business audit, and management style and corporate culture are introduced and executed. Companies acquired through M&A are reborn by changing their corporate culture and adopting Nidec’s brand. What is the real process of transforming acquired companies to true members of the Nidec Group? How do such companies become knowledge-creating companies? Mr. Kawakatsu, who engaged in reconstructing acquired companies under Nagamori, answered these questions in his book “42 fax from the President Shigenobu Nagamori” (Kawakatsu 2016) as follows: The basic policy of corporate reconstruction is consciousness reform based on Nagamori-ism without personnel restructuring and selling assets by the piece. Through consciousness reform, employees can work looking upward instead of downward. Top managers lead consciousness reform; for example, they should practice “do it now; do it without hesitation; do it until completed” by themselves and radiate Nidec’s corporate culture throughout their companies. What is the starting point of consciousness reform? If individuals are unchanged then organizations are unchanged. Three factors are important for consciousness reform: an individual sense of values, a way of thinking, and a way of acting based on them. The most important thing is reforming a personal sense of value. It is necessary for top managers to imprint a desirable sense of value into employees in order to make their organizations have a high sense of value. Also, from the viewpoint of business, Nidec introduces excellent management methods related to reducing costs and strengthening sales.

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Leadership in reconstructing a corporation is required to manage the aforementioned corporate revolution. Day-to-day management power and employees’ ability to do what needs to be done as a matter of course in their daily work are important in the Nidec Group. Corporate reconstruction by Nidec aims at not only improving profitability but also reforming corporate culture to achieve the No. 1 position in the market as a trigger due to M&A. In fact, as of 2015, there were over ten No. 1 products in the world provided from acquired companies. The importance of Nagamori-ism for corporate reconstruction is the corporate culture and “soil” in a knowledge-creating company model, which are: (a) Time: value of time, speed, short period for decision making (b) QCDSSS: quality, cost, delivery time, speed, service, specializationdifferentiation (c) Working style: Do it now; do it without hesitation; do it until completed. Reforming corporation culture through consciousness reform corresponds to developing good soil in agriculture. In such a corporate culture, all employees can pool their ideas together like Nidec’s original corporate culture at start-up. The process of enacting such corporate culture in companies consists of the following four steps: Step 1: Unflagging resolve of top managers: The top managers’ strong desire to reform their company regardless of whatever happens is necessary. Step 2: Formation of a liaison group consisting of middle managers: One person cannot change an organization alone. A group that shares sensitivity and a sense of values is necessary to reform with top managers. Step 3: Continuous implementation of new management methodology: Changes are realized and accelerated. Step 4: Formation of new corporate culture. Such corporate reform is similar to the Yonezawa Uesugi clan’s reformation in spite of its debt, led by feudal lord Yozan Uesugi in the Edo period. Yozan said, “Where there is a will, there is a way. Nothing will happen if a person does not do something. Things go wrong due to a person’s insufficient effort.” The sayings in English are the same or similar—“where there is a will, there is a way” and “if you put your mind to it, you can accomplish anything.” The reason for a lack of accomplishment is that people do not make thorough efforts. Reformation is always achieved if people make a thorough effort. Yozan Uesugi was a poor lord, but members of a group of young samurai were deeply impressed by his sincere behavior and decided to join his reformation movement. Based on his experiences, Nagamori said that if 20% of all employees support a reform then it will be done successfully. Young, motivated employees who actively participate in the reform efforts of top managers expand the movement by influencing others. If the reform begins to gain traction, the speed of the reform accelerates without relaxing their efforts. The corporate reform of acquired companies implements Nidec’s original corporate culture and cultivates corporate soil for a knowledge-creating company. Then,

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all employees learn to autonomously “work hard and smart” in order to address and solve issues.

2.6.4 Phase 3: Knowledge Creation Among Nidec Group Companies (SECI Model) If companies in the Nidec Group have the same corporate culture as a knowledgecreating company, then it is easy to collaborate to create knowledge within the Nidec Group. This concrete example was the WPR Project by which Nidec could overcome the “Lehman shock.” Asada et al. (2013) investigated these activities of Nidec from the viewpoint of knowledge creation theory as follows. In order to achieve the difficult objective of WPR, various ideas were gathered from employees of the Nidec Group all over the world and effective ideas were executed. Effective ideas for WPR were collected, formalized, and shared as corporate knowledge of the Nidec Group through active discussions beyond the framework of organizations. The WPR Project introduced various changes besides knowledge sharing at the working sites, which were clarifying goals and fostering participation of all the members in an organization. In order to achieve the difficult objective, a sense of crisis was shared among all employees. They realized not to ask someone in their organizations but to require all employees’ contributions. The Nidec corporate culture of “passion, enthusiasm, tenacity,” “working hard and smart,” “do it now; do it without hesitation; do it until completed,” and 3Q6S, which was conducted in daily work and took root in the organization, contributed to employees’ motivation toward the WPR Project. This activity is the SECI model itself, which is a knowledge-creating company model proposed by Nonaka and Takeuchi (1995). In socialization (S), members of the organization share the objectives of the organization and create knowledge for the objectives at each position. In externalization (E), created tacit knowledge is converted to explicit knowledge through discussions. In combination (C), effective knowledge is formalized as corporate knowledge. In internalization (I), all members practice created corporate knowledge. Nidec achieved the difficult objectives of the WPR Project by doing SECI’s knowledge-creating process in all Nidec Group companies. Thus, the entire Nidec Group became a knowledge-creating group and the synergy among group companies made it easy to acquire new knowledge and competitiveness. The results are that the integrated global management for new business development and the transformation of business portfolios can be done easily and Nagamori-ism penetrates all the Nidec Group companies in the world.

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2.6.5 All Phases: Reviews by Top Managers Finally, we would like to explain how top management’s reviews have an important role in managing the knowledge-creation process. Actually, it is difficult for working people to be objective when evaluating the correctness of a set objective or the validity of a knowledge-creating process by themselves. In such cases, top managers should show their seriousness and commitment by scolding, reviewing workers’ motivation, and providing indications about settings and approaches to objectives. Such feedback is effective in promoting the knowledge-creating process. According to Nonaka’s knowledge science school, there are six important abilities for leaders: (a) ability to set good objectives (b) ability to prepare good, timely “Ba” (place for discussing and creating knowledge) (c) ability to face up as it is (d) ability to conceptualize the essence of intuition (e) political power to realize a concept (f) ability to organize practical wisdom. Also, they claim that practical wisdom cannot be defined separately from practice. The questions “what is wise?” or “what behavior is virtuous?” change based on individual and specific contexts. Ultimately, practical wisdom is considered to be generated while thinking in action. Such discussion is true for Nagamori’s actions. He reviews the knowledge-creating activities in the Nidec Group from these viewpoints.

2.6.6 Shigenobu Nagamori as an Innovator from the Viewpoint of Nonaka’s Knowledge Management Nonaka describes innovation in the following sentences from his book “The Essence of Innovation” (Nonaka and Katsumi 2004). The essence of innovation is the knowledge-creating process and human beings are the main parts in knowledge creation. Innovation cannot come from rational, analytical methodology. The advancement of technology education alone is not enough for innovation. From the standpoint of a leader’s phronesis (prudence, practical wisdom), knowledge and experience and their development are very important for innovation, and a human being’s subjectivity and his initiative is the essence of innovation. The development of knowledge creators is the important point in generating innovation. We should recognize once again that the essence of innovation management is not logic or analysis but just his way of life projecting himself into the future, involving his colleagues.

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Nonaka combined innovation management with an innovator’s way of life. Also, he positioned innovation as knowledge management itself. According to Nonaka, the Nidec Group was developed by an innovator, Nagamori, through his way of life itself. He projected himself into the future, involving his colleagues and employees. He describes it in the last part of his book (Nagamori 2005) as follows: I have been thinking that we can buy the future by having a dream or a spirit of romance. Nobody can sell the future I dreamed of, even if I paid a lot of money. I could obtain it only through my passion, my enthusiasm, and my tenacity. […] I really want to continue my job at the forefront of the Nidec Group as long as I live. The reason is that I want to witness the realization of many young employees’ dreams in the Nidec Group.

2.7 Analysis of Nagamori’s Entrepreneurship We analyze Mr. Nagamori’s entrepreneurship according to the following attributes. (1) His Dream and Objectives His desire to become a president and his interest in motors in his elementary school years became key to the development of Nidec. He understands the importance of dream and his dream is described in the corporate statement as follows: “We begin with dreams. Dreams drive our motivation. Dreams are our future. The world’s dreams, people’s dreams, our dreams. Our passion creates ideas that make dreams come alive. Technology and products that were only dreams become reality. All for dreams. Dreams challenge and the Nidec Group will continue to meet the challenge. For the world’s and people’s tomorrows, the world’s first, the world’s best technologies and products, we will continue our part in creating a better society.” (2) His Ability of Forecasting the Future Business Environment The major reason for Nidec’s growth was the small precision motor business for personal computers, which was key to the growing information business and other new businesses that emerged. This business has expanded rapidly from the global information business growth in the 1980s. Now, the Nidec Group is expanding its business to automotive, IoT, robots, and other new fields. Thus, Nagamori has excellent insight into growing business areas. (3) His Core Resources or Technologies Core resources are motivated people in the Nidec Group. Because he said “We do not need geniuses. One hundred people trying to make one step forward is more important than one genius making one hundred steps forward. Consciousness is more important than ability. Emotional quotient (EQ) is more important than intelligence quotient (IQ), and motivation can solve difficult problems. Motivated people can do anything if they work hard.” Concerning technologies, he focuses on motor technologies, which has been interesting for him since his elementary school.

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(4) How to Manage his Company As described in Sect. 2.6, his management has been done to make the Nidec Group a knowledge creating group. He has been cultivating the Nidec Group’s corporate culture and soil for knowledge creation, such as “Passion, enthusiasm, tenacity”. He has been setting up the right driving objectives. He has been promoting knowledge creation process focusing on execution and speed such as “Do it now, do it hesitation, do it until completed”. Also, he has been reviewing its knowledge creation process by top management. His management has realized the concept of knowledge creating company by Nonaka successfully in real business. (5) His Way and his Value Sense His way is “All for dreams,” which is the corporate slogan of Nidec. He said “I have been thinking that we can buy the future by having a dream or a spirit of romance.” “I really want to continue my job at the forefront of the Nidec Group as long as I live. The reason is that I want to witness the realization of many young employees’ dreams in the Nidec Group.”

2.8 Conclusion We discussed from the viewpoint of knowledge science. It was found that the major reason for the Nidec Group’s growth and success was that a corporate culture and management system for a knowledge-creating company was developed. The Nidec Group has been cultivating the organizational ability to perform knowledge creation with the goal of realizing its future vision. Nagamori has been leading the Nidec Group as a world-famous enterprise though excellent management of a knowledgecreating company. Further development of the Nidec Group is expected through continuing organizational knowledge-creating activities towards the targets for advanced innovation.

References Asada, H., Yoshikawa, K., Kazusa, Y. (2013). Management Accounting Change in Nidec Corporation (in Japanese). Journal of the Japan association of management and accounting, 21(2), 41–60. Kawakatsu, N. (2016). 42 fax from the president Shigenobu Nagamori (in Japanese), President Inc. Nagamori, S. (1998). Become a person that moves people (in Japanese), Mikasa Shobo. Nagamori, S. (2005). Management based on 「Passion, Enthusiasm, Tenacity」 (in Japanese), PHP Institute. Nagamori, S. (2008). The miracle method of human resource development (new edition) (in Japanese), PHP Institute.

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Nagamori, S., & Iga, Y. (2017). Work style reform challenging by Nidec – The productivity improvement is necessary to win business in the world (in Japanese). Diamond Harvard Review of Japan, July 2017, 30–44. Nishida, K. (1950). Zen no kenkyuu (Research of goodness) (In Japanese), Iwanami Shinsho. Nonaka, I., & Takeuchi, H. (1995). The Knowledge-Creating Company. Oxford University Press, Inc. Nonaka, I., & Katsumi, A. (2004). The essence of innovation (in Japanese), Nikkei BP. Nonaka, I., Toyama, R., Hirata, T. (2008). Managing Flow, Palgrave Macmallan. Yasuda, K., & Sakazume, Y. (2011). Success factor analysis of Nidec motor business from the viewpoint of trap of modularity (in Japanese). 2011 spring annual conference of the Japan society for management information, paper-ID: C1-1. Yoshikawa, K. (2010). Nidec M&A strategy and managerial accounting based on marginal profit management (in Japanese). Melco journal of management accounting research, 3, 65–74.

Chapter 3

Jun Lei and Xiaomi—Build Amazing Products with Honest Prices and Let Everyone Enjoy the Fun of Technology Qi Qi, Lijuan Cheng and Jing Wang

3.1 Introduction Xiaomi Corporation is a Chinese electronics company headquartered in Beijing that makes and invests in smartphones, mobile apps, laptops, and related consumer electronics. It was cofounded by eight partners (Jun Lei (CEO), Bin Lin, Wanqiang Li, Guangping Zhou, Jiangji Huang, Feng Hong, Chuan Wang, and De Liu) on April 6, 2010. The company began its operations with the launch of its Android-based firmware MIUI (pronounced “Me You I”) in August 2010; it is a heavily modified and hardcoded user interface that incorporates features from Apple’s IOS and Samsung’s Touch Wiz UI. Xiaomi released its first smartphone in August 2011 and rapidly gained market share in China, becoming China’s largest smartphone company in 2014. As of the start of Q2 of 2018, Xiaomi is the world’s 4th largest smartphone manufacturer, and it has expanded into developing a wider range of consumer electronics, including a smart home device ecosystem. Figure 3.1 is the MI house in Kaide Mall, Xizhimen, Beijing. Within a short span of time, Xiaomi was attracting all the attention in the Chinese Smartphone market, and its vision is to replicate this achievement internationally. This local smartphone vendor has risen tremendously in just a few years, often being called the “Apple of China”, and is proving a cutthroat competition to established players such as Samsung, Apple, Lenovo, Huawei, LG, ZTE, etc. The founder and CEO Jun Lei said that “Xiaomi’s mission is to relentlessly build amazing products with honest prices, and let everyone enjoy a better life through Q. Qi (B) · J. Wang School of Economics and Management, Beihang University, Beijing, China e-mail: [email protected] L. Cheng School of Business Administration, Capital University of Economics and Business, Beijing, China © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_3

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Fig. 3.1 MI House. Source https://www.mi.com/c/xiaomizhijia/beijingxizhimen.html

innovative technology”. “Value for money, new domestic goods” has always been the label of Xiaomi. The fans of Xiaomi products are called Mi fans, and they believe that Xiaomi is “Just for fans”. This means that hardcore Mi fans lead every step of the way. In fact, many Xiaomi employees were Mi fans first, before joining the firm. To obtain the best user experience, Xiaomi encourages product users to participate in the development of all improved models and then cuts various costs not directly related to product quality. A famous serial entrepreneur, Jun Lei graduated from Wuhan University and joined Kingsoft Software in 1992. He became its CEO in 1998 and built Joyo (afterwards acquired by Amazon) in 2000. In 2007, after Kingsoft Software was listed, Jun Lei stepped down as the president and CEO of Kingsoft and served as its vice chairman. In the following years, Jun Lei, as an angel investor, invested in many innovative startups such as Vancl, UC Web and Lakala. On April 6, 2010, Jun Lei decided to start a new business and established Xiaomi. In July 2011, Jun Lei returned to Kingsoft and served as its chairman. Jun Lei has had a legendary life, and many entrepreneurs and researchers wonder why he chose to start a new venture and how he led Xiaomi step by step to success. Based on public information collected from the internet, this article will answer these questions by analyzing Jun Lei’s entrepreneurial history and sharing his story of building Xiaomi.

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3.2 Background of the Industry and History of the Company Given the economic development in emerging innovative countries such as China, the “Made in China” brand is being redefined, especially in the smartphone industry. Some serial entrepreneurs are now relying heavily on innovation instead of government connections and financial powerhouses, and Xiaomi is one such prominent example. When Xiaomi was founded in April 2010, Jun Lei and his partners had one simple idea: make a smartphone that we like and that feels sufficiently cool. Of the eight cofounders, six were engineers, the other two were designers, and all eight were enthusiastic fans of consumer electronics devices. Xiaomi’s founders believe that the courage to break rules and their belief in excellence are the key to Xiaomi’s ability to win the appreciation and support of users. Thus, Xiaomi pursues innovative technology and the highest level of design. Xiaomi’s engineers are also fascinated by techniques and products that their predecessors never tried. They repeatedly sculpt every detail of their products, and they are determined that every product that they produce will be far beyond the user’s expectations. Xiaomi has maintained an impressive growth rate from the day it was founded. It has obtained tremendous market share in the Chinese market both in terms of shipments and revenues. It shipped 61.12 million smartphones in 2014, whereas it had sold only 18.7 million smartphones in 2013 and approximately 7.0 million in 2012. The company expected to ship 100 million smartphones in 2015, but only realized 66 million in sales. Shipments continued to decrease dramatically, dropping to approximately 55 million in 2016. To reverse the declining trend, Xiaomi implemented a number of policies to rescue sales. Through these efforts, shipments successfully rebounded to 91 million units in 2017, and sales have continued growing in 2018, as Xiaomi regained its position as the fourth largest smartphone company. Figure 3.2 shows the stable growth trend of Xiaomi sales from 2015 to 2018. Finally, Xiaomi successfully issued an IPO on July 9, 2018, based on its brilliant performance since its founding. A little more than a month after its IPO in Hong Kong, Xiaomi reported a 68% revenue increase and $2.1 billion in profit for the second quarter of 2018, beating analyst expectations across the board. Having sold 32 million smartphones in the quarter, Xiaomi’s revenue jumped to 45.2 billion RMB ($6.6 billion), bringing its total for the first six months of 2018 to 79.65 billion RMB, which is nearly 70% of the company’s revenue for the entire year of 2017. According to the latest IDC estimates, Xiaomi is currently the fourth largest smartphone producer in the world, trailing only Samsung, Huawei and Apple (Table 3.1). Notably, the company recently surpassed Samsung to become the market leader in India’s booming smartphone market, and Xiaomi plans to further grow its footprint outside of its home market (Table 3.2). Xiaomi has also expanded to develop a wider range of consumer electronics products, including a smart home device ecosystem. In the second half of 2013, Xiaomi

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Fig. 3.2 The steady rise of Xiaomi from 2015–2018. Source https://www.statista.com/chart/15179/ xiaomi-revenue-and-smartphone-market-share/

Table 3.1 Worldwide smartphone market, top 5 company shipments, market share and year-overyear growth, Q1 2018 (shipments in millions) Company

1Q18 shipment volume

1Q18 market share (%)

1Q17 shipment volume

1Q17 market share (%)

Year-overyear change (%) −2.40

Samsung

78.2

23.40

80.1

23.30

Apple

52.2

15.60

50.8

14.70

2.80

Huawei

39.3

11.80

34.5

10.00

13.80

Xiaomi

28.0

8.40

14.8

4.30

87.80

OPPO

23.9

7.10

25.8

7.50

−7.50

Others

112.7

33.70

138.3

40.20

−18.50

Total

334.3

100.00

344.4

100.00

−2.90

Source IDC worldwide quarterly mobile phone tracker, May 2, 2018

started to create an ecological chain layout of the IoT (Internet of Things). Jun Lei invested in many companies with similar concepts via Shunwei Capital and sold their products on the Xiaomi online shop, which is the third-largest e-commerce platform in China. At the end of 2016, there were 77 companies in Xiaomi’s ecological chain, and the total sales of these enterprises exceeded 10 billion RMB. Prior to June 2017, the Xiaomi ecological chain invested in 89 companies, 30 of which issued 200 varieties of products. Sixteen of these companies achieved annual revenues of more than 100 million, and 3 realized annual revenues of more than 1 billion. Furthermore, four companies were unicorns, and the volume of networking equipment sold on the

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Table 3.2 India smartphone market share—Q1 2018 India smartphone shipment market share (%)

Q1 2017 (%)

Q1 2018 (%)

Xiaomi

13.1

31.1

Samsung

25.9

26.2

VIVO

11.9

5.8

OPPO

9.9

5.6

Honor(Huawei)

1.4

3.4

Others

37.8

27.9

Total

100

100

Source Counterpoint research market monitor Q1 2018

entire Xiaomi IoT platform has exceeded 60 million units. Xiaomi’s team for the ecological chain also grew from a dozen persons to more than 190 persons. There are 5000–6000 employees within and outside the system comprising the ecological chain companies. Xiaomi’s ecological chain has developed into the world’s largest intelligent hardware platform.

3.3 History of the Entrepreneur and His Psychological Journey (1) Jun Lei’s Background Jun Lei was born in Xiantao, a small city in Hubei Province in 1969 and graduated from the Computer Department of Wuhan University. Unlike other famous internet entrepreneurs, Jun Lei comes from an ordinary family, and therefore he was used to always working extremely hard to achieve his goals. He is also very intelligent, for example, successfully completing all credits in only two years and winning the full score for “Assembly Language Programming” at Wuhan University. (2) The First Venture After completing his studies, Jun Lei read a book titled “Fire in Silicon Valley”. This book thrilled Jun Lei and filled him with joy; he was deeply impressed by the entrepreneurial process of Apple, founded by Jobs and Waltz. He instantly determined to build a great company of his own. Jun Lei established a tri-color company together with his classmates in his fourth year of university, aiming not to earn money but to increase his entrepreneurial experience. Therefore, he was willing to enter into any project as long as he could learn something. He wrote encryption software, antivirus software, financial software, CAD software, Chinese systems, and software for various gadgets. He even worked as a hacker and decrypted various kinds of software. In his spare time, he cowrote “In-depth DOS Programming” with his colleagues, which was popular with

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many programmers. Two years later, Jun Lei’s level of technological skill had greatly improved, and he became well in Wuhan’s electronics street. Although he did not earn much money, he was very happy. The good times did not last. A large company quickly copied their technology and sold similar products at a lower price. Within six months, Jun Lei’s company went bankrupt, and the assets were disposed of. Jun Lei only kept one 286 type computer and one printer, and he was almost penniless. (3) Working at Kingsoft In 1992, Jun Lei joined Kingsoft. Firmly believing that “there is no shortcut to success, and one should strive at all times”, he worked 16 h a day and seven days a week at Kingsoft. Through his hard work, Jun Lei achieved much in those years. He served as the general manager of Kingsoft in 1998 and was appointed an honorary professor by Wuhan University in the same year. In 2000, he was appointed President of Beijing Kingsoft Corporation. At that time, Kingsoft was a major player in the Chinese Internet community. In October 2007, following Jun Lei’s great efforts and his impact on the company, Kingsoft successfully launched an IPO in Hong Kong. However, Kingsoft was valued far lower by the market than Alibaba, which was listed in Hong Kong in the same year. It was also less popular than many internet companies listed in the United States, such as Shanda and Baidu. This phenomenon both confused and disappointed Jun Lei. Further, he still wanted to start his own business and build a company that was his own. He wanted to prove himself by successfully creating a successful billion-dollar company. On December 20, 2007, at only 38 years old, Jun Lei resigned as CEO of Kingsoft and ended his overloaded 16 years of work. At that time, he had already made a name for himself, and, moreover, achieved freedom by virtue of his wealth. As one of his friends said, “He was physically and mentally exhausted, so leaving was the best choice”, and it was proven that after this departure, he was reborn. (4) Entrepreneurial Motivation As one of the earliest computer professionals in China, Jun Lei is a well-known internet veteran, and thus as friends or subordinates established their own businesses, he served as an angel investor. The book “Fire in Silicon Valley” had ignited his ambitions to build a top company in China, but after working so hard at Kingsoft for so many years, that dream still felt far away. Hence, he was not satisfied with his status as an investor and decided to build his own business. “This is the last thing I must do in my life”, Jun Lei said about Xiaomi. Now in his 40 s, his passion to pursue his dreams was rekindled. In his own words, he talked about his 40s and how he was afraid of losing his dreams. Then, he thought about the stories of his predecessors, such as Chuanzhi Liu, who established Lenovo at the age of 40, and Zhengfei Ren, who founded Huawei at the age of 43. “I must try to see if I can start a world-class technology company and do something that benefits everyone in the world,” Jun Lei said, and “Starting a business is like jumping off a

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cliff. I am 40 years old, and I can make another bet for the dream I have had since I was 18 years old”. Mr. Lei said it would be his last venture and perhaps the last step in his career, but he was doing it not for money, not for profit, and not for vanity, but just for the dream. In the beginning, he did not hold the stock of Xiaomi, as he did when investing in the gaming platform YY, but then he increased his stake as recommended by the other partners. Jun Lei did not want interest in Xiaomi but the opportunity to prove his talent. Jun Lei said “Even a pig can fly if it is in the middle of a whirlwind”. He further explained: “Anyone who succeeds in any field needs 10,000 h of hard work. If there is no basic skill, anyone talking about flying pigs is really an opportunist”. In 2007, Jun Lei resigned from the position of CEO in Kingsoft. In 2008, after he left Kingsoft, he became an angel investor. He wrote in his personal blog that the mobile internet was a great opportunity for the next wave of entrepreneurship. As an angel investor, he invested in a number of potential companies, including Kingsoft, Cheetah Mobile and YY. These investments deepened his understanding of the mobile internet, and he received extraordinary returns, but these companies were not his own businesses. In the following years, Jun Lei rethought and repositioned himself while continuing to invest in Lakala, YY, Vanke and UC web. Because Jun Lei was a software originator, he hoped to learn how the Internet works as an angel investor. At the same time, he was also looking for his own opportunity. Four years later, Jun Lei and others found a great business opportunity: Mobile Internet. The whirlwind soon arrived, as the market for smart phones was ready to explode. In 2010, the 40-year-old Jun Lei immediately seized the opportunity and founded Xiaomi technology together with Wanqiang Li, Bin Lin, and other partners. (5) Xiaomi’s First Success Before Xiaomi was founded, Jun Lei was already fanatical about smartphones, and he had wanted to set up a company with the slogan “Born for fever” for many years. After three years of preparation, Jun Lei entered the smartphone world in the spirit of “millet plus rifle”. Xiaomi’s first product, MIUI, was very quickly released by Jun Lei. He created a new business model of internet thinking to make Mi phones that allowed users to participate in the design process. At that time, the domestic smartphone market was ruled by Apple and Samsung because China’s mobile phone quality could not compete. Therefore, Jun Lei vowed to make a low-cost but highquality mobile phone that everyone could afford. The Chinese smartphone market began to explode with the arrival of the iPhone4. However, many customers were bothered by the large number of low quality and high cost “shanzhai” phones. The first generation of Mi phones shocked mobile phone manufacturers. Figure 3.3 shows a picture of the Mi1. To obtain the best cost performance, Xiaomi, for the first time, took “fever” as the core concept of its brand and created a slogan “Born for fever”. Since then, Mi phones have become the price benchmark in the smartphone market. Thus, through Xiaomi, all Lei’s dreams come true. In the preface of “Sense of Participation” (Li 2014), Jun Lei says “my idea is building Xiaomi like a small restaurant that lets users participate in the company”.

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Fig. 3.3 Mi1. Source https:// baike.baidu.com/item/M1/ 15385857

As the boss, he aimed to be the friend of every guest coming for dinner. In this book, Xiaomi’s concept of “concentration, perfection, word of mouth and speed” was highlighted. When Mi phones were released, the inevitable controversy and criticism followed, such as disapproval of their hunger marketing techniques. However, their market performance proved the success of Mi phones. Because of its excellent cost performance, Xiaomi, had only been founded over a year ago, achieved 800 million RMB in sales in less than two days. It went on to sell 7.19 million phones in 2012 and 18.7 million in 2013. Meanwhile, Xiaomi completed four rounds of financing. In 2012, Xiaomi raised $216 million, with a company value of $4 billion. In 2014, the company reached the peak of its development, and more than $10 billion in annual sales was achieved, breaking several historical records. Xiaomi became the largest smartphone manufacturer in China and a brand phenomenon in the industry. Countless news stories, discussions and research ensured about everything that happened in Xiaomi. Many domestic smartphone manufacturers imitated the business model of Xiaomi, one after another, and Huawei Honor even proposed to imitate Xiaomi “pixel by pixel”. (6) Difficulty and Response Although they studied and imitated Xiaomi in their business models, other domestic manufacturers had a heartfelt dislike for Xiaomi with respect to the low-price benchmark. According to previous standards, a typical flagship phone could sell for approximately 4000 RMB, but all of the pricing rules changed since Xiaomi was founded. In the opinion of customers, approximately 2000 RMB is a flagship phone standard with high cost performance. This change substantially cut the profits of smartphone companies. Therefore, these domestic manufacturers consistently criticized Xiaomi

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in public, noting its ugly appearance, system problems, poor battery life, short supply, etc. Indeed, Xiaomi had some problems as a new startup. Because Jun Lei started his career as an engineer, he decided to face the criticism directly and simply: “There are a lot of bugs with my products, and I will keep on improving them”. He stayed up late almost every night and worked just as hard as he did at Kingsoft. Many former Xiaomi employees said that they often saw Lei’s driver waiting for him downstairs at two or three in the morning. Someone said that the phone’s appearance was poor, so Jun Lei strengthened its appearance; someone said that the system often went wrong, so Jun Lei allowed the mobile phone system to continue to update, so that even the system of the Mi phone 2s was still being updated a few years ago; someone complained the short supply of Mi phones, so Jun Lei personally supervised the supply chain and increased the supply of mobile phones. Hence, Xiaomi has been improved step by step by actively solving the problems with their products. However, even if most of the bugs were modified, opponents still criticized Jun Lei for the low prices of Mi phones. They led consumers to doubt the quality of Xiaomi products given such a low price. Therefore, there was always a different challenge, and Jun Lei and Xiaomi needed to conquer them one by one. (7) The First Waterloo With the rise of other domestic brands, Xiaomi’s sales ranking stared to decline continuously. In 2014, relying on rapidly entering the smartphone market and Wanqiang Li’s leading marketing strategy, Xiaomi achieved unprecedented success. On January 5, 2015, Jun Lei mailed an analysis of Xiaomi’s performance in 2014 to all the staff: sold 61.12 million mobile phones, an increase of 227%, and obtained a 74.3 billion RMB increase revenue, an increase of 135%, occupying the top Chinese market share. At that time, Mr. Lei was self-confident and even later set a goal of selling 800 million to 100 million phones in 2015. However, due to multiple failures in the supply chain, marketing and R&D, Xiaomi saw its first Waterloo in its development history in 2015, when the company failed to reach its sales goal of 80 million. In the following year, Xiaomi continued to fight against this downtrend. Mobile phone sales continued to fall sharply, and the company’s development was hindered by numerous obstacles. Due to Xiaomi’s rapid expansion in 2016, Mi phone sales were far less than that in 2015, and Xiaomi lost most of its domestic market share to Huawei, OPPO and VIVO. Hence, Xiaomi had to compete with Huawei, OPPO and VIVO in the native market; moreover, it was also facing some lawsuits due to patent problems in the international market. These issues not only created sales problems but also directly affected the trust of many partners. This situation did not change until the launch of the blockbuster Mi MIX. From 2015 to 2016, it was fashionable to criticize Xiaomi and brag about other brands. In the face of a terrible decline in sales, Jun Lei quietly dropped the internal KPI (key performance indicator), and half reluctantly and half self-deprecating said: “2016, just enjoy a happy life”. However, even if Xiaomi was no longer first in the

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market, his rivals still forced him to give up his low-price strategy to increase profits. Jun Lei said helplessly “I feel very lonely”. Even so, Jun Lei never changed his original intention to make high-quality products at lower price. (8) Pick up the Slack In 2017, to recapture the rising trend and its leading position in the smartphone industry, Jun Lei restrained his ambition and proposed the idea of “learning from lessons”. By this, he meant that Xiaomi had been too aggressive in the previous stages, and he was prepared to move in a more down-to-earth direction. First, the most important problem in need of a solution was the supply chain. At that time, Guangping Zhou, the cofounder in charge of the supply chain, could not properly handle Xiaomi’s relationship with suppliers, which resulted in an impact on the overall strategy of the company. The release of Mi5 was postponed from 2015 to February 2016 owing to the terrible relationship between the upstream and downstream suppliers. Three months later, Guangping Zhou was forced out of his job for restructuring through an internal letter from Jun Lei. At this time, Jun Lei became deeply aware that it was no longer reasonable to rely on Xiaomi’s previous “hunger marketing” strategy given the increased inventory and the upgrading of the consumer market. This business model could have strong effects in the blue sea period of the smartphone market when user choice is limited. However, as the blue sea gradually transforms into the red sea, market competition becomes much more fierce, and consumers have many choices and act more rationally. Therefore, competition between the major manufacturers no longer relied on the “quick and hard” marketing model but depended on long-term, stable sales based on their supply chains. For this reason, Jun Lei attached more importance to improving the problems in the supply chain and personally supervised the R&D and supply of Xiaomi’s products. Xiaomi’s products thus became increasingly outstanding. Starting with the Mi4 and Mi5, Xiaomi’s product performance became progressively stronger. In Mi6, even the targeted appearance level was achieved. The Mi NOTE series were also quite impressing, and the workmanship was becoming increasingly exquisite. Table 3.3 shows the path of Xiaomi’s process exploration. When the Mi MIX was launched, Xiaomi attracted global attention (Fig. 3.4). Considering the scientific and technological innovation, artistic and aesthetic design of Xiaomi’s products, the price was extremely generous. The phones’ design was an exploration of the future of Chinese mobile phone manufacturers, and it shocked the overseas media. Table 3.3 The path of Xiaomi’s process exploration Name

Mi 4

Mi Note

Mi 5

Mi Note 2

Mi MIX

Characteristic

An art tour of a steel plate

3D curved glass

3D ceramic body

Hyperboloid flexible screen

Whole ceramic body

Date

2014.7.22

2015.1.15

2016.2.24

2016.10.25

2016.10.25

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Fig. 3.4 Mi MIX. Source https://www.mi.com/mix3/

The Mi MIX was reported in the headlines of THE VERGE, a well-known digital technology website that rarely paid attention to domestic Chinese companies. Under the leadership of Jun Lei, Xiaomi finally rebounded against its downward trend and entered a new growth stage after two years of disappointment. In July 2017, Xiaomi’s results were published in Weibo: shipments in the second quarter were 23.16 million, an increase of 70%, creating a new record in quarterly phone shipments. This means that after two years of adjustment, Xiaomi resumed its trend of high-speed growth. Xiaomi, in the most challenging period of the domestic mobile phone industry, used his own methods to ultimately succeed despite fierce competition and become a great Chinese company in the smartphone industry. No matter how controversial the company is and regardless of criticism, we must recognize that Xiaomi overturned the entire smartphone market. If there was no Xiaomi, the concept of “thousandyuan smart phones” would not have appeared. It is likely that China’s full-screen smartphone would have appeared later, and there would be no “flagship phones” at approximately 2,000 Yuan.

3.4 Pursuit of the Entrepreneur (1) A Person with Feelings A dream started during university can be realized over the next few decades. In 2007, after Kingsoft went public, Jun Lei retired from public life. He slept until he woke up naturally every day. In 2008, Jun Lei chose to leave Kingsoft and become an angel investor. In a few years, his investments gave him a deeper understanding of the internet industry and earned him substantial returns. However, his investments in startups could not be regarded as his own career: there was always a flame in his

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heart that never went out. After three or four years, until he was 40 and into his 40s, he realized that he could not live his whole life like this. He had to have some pursuit and a dream. From the heart, he still wanted to start a real business of his own and to establish his reputation as a successful entrepreneur in the internet industry. So he rekindled his youthful passion for dreams in his 40s. It was ignited no longer by the fire in Silicon Valley but by the fire from his own dream: he said that he was going to build a company valued at multibillions of dollars. He said that when you “stand in the middle of whirlwind, the pig can fly. I quote it to show that the essence of entrepreneurial success is to find the trend and go with the flow”. The whirlwind was coming, that is, smartphones and the mobile internet. In 2010, when Jun Lei was financially free, many ideas had a chance to be realized. Therefore, he started his own business as Xiaomi with this background. (2) A Person with a Pursuit Cost performance, new national goods and “let everyone enjoy the fun of technology” are typical labels for Xiaomi. Xiaomi insists on the path of cost performance, not abusing users’ trust, and making friends with users. For example, Redmi phones mainly focus on students and elderly persons, so it has a simple function that can change the type into big characters for elderly people. Because most older adults are relatively thrifty, they are reluctant to spend money on new mobile phones. If their children’s mobile phones are obsolete, they can keep them. Almost all vendors are considering whether they can sell mobile phones at higher prices; conversely, Xiaomi is trying to see if they can encourage one more elderly person in the countryside to use smartphone or help allow a poor student to afford a good smartphone to play his beloved games. That is what Redmi phones aimed to do. Figure 3.5 shows the Redmi 6 Pro. More than once, Jun Lei was advised to set a higher price, but he rejected this advice. In February 2017, Xiaomi officially launched its own Songguo surge S1 chip. Jun Lei said at the press conference, “Exploring black technology, born for Fig. 3.5 Redmi6 Pro. Source https://www.mi.com/ redmi6pro/

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fever”. Although the surge S1 chip still has a large gap in speed compared with other mainstream manufacturers, Xiaomi had become the fourth manufacturer with both chip design ability and production capacity, ranking after Apple, Samsung and Huawei. It required millions of dollars to establish a chip flow at that time, and this process needs to be repeated many times, so this cost is only a very small part of R&D. Jun Lei determined to engage in independent research and development, which is truly difficult. He often expressed that Xiaomi needed to produce new national goods that could allow every consumer to enjoy the fun of high-quality and low-cost technology products. (3) A Person with a Dream In Jun Lei’s opinion, Xiaomi was founded to help transform and upgrade China’s manufacturing sector through internet thinking and internet methodology. He wanted to change the entire Chinese manufacturing industry and overturn the public impression of Chinese goods by making the best products based on China’s strong manufacturing capability to benefit everyone in the world. At a 2015 press conference, Jun Lei expressed that he did not want Chinese goods regarded as cheap and inferior in the eyes of both Chinese and global consumers. He hoped to build Xiaomi into a national enterprise in China, like SONY in Japan in the 1970s, and drive the transformation and upgrading of the entire industry. Xiaomi’s dream is to make products of world-class quality at reasonable prices. To remove the impression that Chinese products are inferior, he believes that the key problem is to attach great importance to product quality, design and innovation. Jun Lei believes that if 20 or 30 individual of Xiaomi products can rank first in the world, then they can lead the world to change its impression of China’s entire industry. Thus, Jun Lei used his influence to promote Huawei’s products and build an ecological chain that could compress the profits of high-price manufacturers, forcing them to reduce price and improve quality. “I want to do something different and change the image of Chinese goods. The Xiaomi model is to make a good product at a lower price that touches consumers’ hearts. Our secret is to spend all of our money on products as long as business efficiency is improved. The real mission of Xiaomi is contributing to the development of Chinese manufacturing and domestic products; so that everyone knows there are good products beyond expectation at a low price”. “I started Xiaomi when I was 40. All my life I want to do something amazing no matter what the outcome was”. Currently, Jun Lei feels that the “earth-shaking” thing is to change the status of Chinese goods and let people enjoy good quality from inexpensive goods. Jun Lei posted in Weibo: “Thirty years ago, my mood hasn’t been calm since I sit in the university library reading “Fire in Silicon Valley”, so I have a dream in life: to become a great man, and a different person. Today, at Wuhan University, we officially promise that we will never forget our original intention and will keep our mission in mind. Xiaomi’s hardware profit will never exceed 5%”. Jun Lei promised that the net profit margin of Xiaomi hardware would never exceed 5% in a press conference in 2018.

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(4) A Visionary Entrepreneur As early as 2008, Jun Lei proposed “concentration, perfection, word of mouth, speed” as seven characters (four words) describing the internet mindset. He adopted this set as Xiaomi’s philosophy and achieved great success. Jun Lei’s ambition obviously applies beyond mobile phones. He wants to establish an ecological chain for Xiaomi and create an intelligent home environment based on Mi phones. At the end of 2013, Jun Lei observed the trend in intelligent hardware and the IoT. Of course, it took an additional five to eight years for the IoT to become a reality. Jun Lei decided to use Xiaomi’s successful experience in making mobile phones to copy 100 small Xiaomi and lay out the IoT ahead of time. Jun Lei is a master of marketing, and he set Mi phones at the center and expanded the product line to television, settop boxes, the future e-reader, and many other types of hardware. Meanwhile, all hardware is sold through Xiaomi’s channels, and the ecological chain is based on integrating a variety of hardware videos, pictures, music and other internet services, as well as internet applications. Through Shunwei Capital, Jun Lei invested in many enterprises with the same basic genes. By selling their products on a single platform, Lei constructed the Mi mall, China’s third-largest e-commerce platform. Most of the goods sold in the Mi mall are electronic products, and you can buy any product almost without thinking due to Xiaomi’s reputation for good quality with high performance for cost. Xiaomi has changed from being a mobile phone company into being an eco-chain company. Now doing more than manufacturing mobile phones, Xiaomi has become a place where people can try something new because they trust the company, which is an important responsibility assumed by Xiaomi. Zhenyu Luo made it clear in his speech in 2018 that the area effectiveness of Xiaomi’s stores was in second place, only behind Apple stores. Considering that the price of the Mi phone is far lower than that of an Apple phone, we can imagine how high the coverage of Mi products is and how deeply consumers have come to trust Xiaomi. Xiaomi’s smart home will form a closed loop, which means that although the gross profit of a single product is low, once users enter the loop, they will gradually rely on its convenience. That is why many consumers are slowly planning to add more Mi items. (5) A Hard Worker To a great extent, the success of Xiaomi can be attributed to the workaholic spirit of Jun Lei. He was always been a model worker in Zhongguancun when he worked at Kingsoft. After Xiaomi was founded, he expressed many times that as the founder of a startup, he needed to stay in the company all the time. “When I started Xiaomi, I personally communicated with every partner one by one, talking for 10 h each time and several times a month”. At the age of 48, we can still see that he is very energetic and youthful. The birth of Xiaomi has become the starting point in the rise in domestic mobile phones in China. As a revolutionary

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company, it has led to the transformation of the entire industry. Jun Lei is still the same person he used to be when he started his own business. While other internet veterans enjoy their lives and occasionally throw out one or two surprising words, Jun Lei still persist in the principle of “god rewards diligence”. This is why Jun Lei’s entrepreneurial journey appears to have greater integrity. (6) A Creative Person The smartphone industry is the most competitive industry in the world today. The leading firms are Apple, Samsung, Huawei and Lenovo, so the competition is very fierce. After Xiaomi entered the market, a miracle occurred. In two-and-a-half years, a small company beat all its counterparts at home and abroad, becoming the top firm in China and third in the world. This shows that a series of innovations at Xiaomi shocked the world and brought it a very strong penetration rate. Xiaomi’s innovation is mainly regarded as business model innovation and a core technology innovation. Xiaomi attached importance to high quality, a highend appearance, high cost performance, a rich product portfolio, and online and offline retail based on internet thinking. Xiaomi released the world’s first full-screen concept phone, the Mi MIX; its full screen represents future of mobile phone design, such that the national museum of design in Finland has announced its collection of Mi MIX phones. Jun Lei believes that people all over the world are the same and that people will be willing to tip if you do a good job. Not making money is not sustainable for a commercial company, so Xiaomi offers several internet services to make profits. At the beginning of e-commerce, Xiaomi entered the offline market and innovated various retail business models. Jun Lei attached great importance to design in the early days. To date, Xiaomi has obtained all three of the world’s top design awards, winning the German IF gold award earlier this year, and later the German red dot and IDEA gold award. In addition to the three golden design awards, Xiaomi has won approximately 150 industrial design awards. In March 2018, Jun Lei stated that the development of the manufacturing industry must first rely on innovation and a focus on quality. Innovation is the most important way to achieve a breakthrough in core technology, but quality is just as important as innovation. Only if quality is improved can China eliminate its “shanzhai” and low-class image. (7) A Person Good at Thinking Jun Lei worked at Kingsoft for 16 years before resigning, aware of his “failure” in the first half of his life, and then he started to pursue his youthful dream. He proposed the theory of the whirlwind in the entrepreneurial process, deciding to follow the trend and founding Xiaomi technology. When Xiaomi experienced its first Waterloo, he controlled his ambition and proposed to “make up a missed lesson”, which is equivalent to admitting that the Xiaomi’s earlier development was too radical and that he needed to be more down to earth. Jun Lei found that low efficiency was the key issue for the operating process of Xiaomi in China’s commercial field, so he decided to minimize all unnecessary

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costs, spending all the firm’s money on product research and development. Zero advertising budgets, an almost zero channel budget and cost pricing were Xiaomi’s special strategies. Therefore, Xiaomi had to do all of its business by itself, including hardware R&D and retail strategies. Owing to its high efficiency, Xiaomi quickly eliminated all Chinese “shanzhai” phones and, in turn, forced domestic smartphone manufacturers to progress. With the change in the marketing environment, Xiaomi entered a different development stage. To expand its group of target customers, Xiaomi also started to increase its marketing and channel budgets. Generally, the original fans of Mi phones were male customers with a good understanding of electronic technology products. To encourage more women to learn about Xiaomi, they invited popular stars such as Yifan Wu to be featured in advertisements. Jun Lei also thought about more efficient marketing, so Xiaomi could reach more families and gain an understanding of its products among more people.

3.5 Considerations of Success Factors (1) User-Centered: Do What Users Need From the perspective of consumers, Xiaomi’s business model can be explained as high quality and lower cost. As Jun Lei wrote in his blog in 2016 “Insist on making friends with users; insist on making good products, and be a company that makes users happy. Quality, word of mouth and cost performance, these words finally are concluded into the user’s trust”. When users see the Xiaomi or Mijia brands, they do not need to doubt the quality and price: they can make decisions instantly. Xiaomi adheres to its advantage of cost performance, not abusing users’ trust, and making friends with users. Figure 3.6 shows parts of 100,000 postcards to all the Mi fans which were hand-written by the employees from Xiaomi. This is a good example to explain how to make friends with users. Xiaomi did everything it could to make every product perfect. At that time, the price of a foreign fitness band was 1400 RMB. It only went five days before it needed a charge, and it was easy to ruin with water in a bath. Jun Lei stated several requirements when designing the Mi band. First, can you go 60 days without charging? Second, can it be waterproof? Third, cost pricing. As a result, the Mi band sells for only 79 RMB, and it is very beautiful and exquisite. It can go 70 days without charging, and it is waterproof. Its price is 5% that of foreign counterparts. Xiaomi’s dream is to make products with affecting prices, to achieve world-class quality and to sell them for less than half the global price. (2) Innovation: Business Model Innovation and Core Technology Innovation Innovation of the business model: the introduction of “internet plus”. Xiaomi used internet technology and methodologies to make mobile phones and a range of products. Internet thinking is a new methodology; when it is used to rethink the orig-

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Fig. 3.6 The postcards to Mi fans from Xiaomi. Source https://www.mi.com/about/culture/

inal business, one can draw many different conclusions. Xiaomi spent substantial resources for core technology innovation. Xiaomi not only has applied for domestic patents but also has expanded to other countries such as Europe, America, Japan and South Korea. Its patent applications include hardware, the software experience, and a combination of hardware and software experience, such as edge touch, a children’s model, and facial recognition. (3) Efficiency The essence of Xiaomi’s business model is efficiency. Jun Lei noted that the core problem in Chinese manufacturing is operational efficiency across the whole society. Instead of working hard on research and development, companies in China are thinking about how to make money in the chain. The main reason many domestic products are not successful is low efficiency, which results in a vicious cycle where the products are poor quality and the price is high, so users are not satisfied. Xiaomi sells its products on its own e-commerce platform, so that it has a short distance between the factory and the consumers, which minimizes the channel cost to the greatest extent possible. For example, Xiaomi chooses a high-quality goods strategy, rather than a plentiful model strategy, from the perspective of efficiency. The plentiful models strategy has limited and scattered research and development, production, and marketing resources, and the cost of each product line is very high. Xiaomi, in contrast, concentrates all its resources to develop a good product. The business model of the Xiaomi ecological chain is also designed based on efficiency, and it uses the two-wheel drive of “manufacturing plus finance” to

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avoid becoming a huge company. If Xiaomi had 77 divisions to produce its different products, it would be exhausting and inefficient, so instead, Xiaomi turns entrepreneurs into bosses. Xiaomi is a fleet of companies, and every company in the chain is run efficiently. Because it regards efficiency as its core guiding philosophy, Xiaomi has achieved much that others cannot do: reduced the price of mobile power products from more than 200 to 69 RMB; brought air purifier pricing down from 4000–5000 RMB to 699 RMB; dropped high-grade mattresses pricing from more than 4000 to 699 RMB. (4) Pay Attention to Product Design Xiaomi was founded by eight partners, 2 of which are professional designers. Xiaomi won three global golden design awards this year, being the only Chinese company with this achievement. It has also won approximately 150–160 industrial design awards. In 2013, Xiaomi began to develop the patch board because almost all existing products were large and ugly; moreover, the technology had not been improved for almost 30 years. Xiaomi decided to make the panel small, like art, and even the packaging was designed to be as delicate as that of Apple watches. Subsequently, a series of ecological chain products released by Mijia, especially its lamp and socket, amazed consumers with its conciseness and beauty. Figure 3.7 shows the Mi LED smart table lamp, which received the German IF design gold award in 2017. After the Mi patch board was released, other patch boards in the market began to look more like Xiaomi’s. Their sense of design feels increasingly stronger, and their performance also saw a large promotion. Xiaomi’s products impelled other manufacturers to upgrade their own products; thus, the entire patch board industry was improved. Jun Lei is gradually improving the various manufacturing fields in China by offering high-quality and cost-effective products. Fig. 3.7 Mi LED lamp. Source https://www.mi.com/ mjsmartlamp/?cfrom=search

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3.6 Analysis of Mr. Jun Lei’s Entrepreneurship (1) Jun Lei’s Dream and Objectives As discussed above, when he was an undergraduate, Jun Lei’s dream was to build a great company with a huge impact in China and globally, similar to Apple. Although he became the CEO of Kingsoft in his 30s, he was not satisfied and never gave up his dream. Hence, he decided to found Xiaomi with other partners in his 40s after he retired from Kingsoft and after he spent a few years as an angel investor. In Jun Lei’s opinion, Xiaomi was founded to help transform and upgrade China’s manufacturing sector through internet thinking and internet methodology. He wanted to change the entire Chinese manufacturing industry and overturn the consumers impression of Chinese goods by making the best products based China’s strong manufacturing capability to benefit everyone in the world. Jun Lei does not want Chinese goods to be regarded as cheap and inferior in the eyes of consumers. He aims to build Xiaomi as a national brand of China, like SONY in Japan in the 1970s, and to make products of world-class quality with reasonable prices. He believes that the key need is to attach great importance to product quality, design and innovation. Therefore, he defined the mission of Xiaomi as “let everyone enjoy the fun of technology”. (2) His Ability to Forecast the Future Business Environment Jun Lei is a visionary entrepreneur who has a strong ability to forecast developing trends in business. As early as 2008, Jun Lei proposed “concentration, perfection, word of mouth, speed” as seven characters (four words) for the internet. He took these as Xiaomi’s operating philosophy and achieved great success. He also observed that when we “stand in the middle of whirlwind, the pig can fly. I quote it to show that the essence of entrepreneurial success is to find the trend and go with the flow”. In 2007, Jun Lei resigned from his position as CEO of Kingsoft. In 2008, he became an angel investor. He wrote in his personal blog that the mobile internet was a great opportunity for the next wave of entrepreneurship. As an angel investor, he invested in a number of potential companies, including Cheetah Mobile and YY, which gave him a deeper understanding of the mobile internet and delivered extraordinary returns. In the following years, Jun Lei reconsidered and repositioned himself while continuing to make investments such as Lakala, Vanke and UC web. Because Jun Lei was a software originator, he hoped to learn how the internet works by investing as an angel investor. The whirlwind soon arrived, and the market for smart phones was ready to explode. In 2010, the 40-year-old Jun Lei seized the opportunity and founded Xiaomi together with Wanqiang Li, Bin Lin, and other partners. At the end of 2013, Jun Lei observed the trend in intelligent hardware and the IoT. He decided to use Xiaomi’s successful experience in making mobile phones to copy 100 small Xiaomi and lay out the IoT ahead of time. Jun Lei is a master of marketing, and set Mi phones as the center, and expanding the product line to television, settop boxes, and many other types hardware. Meanwhile, all hardware is sold by Xiaomi’s channels, and the ecological chain is established through the integration of

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a variety of hardware, video, pictures, music and other internet services, as well as internet applications. By taking advantage of Shunwei Capital, he invested in many enterprises with the same genes. By selling their products on his platform, Jun Lei constructed a Xiaomi mall, which is China’s third-largest e-commerce platform. Afterwards, the competitive environment shifted for the selling of smartphones from online to offline. Jun Lei also transformed Xiaomi’s strategy to pay more attention to offline retailers in the distribution channel. Furthermore, he repositioned Xiaomi’s business model as a “triathlon”, a concept he developed from scratch: hardware, new retail and internet. Figure 3.8 shows the new Xiaomi Triathlon. With this model, he is catching the trend of new retail and assuring that Xiaomi can continue growing despite fierce competition. (3) His Core Resources or Technologies Jun Lei is a well-known internet veteran in China who has access to extensive human and financial resources. Therefore, he was able to quickly find the most suitable team members and raise the money to found Xiaomi. The success of Xiaomi is attributed to its innovation of the business model and technology. Its innovation of the business model was the introduction of “internet plus”. Xiaomi uses the technology and methodology of the internet to make mobile phones and a range of other products. Internet thinking is a new methodology used to rethink

Fig. 3.8 Xiaomi Triathlon. Source https://pandaily.com/

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the original business and draw many different conclusions. For core technology innovation, Xiaomi spent a substantial amount of resources. Xiaomi applied for not only domestic patents but also expanded to include patents in other countries such as Europe, America, Japan and South Korea. The patent applications include hardware, the software experience, and the combination of hardware and the software experience, such as the edge touch, the children’s model, and facial recognition. Cost performance and new national goods are typical labels for Xiaomi. Xiaomi continually insists on the path of cost performance, not abusing users’ trust, and making friends with users. Hence, Jun Lei also attaches importance to supply chain management and marketing strategies. A good relationship with suppliers guarantees the cost performance of Xiaomi products, while creative marketing helps Xiaomi obtain loyal customers at a low cost in a short time. (4) How to Manage His Company The essence of Xiaomi’s business model is efficiency. Jun Lei noted that the core problem of Chinese manufacturing is its operational efficiency across the whole society. Therefore, Jun Lei designed his management system according to the efficiency rule. As such, Xiaomi adopted a flat organizational structure with only three layers across the whole company, and the entrepreneurial team continues to work hard even though Xiaomi has obtained great success. Meanwhile, Jun Lei insists on selling the products through Xiaomi’s e-commerce platform first and then gradually expanding to other online shops and offline stores. In the early stage, he seldom made advertisements for Xiaomi, trying different ways to save on distribution costs and marketing costs to focus on research and development. Moreover, Jun Lei attaches great importance to human resource management. He spends 80% of his time recruiting the most suitable talent and persuading them to join Xiaomi. Then, he fully trusts employees and does not set KPI but instead drives them to work for the user from their heart. To successfully manage Xiaomi, Jun Lei learned from the experience of three famous companies: Tongrentang, Costco and Haidilao. As he said, Xiaomi decided to make high-quality products at an honest price, such as the Chinese medicine produced by Tongrentang. Xiaomi will consistently increase operational efficiency and reduce unnecessary costs, such as Costco from the United States. Last, Xiaomi also focuses attention on the word-of-mouth effect from excellent products, such as the well-known Haidilao hot pot, to provide high-quality service beyond consumers’ expectations. (5) Jun Lei’s Way and His Value Sense Jun Lei is a visionary entrepreneur with a big dream. As he said, his motivation to found Xiaomi was not money and vanity but to pursue that dream. Hence, Xiaomi holds the following value: to make amazing products at honest prices that allow everyone to enjoy the fun of technology. Jun Lei expects to help transform and upgrade China’s manufacturing sector through internet thinking and internet methodology.

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He does not want Chinese goods regarded as cheap and inferior in the eyes of users, and he hopes to build Xiaomi as a national brand of China, like SONY in Japan. Jun Lei wrote the following on his blog in 2016: Xiaomi will insist on making friends with users, insist on making good products, and be a company that makes users happy. Quality, word of mouth and cost performance: these words ultimately transform into users’ trust. When users see the Xiaomi or Mijia brand, they do not need to question the quality and price, and they can make decisions instantly. Xiaomi adheres to the advantages of cost performance, not abusing users’ trust, and making friends with users. Xiaomi does everything it can to make every product perfect.

3.7 Further Development (1) Overseas Expansion of Xiaomi In addition to the domestic market, Xiaomi has entered the overseas market, starting with nearby southeast Asian markets, such as Singapore and India, then turning to Russian markets and farther to European markets, Xiaomi’s products can be found in all of these countries. Xiaomi’s overseas performance is very impressive. By relying on its premise of a low price for good quality, it has eliminated a number of competing brands, quickly treading on the heels of overseas firms in their local markets, and occupying a certain market share. In November 2017, Jun Lei made two microblog posts on Weibo: Xiaomi claimed that it had achieved excellent results in the Indian market and the Russian market, having reached first place in India and, after only one year, third place in the Russian market. (2) Current Xiaomi Jun Lei believes that today’s Xiaomi has reached a historic and important point. Facing the future, Xiaomi’s global business ecosystem has a very imaginative and broad prospect: let everyone in the world enjoy the beautiful life brought by technology. To achieve this goal, Xiaomi alone is far from sufficient; 100 or more companies like Xiaomi are needed to build a rich and prosperous new business ecosystem. In the second half of 2013, Xiaomi began to move in one direction: to build an ecological chain surrounding the IoT. By the end of 2016, Xiaomi held 77 enterprises in its ecological chain, and their overall sales exceeded 10 billion yuan. Xiaomi’s ecological chain has developed into the world’s largest intelligent hardware platform. These years have witnessed the rapid expansion of Xiaomi’s ecological chain and Xiaomi’s continuous fighting and growth in the shopping mall. The Xiaomi ecological chain is an intelligent hardware incubator based on enterprise ecology. Without precedent, depending entirely on internally developed practices, Xiaomi invested in ecological companies based on a series of unique methods: the special investment logic of “only investing but no capital holding, only helping but no interfering”. Priority investment is given to startups composed of an engineering team; they are managed with a matrix style and supported with comprehensive

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incubation. All of these investments have facilitated Xiaomi’s journey to offer a world-class ecological system of intelligent hardware. Xiaomi has a clear and mature investment direction and specific category layout direction: intelligent equipment related to the smartphone, intelligent household appliances, personal short-distance transportation products, and geek gadgets, which can be determined to be family and personal life supplies. The investment logic of Xiaomi is user-centered. This requires the team to care about the user’s needs without worrying about the boundaries of the category. Xiaomi’s investment strategy can ensure that the entrepreneurial teams hold the largest share of the stock, leaving the maximum benefit with team. Hence, the startup teams will be motivated to do their best. However, Xiaomi has set a boundary for itself. In its eco-chain companies, Xiaomi has the right to give suggestions but it never makes decisions or seeks control. Xiaomi instead adopts the unique bamboo forest effect to develop its ecological chain: Xiaomi invests by searching for bamboo shoots and building a pan-group company with the bamboo forest theory. At the same time, Xiaomi provides nutrition and water for the entrepreneurial team through its large user base, financial support, relatively mature product methodology, and strong supply chain resources. While absorbing these nutrients, the startups build strong teams to complete the original objectives. Meanwhile, they continue to multiply and connect at the root, accumulating new potential energy and producing new bamboo shoots.

3.8 Conclusion Among the best-known entrepreneurs in China, Jun Lei is also the most approachable and fascinating. Many young people may know Jun Lei from the funny video “Are you OK”, which was made by station B and makes fun of Jun Lei’s English accent. When they become familiar with Jun Lei, they learn that he has always been an outstanding student, a Chinese internet legend and the CEO of Kingsoft. In 2010, when Jun Lei founded Xiaomi Technology, most mobile phone customers were still using Nokia. N9 was regarded as the world’s best mobile phone at that time, and Apple phones were destined to be popular in the future. When Jun Lei designed a Mi phone with high configuration and low price, in was a market breakthrough. However, due to short supply, many fans were unable to buy Mi phones, and negative news and criticism of Xiaomi spread everywhere. However, Jun Lei has always been an optimistic and modest person and knew that the best response was to solve the problems and make an excellent product. Afterwards, Mi phones became the representative of high quality and low price, making them very popular with students and engineers. Jun Lei said that he decided to insist on this strategy: making highquality products at a reasonable price. Xiaomi’s products become increasingly outstanding. Starting with the Mi4 and Mi5, their performance became stronger. In addition to their good performance, Mi6 also has a beautiful appearance. Furthermore, the Mi Note series are quite impressive

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because Xiaomi’s workmanship has become increasingly exquisite. When the Mi MIX was released, the whole world was astounded. Xiaomi, with Jun Lei’s own methods, ultimately won despite fierce competition and become a great Chinese company in the smartphone industry. No matter how controversial the firm is and despite criticism, it must be recognized that Xiaomi overturned the entire smartphone market. Without Xiaomi, the concept of a “thousandyuan smartphone” would probably not have appeared, the Chinese full-screen phone would have appeared a little later, along with the 2000-yuan flagship phone. Jun Lei next established the intelligent ecosystem of Mijia, turning a mobile phone company into a fleet of enterprises with an ecological chain. To make innovative highquality products, Xiaomi’s ecological chain researches and develops new technology together with their upstream suppliers or even invests in the suppliers and helps them to set up new production lines. Hence, Xiaomi can help its suppliers upgrade their manufacturing process. Jun Lei has a big dream, which is to improve the Chinese manufacturing industry and let everyone enjoy the fun of technology by making high-quality products at a lower price.

References Wanqiang Li. Sense of Participation[M]. Beijing: China Citic Press, 2014. The Barn School of Xiaomi Ecological Chain. The Battlefield Notes of Xiaomi Ecological Chain[M]. Beijing: China Citic Press, 2017. https://weibo.com/leijun?is_hot=1 http://blog.sina.com.cn/leijun https://tech.sina.com.cn/t/2017-03-09/doc-ifychhus0202534.shtml http://edu.sina.com.cn/bschool/2012-08-15/1412352320.shtml http://tech.163.com/14/0109/08/9I4QGOG900094MOK.html http://jingji.cntv.cn/2016/03/25/VIDEdAZEzEf37mrPVZIIL1Ff160325.shtml https://www.cyzone.cn/article/127335.html http://finance.sina.com/gb/economy/sinacn/20180502/16321741587.html http://www.sohu.com/a/134791352_463963 https://www.statista.com/chart/15179/xiaomi-revenue-and-smartphone-market-share/ https://www.idc.com/getdoc.jsp?containerId=prUS43773018 https://www.counterpointresearch.com/zh-hans/india-feature-phone-market-doubled-smartphonemarket-remained-flat-yoy-q1-2018/ https://baike.baidu.com/item/M1/15385857 https://t.cj.sina.com.cn/articles/view/6385981482/17ca2582a001004har https://www.mi.com/mix3/ https://www.mi.com/redmi6pro/ https://www.mi.com/mjsmartlamp/?cfrom=search https://item.btime.com/m_2s1bin34grs?from=zhijian https://pandaily.com/xiaomi-ceo-lei-jun-says-xiaomi-is-a-retail-business-and-the-goal-is-to-beanother-muji/

Chapter 4

Guotian Liu and Jinsida Group Co., Ltd.—To Keep Lucid Waters and Lush Mountains for the Next Generation Hua Bai and Jing Wang

4.1 Introduction Anyone who lays eyes on the giant piece of equipment pictured below for the first time will be amazed to see it devouring all sorts of household garbage at one end and producing plastic products, construction materials, fuel and methane out of different outlets at the other end (Fig. 4.1). With more than 130 domestic and international patents, this piece of equipment is realizing its inventor’s dream to recycle and reuse garbage rather than just “properly” dispose of it. This technology represents a magnificent feat accomplished by Guotian Liu (Fig. 4.2), the former “king of textile printing and dyeing”, then the “king of seeding and tree planting” and today the “environmental protection expert”. Born in a poor

Fig. 4.1 Domestic garbage treatment system H. Bai (B) · J. Wang School of Economics and Management, Beihang University, Beijing, China e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_4

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Fig. 4.2 Guotian Liu

rural family, Guotian Liu has grown from his first job as a carpenter’s apprentice into the chairman of Jinsida Group, which comprises more than 10 companies, and a character of legend. Guotian Liu’s personal experience was representative of his generation of Chinese, who endured difficulties and hardship in life when China was poor and undeveloped. This generation was inured to hardships, steadfast and persistent. This characteristic serves as the inner core in his path to entrepreneurship, leading him forward despite all obstacles. As a business owner, Guotian Liu was extraordinary. When others were busy expanding and making money, Guotian Liu turned from his already successful textile printing and dyeing business and plunged himself and his company into the cause of environmental protection and healthy living. This is where he believes “true and bigger value” lies. Guotian Liu is willful, romantic and poetic as an entrepreneur, although entrepreneurs are supposed to be practical and focused. Only when we have learned about and fully comprehend his experience and his concept of entrepreneurship can we understand how he has been stick to his value and never been away. In this case study, readers will learn about the development of Jinsida Group Corporation and the growth path of its founder Guotian Liu. The content of this case study is based on interviews with Mr. Guotian Liu and Jinsida employees, companyprovided information and the company website.

4.2 Outline of Guotian Liu’s Business Kingdom Located in Changyi, Weifang, a prefecture level city in Shandong Peninsula, Weifang Jinsida Co. Ltd. was founded in 1992 (Fig. 4.3). The firm started in the textile printing and dyeing business, then expanded into environmental preservation. Jinsida is now

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Fig. 4.3 Location of Jinsida Co. Ltd

a group of companies engaged in manufacturing industry, agriculture, environmental engineering, tourism and cultural industries. With more than 1800 employees and 2.1 billion RMB in total assets, Jinsida has been named a “National Leading Enterprise in Agriculture Industrialization”, one of the “Top 100 Private Enterprises” in Shandong province, a “Shandong Low Carbon Exemplary Organization” and AA+Grade Credit Enterprise in the Agricultural Bank System in Shandong Province. Since 2001, Jinsida has been continuously awarded the honorary titles of the “Youth Civilization Unit” and the “Star of Glory” by the Central Committee of the Communist Youth League and the State Administration for Industry and Commerce, respectively. (1) Textile Printing and Dyeing: The First Business of Jinsida Weifang Jinsida Textile Printing and Dyeing Co. Ltd. was the first company in the Jinsida group. Founded in 1992 from a family workshop of fewer than 10 people, within 20 years, Guotian Liu has transformed the company into a modern, hightechnology and comprehensive national leading enterprise. Today, the company has more than 1200 employees and 260 professional technical personnel; it includes 4 factories and 2 specialized workshops. The products cover all types of high-grade printing cloth, bleached cloth, dyeing cloth, pure cotton, polyester and a series of bedding. The company is equipped with a Japanese high-tech tilting rotary screen printing machine, which is mainly used for high-quality, high-precision printing, cotton printing and more than 10 high-technology production lines (Fig. 4.4), with an annual production capacity of more than 300 million meters. Due to its variety and high quality, the products of Jinsida Textile Printing and Dyeing Co. Ltd. are enjoyed by customers both domestically and internationally and sold worldwide (Fig. 4.5).

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Fig. 4.4 A production line for bedding

Fig. 4.5 Products of Weifang Jinsida Textile Printing and Dyeing Co. Ltd

(2) Resource Utilization and Recycling: Expanding the Business into Environmental Preservation Aside from his success in the traditional industry, Guotian Liu explored and accomplished innovative achievements in the fields of resource utilization and recycling. Jinsida Environmental Engineering Co. Ltd., as a high-tech environmental protection engineering enterprise in the Jinsida Group, is an integrated solution provider for the resource utilization of industrial sewage, domestic garbage and agricultural waste. The company is committed to researching and developing new technology, new manufacturing processes and new products, thereby establishing a positive corporate image in the environmental protection industry. Adhering to the principle of “talent based, science and technology leading”, Jinsida Environmental Engineering Co. Ltd. owns more than 120 patented technologies (Fig. 4.6) and has gathered a number of professional and technical personnel who have been engaged in the environmental engineering industry for many years, with rich experience in design and field debugging and a comprehensive understanding of

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Fig. 4.6 Wall of intellectual property

the relevant technologies and their application. The company’s independently developed projects for the reuse of printing and dyeing wastewater and the utilization of urban and rural domestic waste have been identified based on their results and have reached an internationally advanced level. Its project on the resource utilization of urban and rural domestic waste was awarded the “Shandong Major Energy Conservation Achievement Award”. In addition, Jinsida’s production of excellent quality recycled plastic products and wood plastic products with advanced technology is well recognized by the market. (3) Seedling and Tree Planting: Promoting Business in Environmental Preservation and People’s Welfare Another integral piece of Guotian Liu’s business kingdom is agriculture and tourism. Since 2001, the company has built 11 nursery bases, including green seedlings and landscaping, covering an area of 1 mu. These offer more than 400 varieties of highquality seedlings, a total of more than 7000 million plants, and led to the formation of 100 thousand acres of greening seedlings in the city of Changyi. Led by Jinsida, Changyi has become a “greening seedling base of North China” and a “national seedling trading market”, and the company has become “the key national leading enterprise of agricultural industrialization”. Jinsada invested in the construction of the Green Expo Garden and helped the government to successfully hold fifteen China (Changyi) North Greening And Seedling Expositions and twelve Chinese garden flower and tree information exchanges. More than 4000 merchants total participated in these events, with more than 7100 sale contracts, a seedling trading volume of 2 billion 300 million yuan, reflecting 7 billion 400 million yuan in investment.

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While developing the seedling industry, Guotian Liu extended his achievements in agriculture into tourism agriculture and the green culture industry. An investment of more than 200 million yuan in the Green Expo Garden (Figs. 4.7 and 4.8) has made it a regional sightseeing landmark, and it has been designated a “National Agricultural Tourism Demonstration Site”, a “AAAA National Tourism Scenic Spot”, a “Shandong Provincial Cultural Industry Demonstration Base”, a “National Science Popularization Base” and a “National Leisure Agriculture and Rural Tourism Demonstration Site” by the government. The three realms of Guotian Liu’s business kingdom seem to be only remotely connected with each other and slightly disorganized. However, if put together with the personal experience of Guotian Liu, it can be seen that they are well aligned, representing a reflection of his developing entrepreneurship.

Fig. 4.7 Green Expo Garden

Fig. 4.8 Plants

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4.3 Background of Guotian Liu—From a Young Carpenter to the Textile Factory Manager Born in 1957 in a small village in Changyi, Shandong province, Guotian Liu was expelled from school at the age of 14. Later, he learned from his parents that his family used to be local magnates before the founding of new China. During the Great Cultural Revolution, although he was a good student at school, this family label was enough to make a student’s career or any “good” career impossible for him. Between the choices of being a poor rural peasant for his entire life or learning some skills, Guotian Liu chose the latter. Thus, at the age of 15, he became a carpenter’s apprentice at a local middle school fixing desks and chairs. Before long, this young apprentice caught the attention of the master carpenter due to his cleverness and eagerness to learn. The young Guotian Liu not only learned quickly but also showed tremendous interest in the creative work accomplished by the master carpenter. Every day, he quickly finished the elementary tasks assigned to him and then watched and helped the master carpenters work. During his rest time, he practiced and even designed and built an exquisite demountable wood gun on his own. Given his family background, Guotian Liu could not become a permanent worker at any organization but could only work at scattered temporary jobs. In the cold early spring of 1974, he was sent to the Jiaolai River to serve as a bearer (doing temporary construction and transportation work). It was very hard work, but Guotian Liu persisted in it, as it provided four good meals a day that could keep the young man from starving. His mind and body were honed and strengthened through this experience. Subsequently, as a part of a team of carpenters, he worked at a refrigeration factory and a seaside shrimp factory, but always for just a short period. During that period, he became good friends with two young men who were of similar age, mechanical repairman Hu Ming’en and electrician Zhang Mingquan, who decades later became his business partners. Together, they achieved great innovations and success. After the Third Plenary Session of the Eleventh CCCPC in 1978, China entered the new era of reforming and opening up. Hoping to see more of the world, Guotian Liu left Changyi. With his parents’ help, he arranged to visit his uncle in Guiyang, a city in South China and more than 2000 km from home, where he hoped to find a job and earn some money for his needy family. However, he did not find work opportunities there. Instead, he spent all the money he brought, which was almost all of his family’s savings, and all the money borrowed from his uncle to travel around the south and east China. When he arrived home months later, instead of bringing money home, he was not only penniless but also in debt to his uncle. Although his parents were furious, Guotian Liu was quite satisfied with his trip, feeling that his mind and vision had broadened greatly. This event fully embodied Guotian Liu’s view about money. Between accumulating a fortune and spending it on creative and meaningful activities, he always tended toward the latter. He believes the value of money can only be achieved when it is circulated; otherwise, it is just a series of numbers in your account. This view of money influenced many important decisions of Guotian Liu. Indeed, objectively, it

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was this view of money that compelled him to start his own business. In 1983, Guotian Liu borrowed 30 thousand RMB to build a 2-story house to improve the living condition of his family and to practice his self-taught knowledge on architecture design and construction. At that time, 30 thousand RMB was the sum of thirty years of an ordinary worker’s income. Although it was an astronomical figure to him, he was confident and promised his father that the money would be repaid soon. To repay the debt, he had to work on a beach farm. Although it offered relatively high wages, it was a place where few people wanted to work. The monotonous, lonely days were unbearable to him, and eventually Guotian Liu returned home. Still needing a way to make money, Guotian Liu was forced into self-employment. With his carpentry skills, he first set up his own woodworking group, with more than a dozen apprentice workers. Identifying the demand in the local textile manufacturing supply chain, he also established his own prefabrication workshop. In 1987, he was hired as the plant manager of a local textile factory. However, despite all these efforts, he could hardly afford to support his family while also repaying his debt. One year later, Guotian Liu made up his mind to quit his job as the plant manager and seek a better opportunity.

4.4 Milestones of Guotian Liu’s Entrepreneurship 4.4.1 Starting His Own Company and Thriving in the Textile Printing and Dyeing Industry (1) Stage 1: Start of a Family Workshop The region of Changyi has a long history of silk production, which created a solid foundation for the later prosperity of its local textile industry. In the 1980s, with the success of the new cotton cultivar “Lu (abbreviation for Shandong) Cotton No.1”, Shandong became a major province for cotton production in China. That event began the development of the textile production and dyeing industry in Changyi. In 1988, under pressure to repay his loan, Guotian Liu quit his job as the plant manager in a local textile factory and started his own business in the textile printing and dyeing industry. His business was only a 4-person family workshop. It was the prosperity and profit that attracted Guotian Liu into this business, but he knew no printing or dyeing technics, as he had no prior experience. However, his rough childhood fostered him fearless when facing difficulties. He was a true believer in the old saying that nothing in the world is difficult for one who sets his mind on it. He invited a technician from the local towel factory to teach them the techniques, and thereby put his production on track. Through unremitting effort, he persuaded the village accountant to join his workshop to get it into financial shape. Times were initially quite difficult; as a starter workshop, they had no position but had to pick whatever customers and take whatever orders were available to them. However, because they

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accepted all varieties of customer demands, they found their niche in the market and very soon started to earn profits. Within one year, Guotian Liu had successfully paid off his debt. (2) Stage 2: Contracting a Bankrupt Factory In the winter of 1988, Guotian Liu decided to expand his business, and he set his eyes on a local factory called Huangxin Textile Printing and Dyeing Factory that was on the verge of bankruptcy. The contracting cost was 30 thousand yuan. Guotian Liu had earned some money with his family workshop this year, but he had spent almost all of it paying off his debt. However, by doing so, he earned a reputation. With little difficulty, he soon borrowed enough money to start the factory. Moreover, he made a deal with his partner, who provided half of the starting funds for the factory, that he would be totally responsible for the operation of the factory, without interference from his partner. Although these terms seemed arrogant and arbitrary, Guotian Liu believed it was the best for the development of the factory and its efficiency. His partner offered Guotian Liu an absolute trust and agreed to the deal. With his ability and effort, the factory was quickly set on the right track. Just when everything appeared to be promising, however, the market suddenly dropped in 1989 due to a political turbulence in China, and Guotian Liu’s factory saw its cash flow disappear. Based on his strong belief in the potential domestic demand for printed cotton products, he decided to take the risk and push through the crisis. Again, it was his trustworthy reputation that helped him successfully collect money from the villagers and his employees and temporarily keep the factory alive. To find an opportunity, Guotian Liu carefully investigated the market and found that there was a special type of yarn with relatively low demand but rather high requirements for the manufacturing process. As a result, no large factories wanted these orders, and no small workshops were able to take them due to technical limitations. This was their opportunity. As long as they could meet the manufacturing process requirements, their factory could manufacture this yarn and their business would be saved. Thinking about this strategy, Guotian Liu immersed himself in the factory for days, experimenting and testing. Finally, he was able to find the best match point for the dyeing material and temperature in the manufacturing process. In the spring of 1990, he turned the business around. He had not only paid back all the money borrowed but also accumulated a fortune of several hundred thousand yuan. (3) Stage 3: Founding of Jinsida Industrial Co., Ltd., and Success in the Market By inviting professionals in management, technology and manufacturing to join the company, continuously learning from the world’s leading dyeing technology and even successfully inventing a cheese dyeing system that could compete with the most advanced German equipment at that time, through unremitting research and efforts, Guotian Liu found footholds for his company in the market and made rapid progress. When the 3-year contract with Huangxin Textile Printing and Dyeing Factory ended in 1992, Guotian Liu decisively founded his own company: Jinsida Industrial Co., Ltd.

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Greatly inspired by his former success, Guotian Liu expanded into 3 factories all at the same time, engaging in bleaching, dyeing, cotton weaving and refrigerating, picturing an even brighter future. However, it did not turn out as he expected. Although the field of cotton weaving was closely connected with textile dyeing and Guotian Liu even had relevant work experience as a cotton weaving factory manager, he lacked the expertise for the factory to succeed in the market and ended the first year with a large loss. He had to reconsider the core competence of the company and adjust his strategy. By decisively avoiding his weakness in cotton weaving and giving full play to his advantages in textile printing and dyeing, Guotian Liu successfully turned the situation around. By 1994, the profit and tax from his company totaled over 2 million RMB. (4) Stage 4: Becoming the King of Textile Printing and Dyeing Success fosters ambition. In 1996, Guotian Liu contracted a workshop from the Changyi Textile Printing and Dyeing Plant in the hope of an expansion. However, it was followed by a series of problems. As a result, he lost over 1 million yuan within half a year and had to end the contract. This failure was sobering, but, Guotian Liu was not defeated and he did not give up. He reflected upon the mistakes he had made during the past year and realized that his management needed to be improved to keep up with the development of the company. He needed to transform himself, both mentally and in practice, from a small business owner to an entrepreneur. He understood clearly that when the company has reached a certain scale, important decisions should be made after thorough consideration and comprehensive investigation, otherwise he would suffer irreversible loss. The entrepreneur had to know to restrain his desire and to lead the enterprise forward steadily. The idealist brought himself down-toearth and promoted self-growth through the failure. When life forced him to start his own business, Guotian Liu was merely trying to make money to pay back his debt. As his business grew and became more successful, Guotian Liu extricated himself from his personal financial crisis, but he felt strongly that it was his responsibility to help his employees make a better living. The goal of his actions became “to make more people rich and realize social value”, and Liu was to realize this goal through his company. Guotian Liu always believed that his sense of responsibility was an inexhaustible motive for the growth of the company. As a result, in 1997, he carried out the Jinsida Shareholding System Reform. The owners sold shares to all employees and hired a professional management teams. Later, he dismissed his wife and other relatives from the company to ensure that the management team could practice without concern. Ever since, this has been Guotian Liu’s management philosophy: “keep relatives out of the company, trust the people you use and delegate”. Under all these reform measures and through the joint efforts of everyone, Jinsida Industrial Co., Ltd. survived its various difficulties and developed into a leading enterprise in the city of Changyi, and Guotian Liu received the title “king of textile printing and dyeing”.

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4.4.2 An Important Turning Point: From the Dyeing Business to Environmental Preservation Guotian Liu always had the reputation of being kind-hearted and socially responsible. He offered help to employees in need, built a school for children and a nursing home for elderly people. Even before he became a business tycoon, he was respected as a “good man”. When the printing and dyeing business became successful, Guotian Liu became the local “king of textile printing and dyeing”. However, during the late 1990s, every time he finished a business tour of a developed country, he felt a strong sense of loss because of the huge contrasts he saw in the environment. The printing and dyeing industry is a highly polluting industry. But at that time, all of China focused on financial indicators, and other factors were not emphasized. After a trip to Singapore in 2000, Guotian Liu realized that although he had worked wholeheartedly to improve the quality of life of his employees and local people economically through his business in textile printing and dyeing, the side-effects had been long neglected. It was a major mistake to focus only on the economics: Guotian Liu felt very much in debt to future generations for polluting the environment. Hence, he invested 3 million RMB to purchase and install printing and dyeing waste water treatment, desulfurization and dusting cleaning equipment in the year 2000. In 2001, he entered the tree planting and seedling industry. By 2006, his green industry has reached quite a scale. Later, not satisfied with the available pollution control system, Guotian Liu established his own R&D team to address dyeing sewage treatment and successfully realized zero harmful emissions. He planted trees, bred seeds and built parks to improve the living environment for local people. Seeing news about “cities besieged by waste” on TV, he committed himself to research on municipal garbage reclamation. The former ‘king of textile printing and dyeing’ is today the “environment protection expert”. (1) Polluted Water Recycling Project Guotian Liu saw clear air, blue sky and clean water abroad, whereas in his hometown, the Huai River, which had flowed for thousands of years, was polluted and malodourous from industrial sewage disposal. Guotian Liu realized that while he was trying to develop his company and helping his employees achieve a better life, there had been a major side effect that he had not considered. He saw the pollution as a debt of conscience to his descendants that he had to repay. Guotian Liu immediately invested 3 million in wastewater treatment and desulfurization and dust removal equipment for textile printing and dyeing production, and Jinsida reached the national standard for sewage discharge. However, he was not satisfied. Although the treated wastewater met national standards, the harmful substances were transferred into the air and river mud, which still polluted the environment. Guotian Liu decided to research to develop his own equipment. The printing and dyeing sewage treatment system developed by Guotian Liu, in a strict sense, is not a waste processing and disposal system but a resource recycling and reuse system. Sewage produced by the factory first goes through a row of biogas

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tanks buried underground. The large amounts of bacteria in the sludge help with the decomposition of organics in the sewage, during which process methane is produced. Biogas can be used to generate electricity for biogas power generation equipment, which is buried under the ground for insulation and to reduce operating costs. Guotian Liu tested the remaining sludge and found that two tons of sludge is equivalent to a ton of coal in the heat energy it holds. After squeezing in the extruder, the dried sludge is mixed with coal, which together make briquettes to be used in the factory boilers as an energy source. In the reclaimed water workshop, the wastewater from the biogas tanks is filtered and sterilized. It becomes reclaimed water with a calorific value. The quality of the water reaches the standard acceptable for reuse in the printing and dyeing workshop. The entire process achieves the complete recycling of sewage from textile printing and dyeing with no pollution and zero emission. As a result, for one year, 2 million and 880 thousand tons of wastewater generated from his printing and dyeing factories is now recycled and reused in the production process. A total of 720 thousand cubic meters of biogas is generated from treating sewage that produces 700-thousand yuan worth of electricity, and 1080 tons of coals are produced from the sludge, worth 430 thousand yuan. The calorific water reused in production can save up to 3.6 million yuan. In addition, another 3 million yuan is saved from water conservation and cost reduction on sewage disposition charges. In total, the benefit from implementing the sewage treatment system is up to tens of millions of yuan per year., a truly impressive accomplishment. During the following years, a series of effects emerged as the pollution control efforts continued to increase. Many printing and dyeing enterprises in Changyi were shut down because they failed to meet sewage discharge standards, whereas Jinsida Textile Printing and Dyeing Co., Ltd. not only survived but also expanded with zero sewage discharge. Furthermore, Jinsida Environmental Engineering Co., Ltd. was founded with a core competence in sewage treatment, becoming a new and strong source of economic growth for the Jinsida Group. (2) Municipal Garbage Reclamation Project With the rapid economic development and urbanization, municipal waste production is rapidly increasing. Among the 600 cities in China, 2/3 are facing a garbage siege. Existing treatment methods such as landfills, incineration and other traditional approaches have obvious defects in that they take up lands and cause pollution. Learning about this situation from the news, Guotian Liu became unsettled and decided to take on this worldwide problem. As the starting point, Guotian Liu and his team focused on how to automatically classify and separate different types of substances in the garbage. He sticks to his principle of keeping things simple and the philosophy of “splitting”. Although there are numerous substances in municipal garbage, they can always be split into two types: solid and liquid, metal and nonmetal, organics and nonorganics. After being fed into the equipment, the garbage goes through shredding; hydraulic washing; gravity, magnetic and buoyancy picking and then washing by high-organics concentrated water. Different types of substances in the garbage are separated for

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further processing. The municipal garbage treatment system developed by Guotian Liu works as follows: garbage is collected by the sanitation bureau, and transport vehicles take it into the treatment workshop. When entering, the automatic weighing system weighs the truck and records the weight. The intelligent door system opens and closes automatically to ensure that the entire vehicle entry process does not cause odor overflow (Fig. 4.9). The transport vehicle will go through a special vehicle cleaning procedure in the cleaning pool after unloading to avoid polluting the environment with the waste residue on the vehicle body. The garbage is discharged into the storage tank (Fig. 4.10) and then fed by a grab bucket on the crane (Fig. 4.11). A distributor (Fig. 4.12) evens out the feedings before they go through a multistage process of crushing, peeling, washing and separation (Fig. 4.13). In this process, metals are picked out by magnetic separation and heavy materials, such as ceramic and glass sand (Fig. 4.14), are selected and washed to be used for the production of construction material (Fig. 4.15). Light materials (Fig. 4.16), such as rubber, plastic and chemical fiber, can be used to produce silicon plastic products and compound Fig. 4.9 Enclosed workshop

Fig. 4.10 Discharge of garbage

84 Fig. 4.11 Garbage feeding by the crane

Fig. 4.12 Distribution belt

Fig. 4.13 Separation of heavy materials

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4 Guotian Liu and Jinsida Group Co., Ltd. … Fig. 4.14 Separated metallic and heavy materials

Fig. 4.15 Products made from recycled heavy materials

Fig. 4.16 Separation of light materials

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wood products, which are widely used in communication, power supply, drainage, landscaping, residential area construction, outdoor landscaping and other municipal works (Fig. 4.17). The treatment equipment can also produce high temperature combustible gas for power generation. The washing liquid containing high concentrations of organic matter produces biogas through an anaerobic process, which can also be used for power generation (Fig. 4.18). Biogas residuals are good organic fertilizer, and the remaining washing liquid can be reused (Fig. 4.19). The entire operational process is contained in an enclosed workshop, and the air in the workshop is purified and tested before being released to the outside. As shown in Fig. 4.20, in this system, domestic garbage is transformed into 5 streams of recycled materials and resources, and zero emissions are realized. Each operational process is centrally monitored, ensuring the normal running of the system and the quality of the final products (Fig. 4.21). Guotian Liu and his team worked on this project for years and invested hundreds of millions of yuan on improving the system. Unlike other R&D teams, they are thrilled when the system breaks down because it offers them the chance to improve

Fig. 4.17 Products made from recycled light materials

Fig. 4.18 Biogas reactor and combustible gas from garbage gasification

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Fig. 4.19 Fertilizer made from biogas residual

Fig. 4.20 Operational process of the municipal waste treatment system

it. To speed up their improvement cycle, Guotian Liu and his team even bought machining equipment to manufacture the parts they need to reduce ordering time. Currently, the municipal waste treatment and recycling system has seen 7 generations of upgrading. It has obtained 150 national patents, including 32 invention patents, and been awarded 1 Japanese authorized international invention patent and 1 international patent authorized by the European Union. In April 2011, the municipal waste treatment and recycling project was awarded the “Major Energy Saving Achievement Award” by the government of Shandong province. In June 18, 2011, the project passed an appraisal by the Institute of Resources and Environmental Policy of Development Research Center under the State Council and was determined

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Fig. 4.21 Central monitoring of the operation process

to represent an international advanced level. Guotian Liu is realizing his dream to conquer the worldwide problem of municipal garbage treatment.

4.5 Analysis of Guotian Liu’s Entrepreneurship (1) His Dream and Objectives Like many poor children, initially, young Guotian Liu merely wanted to make money and help his family to have a better life. When he achieved his personal dream, the objective of entrepreneur Guotian Liu was then to bring value to the people. At first, he saw value purely economically. He worked hard to make his business in textile printing and dyeing a success to offer his employees a good income and his local government higher tax payments. His input on advanced technology and management and his sharing of company ownership were all in pursuit of this objective. Guotian Liu’s understanding of value changed after the late 1990s, when he witnessed the great contrast between the environment in China and that in developed countries during his business trips. He realized that value did not simply mean economic profit for the current generation and that value should not be a cost imposed on future generations. At this time, many business owners invested heavily on real estate to make quick money, but Guotian Liu turned wholeheartedly to environment preservation. He saw value in the much longer term. Leaving his business in textile printing and dyeing to the management board, Guotian Liu focused on sewage cleaning, planting and seedlings, and garbage recycling, aiming to bring value to the current and future generations. (2) His Ability to Forecast the Future Business Environment When Guotian Liu quit his job as the plant manager at the local textile factory in 1988 to start his own family workshop, he was driven by pressure to make more

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money to pay his debts. He chose the textile printing and dyeing industry to fulfill this objective because he was optimistic about the industry. Given the prosperity of the textile manufacturing industry in Shandong province, he saw good opportunity in the supporting businesses. This choice was based on his ability to forecast the overall environment of the industry, and it brought his first business success. When Guotian Liu’s focus changed, it showed an even closer connection between the future and business. When thinking about the value of his business, he thought about creating value for the future. He invented wastewater treatment, desulfurization and dust removal equipment for textile printing and dyeing production. He invented a municipal garbage reclamation system. He planted trees, cultivated seeds, built parks and organized the Green Expo. In short, Guotian Liu turned whole-heartedly to environment preservation. More importantly, he not only believes that this focus represents the primary value of his business but also forecasts that this value will be seen and acknowledged by the people and by China. This change in business direction demonstrates his pursuit of business value and how his forecast matches the future. (3) His Core Resources or Technologies Guotian Liu has always been keen on advanced technologies. He not only invested in most advanced technologies, even when they were hugely expensive, but also personally lead and participated in the R&D for his technological innovations. Aside from his input on technologies, Guotian Liu’s extreme pursuit of a better solution served as the key to his technological competence. To clean the sewage produced by textile printing and dyeing, he purchased imported equipment that ensured accordance with national standards. However, Guotian Liu was pursuing zero emissions. So he was not satisfied. Finding no existing solution in the market, he worked on finding a solution himself until he developed the system that reached his goal. To resolve the problem of domestic garbage recycling, Guotian Liu did not settle for existing available solutions but decided instead to research and develop a system that could achieve total recycling with no harmful residuals. During this process, he did not stop until the goal was met, which required 7 generations of upgrading. When confronting challenges, his fearless, result-driven and relentless spirit was the inexhaustible driving force pushing Jinsida to maintain its technologically leading competences in the marketplace. (4) How to Manage His Company Guotian Liu has three core beliefs comprising his management philosophy. (a) Trust the person who makes decisions Guotian Liu asked for trust from his partners and investors when he started Jinsida, and he offered it to his management team when the group corporation become too large for him to run alone. He believed that trust in the decision maker was the way to keep the company efficient and minimize internal friction. Additionally, because of his trust in management, when he decided to develop a sewage cleaning system

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that could reach zero emissions and a domestic garbage disposal system that could achieve total recycling, he was able to commit himself wholeheartedly to the new cause and course, leaving his textile printing and dyeing company in the hands of those he trusted. (b) Keep family members out of the company In the shareholding system reform, Guotian Liu removed all family members from the company structure, including his wife, a decision that was like dropping a bomb on his family. His wife cried, recalling the hard days they had lived through together. Other family members told him he was cold-hearted. However, Guotian Liu’s belief was firm. He calmly persuaded them with reasoning, empathy and care. He made his family understand that if the company were to grow and succeed, employees needed to know they had a fair opportunity in the company. He did not want employees worrying about their personal relationship with the boss so that they could focus on their jobs. Guotian Liu completely understood his family’s feelings. He comforted them, and to allay their disappointment and worries, he offered them a settlement package that financially ensured their living standard. These personnel changes not only eliminated potential management risks along the development path of Jinsida but also gave other employees faith in the firm and stimulated their enthusiasm for their work. (c) Employee motivation Guotian Liu has always believed that a sense of responsibility was an inexhaustible motivation for the growth of the company. When the market was bad, Guotian Liu did not lay off workers or cut their wages like many other companies. Instead, he not only kept all of his employees but also raised their salaries. The employees then felt that it was their responsibility to pay back the firm for its commitment to them and to find a solution together with Guotian Liu to conquer difficulties, which they did. When Jinsida ran out of cash in 1989, the employees gathered money and helped the company through. In 1997, Guotian Liu conducted the shareholding system reform and sold company shares to all employees. (5) His Way and His Value Sense Guotian Liu is an idealist who takes steady steps. He is a believer who never gave up, despite facing difficult times and enormous obstacles. He is a seeker who is not afraid of problems and who always works until he finds the solution. He is also a Chinese entrepreneur who thinks of the next generations and sees into the future.

4.6 Summary This chapter introduced the development of Jinsida Group Corporation and the personal growth experience of its founder-entrepreneur Guotian Liu.

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Guotian Liu is a successful businessman in textile printing and dyeing. Started as a youthful carpenter, he has always been willing to learn and engage in his own research. In 1988, Guotian Liu quit his job as a factory manager and started his own dyeing workshop under enormous pressure to repay his debts. He was acute in finding market opportunities even when the economy was struggling. Through assiduous study and continuous adjustments, Guotian Liu equipped Jinsida textile printing and dyeing corporation with a pioneering advanced manufacturing system and a professional management and employee team that was committed to the company. Not resting on his business success, after he won the title of “king of textile printing and dyeing”, Guotian Liu next devoted himself to environmental and resource protection, driven by his strong sense of entrepreneurial responsibility to society. Not satisfied with the advanced sewage purifying equipment available on the market, because “transferring poisonous substances from sewage to river mud and the air to meet the discharge standard” was not good enough for him, Guotian Liu developed his own sewage degradation and reuse system that achieves zero emissions by all standards. Because he cared about the municipal waste crisis, Guotian Liu invested millions to find a solution. Through 7 generations of upgrading, and representing the rights to more than one hundred forms of domestic and international intellectual property, the municipal waste recycling system developed by Guotian Liu and his team is appraised as meeting international advanced level. Experts from the Institute of Resources and Environmental Policy of Development Research Center under the State Council considered his invention to be “a realization of complete municipal waste recovery and recycling”. “I can only say the system has reached ‘near-zero emission’. It’s not yet perfect”, says Guotian Liu, modestly. Guotian Liu is an idealist who takes steady steps. He is a believer who never gave up even when facing challenging times and enormous obstacles; a seeker who is not afraid of problems and who persists until he finds the solution; a businessman who thinks of the next generations and sees into the future. Guotian Liu is the former “king of textile printing and dyeing”, the later “king of seeding and tree planting”, the current “environmental protection expert” and a responsible Chinese entrepreneur.

Chapter 5

Kenny Lin and Thermaltake—Branding Strategy and Product Innovation Lung Chieh Chao, Jing Wang and Jing Hua Qi

5.1 Introduction Since the 1980s, the information industry has grown rapidly worldwide, and Taiwan has played an important role in the overall industrial division. Particularly in the computer and peripheral industries, Taiwan is one of the largest bases of the global production system, and various industries derived from computer industry technology are prospering there. Compared with other high-tech products, computers and peripheral industries have the most mature development and system integrity. The Thermaltake Corporation started with computer cooling products and marketed to the world under the “Thermaltake” brand. While developing the personal computer cooling system business, it gradually shifted to an IT company integrating PC peripheral products R&D, production and sales. Currently, their products are involved in almost all computer peripherals, and the group has led its three brands Thermaltake, Tt eSPORTS and LUXA2 to the world market and has successfully established five branches in Europe, the United States, Australia, Russian and China. It has 95 regional agents and more than 4000 high-quality distributors worldwide. It has evolved into a modern global corporation that still bears the same name (Fig. 5.1). The co-writer, Chao Lung-Chieh, had worked as Design manager in Thermaltake for five years (2009–2013), and has cooperated closely with Thermaltake till nowadays. Experiencing the company developing, through the strategies, policies and management, he knows well, instead of a products supplier, branding is what the entrepreneur, Kenny Lin, has been pursuing, and we look into the journey how L. C. Chao Lunghwa University Science and Technology, Taoyuan, Taiwan, China J. Wang School of Economics and Management, Beihang University, Beijing, China J. H. Qi (B) Thermaltake Corporation, Taipei, Taiwan, China e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_5

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Fig. 5.1 The Thermaltake Corporation’s agents worldwide. (https://www.thermaltakecorp.com/ tw/images/company_brochure.pdf)

he lead the company from a single product supplier to a multi brands group, hope it can be used as a reference for others Asia companies in development. The relevant data in this case are from the company’s official website and Taiwan Stock website.

5.2 Thermaltake and Its Development History Thermaltake Technology Co. Ltd. was established in 1999. When Kenny Lin established the company, it was located in garage and only had one employee. The “Thermaltake” brand first established and specialized in PC air cooling system, after successfully launched the world’s first turbine cooler, the “Golden Orb”, it branched into computer cases and power supplies; and then gradually changed into an IT company integrating R&D, production and sales. It became a publicly listed company in 2006, with an IPO on the Taiwan stock exchange. Thermaltake has become the leading brand in computer hardware and peripherals in the PC DIY and MOD market and among the best choices for PC DIY enthusiasts worldwide. With the development of the tablet, in 2009, the company established the simple but fashionable mobile accessory brand LUXA2. The brand combines the latest technology with minimalistic luxury aesthetics to provide high-quality, high performance and high value products to meet all the requirements of modern consumers for their mobile communication accessories. LUXA2 creates fashion technology prod-

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ucts that are indispensable in modern life, using innovative technologies and design to embody elegant, sporty and street styles. To expand its esports market, “Tt eSPORTS” was established in 2010, as was the professional e-sport team, Tt Apollos. This brand opened several flagship stores in Taipei’s business district and Kaohsiung’s shopping district to provide esports players with a high-quality esports experience, environment, product demonstrations and purchase and maintenance services. It has become a professional brand specialized in gaming equipment and continuing to sponsor esports teams and live game players around the world, providing the professional equipment they need, such as keyboards, mice, and headsets and enabling them to successfully complete various competitions. Tt eSPORTS promises to provide the best personalized weapons for esports competitions. Tt eSPORTS is built to represent a spiritual symbol of innovation, challenge and self-optimization in the gaming industry (Fig. 5.2). In the first 10 years since the Golden Orb cooler was released, based on product lines for the three PC components (CPU cooler, computer case and power supply), Thermaltake expanded its scale from a small company with 5 employees to a publicly listed company with hundreds of employees worldwide. Milestones in the first 10 years • • • •

2000: Worldwide first turbine cooler Golden Orb (Golden Orb). 2001: Thermaltake Hongzhan and Hwazhan formed in Beijing, China. 2002: China production plant established. ISO-9001 obtained. 2003: France, Australia, and Japan branch offices established.

Fig. 5.2 Tt eSPORTS showroom in Taipei’s business district (https://www.thermaltakecorp.com/ tw/press_news.aspx?id=46)

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• • • • •

2004: Company restructures to achieve larger global scale. 2005: Thermaltake Germany GmbH founded. 2006: Become a publicly listed company. 2007: IPO on the Taiwan stock exchange. 2009: LUXA2, new division established, Thermaltake becomes a multibrand company. • 2010: Tt eSPORTS, new division for gaming and the professional esports team of Tt Apollos established. From 2006 to 2008, while the firm maintained a high growth rate, the company’s stock price reached NT$126 in 2008, becoming a hot concept at that time. However, the worldwide financial crisis erupted in 2008. Under the economic depression, the company’s development also had been effected, and the strategic adjustments have been made several times since then. The annual revenue since 2006 can be read from the following figures. (The unit of the annual revenue is in NT$100,000,000; and the profit is in percentage.) Accumulated revenue from January to November of 2018 was NT$3,631,424,000, an increase of 11.86% over the same period in 2017 (Figs. 5.3 and 5.4).

Fig. 5.3 The annual revenue of Thermaltake corp. (2006–2018, https://goodinfo.tw/StockInfo/ StockBzPerformance.asp?STOCK_ID=3540)

Fig. 5.4 The President and CEO of Thermaltake Corporation, Mr. Kenny Lin (Picture from https://www. kitguru.net/tech-news/ interviews/bill-smyth/ exclusive-interview-withthermaltake-ceo-kenny-lin/)

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5.3 Kenny Lin and His Startup Way “Every myth starts out as a dream, and at the beginning of every legend is a desire,” said by the President and CEO of Thermaltake Corporation, Mr. Kenny Lin. (1) Brand Dream Like a normal office worker, Kenny Lin went to work on time, but he rarely left on time. As a salesman, he had no time off duty except when customers were off duty. It was the period when the PC industry was booming, and Kenny was working in the sales of computer peripheral products. To become excellent, he needed to make himself an expert in the field, as only professional ability could build customers’ confidence and make them feel safe. Kenny liked to learn new things and soon became an expert in computer cooling systems, fully versed in the needs of computer cooling. This knowledge not only made him outstanding in the work environment but also helped him to recognize the trends in the computer cooling market and consumers’ demand in the market. After several years of working in this business, he had become a business supervisor in charge of the company’s marketing department. However, the company’s business strategy focused on OEM coolers for computer companies, and it did not seem to offer any type of breakthrough in the business. Kenny started to think about whether he had reached a turning point where he should start his own business and whether this business had a chance to succeed. “At the time, I wanted to start my own business because I discovered that my interest was not in OEM or ODM for other companies because that was just the upstream of the industry. I didn’t even know what the downstream was doing, just passing the information between the two companies. When the situation has existed for a long time, our thinking is limited, or it will create deep conflicts. Such as, you have a business idea, which is not accepted by the customer, but you think this idea should be more acceptable for end users. Finally, I decided to start up my company” said Kenny. (2) The First Foundation Stone in the Business Considering stories of how companies were established, Kenny said, young consumers of PCs at that time wanted to know more about how computers worked, so they would disassemble the computer case to study what hardware equipment was inside. There was a bloom of computer assembly DIY. Computer DIY players even regarded overclocking as a challenge. When the CPU is overclocking, the overheating causes a computer crash. To overcome this problem, the players started to look into the CPU cooling system. At that time, the CPU cooler producers in Taiwan were almost all OEMs, and they did not want their own brand. However, when computer DIY became popular, Kenny saw a business opportunity to provide these DIY players with computer components. Therefore Thermaltake chose the CPU cooler as the first product in its initial business; established its own brand, Thermaltake; and actively expanded into the globe market.

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“In addition to being the first company in Taiwan to create a CPU cooler brand, the company has broken the traditional concept that CPU coolers are black cubes and designed the worldwide first golden circular cooler”. Kenny said, “Since the heat dissipation area of a circular cooler is 20% greater than that of traditional cube coolers, it provides better heat dissipation performance”. Thermaltake launched the world’s first circular turbine cooler in 2000, the Golden Orb. Due to its original design and excellent heat dissipation effect; it quickly evoked enthusiastic feedback from consumers in the computer DIY market. “In the first year we introduced this golden circular turbo cooler, nearly 1 million pieces were sold globally”. Kenny stressed that this innovative improvement laid the foundation for the future development of Thermaltake. This first product of the firm, which Kenny had cofounded with a group of partners, won a glamorous position in the PC consumer market and also generated high revenues for the company. That was just the beginning, though. The success of the CPU cooler allowed Thermaltake to see PC terminal consumers’ desire to build their own PCs and to understand that the potential of this consumer market should not be underestimated. Kenny began to study the needs of end users in-depth, considering the user experience to identify product development opportunities and product ideas. “To be honest, I don’t think the round cooler is a difficult technology. We just created what consumers want”. Kenny said he made a discovery in the course of operating in the end-consumer retail market. “If the product can meet the consumers’ needs and stand on their feet, it will have a good sales performance.” “Either the CPU cooler or, later, the PC chassis and power supplies; every product that we produce is in order to meet the needs of consumers.” Kenny explained. “The CPU cooler, chassis, and power supply are all important cooling components in the computer. As long as one of them has a poor cooling effect, the performance of the entire computer will be greatly reduced. Therefore, since the company’s establishment, it has been positioning itself as a computer cooling solution provider.” Kenny took the computer case as an example. In the past, traditional cases were designed as closed cases. Consumers had to loosen 8 to 10 screws on the case before they could open it. This inconvenience alone prompted Thermaltake to explore another product opportunity. They designed the world’s first product where the window on the case opened, earning praise from DIY players soon after the product was launched. In addition, Kenny also found that the young generation of computer DIY players wanted their computers to be unique and special, and they are willing to spend more money to make it look cool and dazzling. Responsive to these young consumers’ thoughts on visual enjoyment, they have gradually designed more products to meet these young people’s needs on assembling their own computer, such as the fan with emitted light. In the next 10 years since the first cooler released, Kenny and his business partners have shaped the concept of the KEY 3 brand. The so-called KEY 3 refers to the three components that are necessary to assemble, modify or overclock PC computers, CPU cooler, computer case and a power supply. With the product lines of these three components, Tt expanded its scale from a small company with 5 employees to a

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Table 5.1 The stock information for Thermaltake 2006–2008 Year

Average stock price

Annual revenue

Profit (%)

ROE

ROA

EPS

BPS

NT$

NT$100 M

Gross

(%)

(%)

NT$

NT$

2008

78.1

40.1

29

8.26 25.9

14.3

6.48

27.03

2007

71.1

38.1

29.7

10.2

40.8

20

8.46

27.14

2006

–

27.6

27.5

7.3

32.5

13.3

5.13

16.04

Net

https://goodinfo.tw/StockInfo/StockBzPerformance.asp?STOCK_ID=3540

publicly listed company in 2006, and with hundreds of employees worldwide. Since its listing in 2006, the stock kept rising, even exceeded NT100 in 2008, and became an emerging stock at that time (Table 5.1).

5.4 Encountering Challenges and Kenny’s Pursuit However, changes have always been coming. The financial crisis in 2008 made the most important computer modification market changed all over the world. Consumers no longer keened build their own computers, which directly impacted the performance of Thermaltake. To adjust to the demand decline in the PC DIY market, Kenny continued to explore new opportunities. Instead of young users being enthusiastic to mod their own computers, more young people were becoming interested in online games. Another phenomenon was the rise of digital entertainment and digital content. In the past, entertainment and content were mostly locked on PC devices, but with the advent of the iPhone and iPad, applications such as entertainment, games, audio and video were moved from PCs to handheld devices. Kenny saw these changes and decided to enter a new battlefield. In the first half of 2009, he created a second brand, LUXA2, to develop peripheral products for Apple. LUXA2 takes the taste for a simple style of Apple fans, shifted out of the professional niche market inhabited in the past and entered the popular luxury fashion industry. In 2010, it established Tt eSPORTS brand and joined with the professional gaming team Tt Apollos. However, the decline in the company’s performance did not end with the end of the financial crisis. “After the financial crisis in 2008, the computer DIY market saw a major turnaround,” said Kenny. “Due to the structural changes in the big environment at that time, the profit of the Thermaltake Technology Group, which specialized in the computer DIY market, began to decline. Plus the huge investment on new brands, the EPS fell from 8.46 and 6.48 NT dollars per year in 2007 and 2008 to only 1.24 and 0.02 NT dollars in the next few years [respectively]. In 4 to 6 years, its stock price dropped from its highest point to a dozen.”

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The company’s directors and USA subsidiary began to challenge Kenny on the product positioning and branding strategy. The USA branch believed that to face the economic downturn, the company should reduce the cost of product R&D and innovation and adopt a low-cost OEM strategy to achieve price competition in the market. At one time, the US subsidiary, accounting for half of sales revenue, preferred to not execute the distribution plan to oppose the company’s business strategy. At one point, even Kenny tried to accept this strategy, but he soon found that the company’s brand reputation was weakened by producing OEM products. However, this strategic management disagreement was not solved promptly, and it even affected operations of the two new brands, LUXA2 and Tt eSPORTS. (1) Branding in New Markets Unlike the dramatic decline in the computer DIY market, the video game hardware market grew rapidly after the financial crisis. According to JPR (Jon Peddie Research), an internationally renowned research institute, computer gamers pursue high-end hardware and require high performance equipment to play online games: “In 2011, the global video game hardware market will exceed US$22 billion, with an annual growth rate of as much as 27%”. JPR was more optimistic about the development of the Asian market, especially the growing population of video games in mainland China, which would stimulate demand among local Internet cafes for computer upgrades and grow China’s video game hardware market to approximately US$2.7 billion. In response to the shifts in consumer interests and behaviors, Kenny stated that since 2008, Thermaltake had been thinking about how to enter the online game market. He smiled and said: “In order to understand the game industry, I almost became a chief game player!” First, in the original Thermaltake PC DIY and MOD market, Thermaltake had a large number of customers who were e-sport players. The Thermaltake brand was recognized by these consumers, and their confidence in its former products makes it easy to introduce new product brands to them. Second, the company’s expert products were PC related, and the team was familiar with the supply chain, R&D and manufacture of computer peripheral products. It had the necessary knowledge and technical basis and was comfortable extending its product line to include other computer peripheral products. Third, the new products could share marketing channel resources with existing products, which was a major advantage for entering the new e-sport product market. In 2009, the company began to cooperate with BMW Designworks USA and prepare a product to enter the online game market. After two years of exploration, Kenny found that in the online game world, the influence of “peer culture” among players is very strong. When the player identifies your culture, it is not just based on the equipment you use or even the equipment you wear. “Yes, if you can convey the brand culture to customers worldwide through a strong community, you can achieve a differentiated marketing strategy”, said Kenny. Therefore, in 2010, the company launched the esports brand Tt eSPORTS and established a professional esports team, Tt Apollo, to build this new brand and suc-

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cessfully bring the Thermaltake brand culture to game players worldwide through their love of video games. Kenny said: “Tt Corporation hopes to create a community through the professional gaming players, so that the consumers who are fans of these professional players like their idols and like the products they use.” (2) Total Brand Management Given the performance pressure on sales returns and the internal challenges, Kenny had to review the company’s business strategies. However, he did not want to give up his original intention and dreams to develop his own brand. At that time, Kenny was taking the EMBA course at Singapore National University, and it inspired him to carry out total brand management in the Thermaltake group. Although OEM/ODM can save on marketing costs, a strong brand image can attract customer loyalty, and extending the brand to other related products can create higher brand benefits. For information products, customer service and quality maintenance are also very important tasks. In particular, for high value-added products from a long-term marketing perspective, it is important to establish a company brand and improve it. “The more you know, the more you know your path. The path is not to do OEM because our advantage lies in the product with value creation, not the manufacturing. If I hold the advantage of the product but stick it with someone else’s brand, does my value not disappear? Then, we were well aware of this crisis, so we insisted that if we want to sell our own products forever, we have to build our brand.” “Tt group has three brands, and the three brands represent three teams. The qualities of the three brands and the atmosphere of the team will be different. How to manage it?” “At the beginning of entering a new market, it was absolutely not to expect so much. But step by step, I felt that when we pulled a carriage, everyone would pull it together in one direction; when it happened to be two carriages, the team would be divided; when there were three carriages, the teams would compete against each other. Different brand cultures do exist, so operators must reshape the company’s vision as final goal for all the teams. Today, our vision is to create a new economy and become a cultural brand for the enjoyment of entertainment, esports, technology and lifestyle.” “In the organization structure, it has three levels. The top layer is the group strategy, to outline the brand’s vision. The second layer is the business unit strategy. The three business units must be very clear about their operating strategies and objectives. The third layer is the business tactics. Each of the BUs must be clear about their responsibilities and requirements for the product, sales, human resources, R&D, and finance. Each BU must understand its respective goals, so that it can understand other levels of strategy. The worst thing is that they don’t know the strategy of the group. Each division wants to be the leader of the company. What we need is for everyone work together as a whole team to create a cultural brand for the enjoyment of entertainment, esports, technology and lifestyle. All the business departments are important, so the division responsibility should be clearly defined.”

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(3) Establish New Corporate Vision, Mission, and Core Values “Our company emphasizes sustainable management. We will not follow the price competition in the market and make our own brand into a low-cost brand. What is the corporate culture? That year, we particularly conveyed and impressed the corporate culture upon all employees of the entire Tt Group. What is the mission that Tt wants to create? We want to create a perfect user experience for our players. What is our vision? The vision of our group is to build Tt Group as a cultural brand for the enjoyment of entertainment, esports, technology and lifestyle”, said Kenny. “According to this idea, we told our employees that we must see these eight core value to do things: have the spirit of seeking truth from facts; solve problems for customers; apply innovation, creativity, and continuous innovation to our products; think globally; be honest; produce the best quality; listen to the voice of consumers and pool our wisdom. What consumers tell us are their needs; we need to meet their needs, to learn endlessly, to continue discussions, to inspire each other, to make good ideas and, finally, to create values that reflect the values of customers. Be proactive, face problems, solve problems, and summarize problems.” “Enjoying entertainment can stimulate creative thinking and create better products. To create a perfect user experience, you must experience the game, stand in the position of players and users to understand the gameplay and understand the game’s needs to create a more suitable product,” said Kenny. Realizing that the atmosphere of the work environment can generate employees’ unlimited inspiration and thinking, the company built its office as a super powerhouse, with a comfortable environment (Fig. 5.5). While the company development direction became increasingly clear, Kenny flew to the United States branch, acquired its shares, and reorganized its management. At that point, the group’s total brand management was completed. (4) Branding and Product Innovation Since its establishment, the company strategy has been set to build its own brand and product innovation. After the total brand management completed and disagreement inside had been solved, the Tt has been focusing on continues innovation, which became the most core value to support it branding building. The company keeps improving on its capability and experience of innovation research and development. The corporation has four departments cooperated to work on the product innovation, Creative Design Center, Engineering Department, Marketing Department and Business Department. And Its Creative Design Center is in charge of industry design. Due to the wide range of the product lines under the three brands, and to maintain its market competitiveness, the company needs continuous innovative product development, and then need to nourish with a steady stream of innovative product idea and concept. For the new product development projects, in addition to using its internal design department, the company also takes active part in cooperating with external design resources on new product concepts design.

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Fig. 5.5 Work environment of Thermaltake Corp. Headquarter in Taipei (https://www.104.com. tw/company/wgqlm3k)

Since 2009, the company has cooperated with BMW Design works USA and developed the new product series, Level 10 and Level 10 M, which includes a computer chassis, gaming mouse and headset, as shown in Fig. 5.6. When Level 10 launched, it received numerous international design awards, such as IDEA and Red Dot. With these star products, the Thermaltake brand has become recognized worldwide. Based on this positive experience of cooperating with external design resources, the company continues to maintain open innovation by cooperating with external design resources periodically to obtain suggestions on product development and demonstrate a positive innovative image. Discussing continuous innovation, Kenny comments as follows: “Ideas brings money and profits! Encourage employees to find breakthrough solutions to enhance our organization’s competitive advantage. We encourage our employees to have unique opinions and innovative ideas, to pursue change and try new things. We want our colleagues to go beyond existing ways of doing things, to be open-minded about accepting new work challenges, to take the initiative to put forward new suggestions and ideas and to implement those ideas in their work”. (5) Extending Product Innovation as an Enterprise Social Responsibility (Chang et al. 2018) In 2012, Tt Company held the first invitational design competition. It was carried out in two universities, and named “Thermaltake’s Fantasy World Creative & Design

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Fig. 5.6 Level 10 Series computer chassis, mice and headset designed by BMW Designworks USA (https://tw.ttesports.com/newsdetail.aspx?s=8471)

Competition”. The initial purpose to hold the competition was the public benefit, and enhance its brand image at the same time. It also hoped to increase the communication between industry and academia. As a public benefit, the company provided design students with a platform to perform their creativity, and help them to understand industry practice through these competition activities. At same time, with the introduction of the company and competition, students’ awareness on the brand was increased, and its brand and product visibility was improved. While the competition was carried out, from these design competition entries, the company discovered that some potential creative proposals can be developed through the internal R&D capability, and transferred to the innovative products. Then the competition also began to be used as an open innovation platform. Till the 7th year, the competition has become an invitational carried out in 7 universities (Fig. 5.7). The competition has been positively received by universities and colleges across China since it was first hosted in 2012. The design subject of the Creation & Design Competition changes annually but covers all esports equipment including the mouse, keyboard, headset and CPU cooler, which are indispensable tools for players. In addition, in the 6th year, shaped by the company’s product innovation strategy, the subject was the application of innovative products and the IOT (Internet of Things); this competition was expected to explore new ideas for IOT concept application in computer peripheral products. This year, the subject has returned to focusing on

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Fig. 5.7 Poster for the 7th Thermaltake Creation and Design Competition (https://creativedesign. ttdesignworks.com/), but the homepage has been changed to the poster of the 8th

the computer chassis, which reflects new adjustments in the company’s business strategies. To expand the influence of the design competition, the evaluation process includes two stages: preliminary and final assessment. Beyond internal professionals at the company, the jury for the final assessment includes external related academic experts, such as industrial design professors from universities and external product designers. After the preliminary assessment, Thermaltake arranges for all the shortlisted winners to visit its headquarters and participate in a technical seminar. While promoting the company’s brand image, Thermaltake’s senior designers communicate with the entries in the technical seminar and provide suggestions for improving their entries. Since the first Tt Creative Design Competition, the company has launched two products that were developed from winning concepts and has an additional 3 entries in market evaluation. However, investment and feasibility must be considered, and so award ranking is not the only standard for commercializing design works, and commercialization is not committed to winners. Aside from commercializing the winning entries, winning concepts and ideas can be transferred into innovation value via another way. For example, the company established the IOT R&D Department in 2015, inspired by the winner’s idea from the 3rd Competition, and it also motivated the 6th Tt Competition, whose subject is the application of innovative products and the IOT (Fig. 5.8). A feasibility assessment is conducted before commercialization. The feasibility assessment of the winners focuses on market acceptance and competitiveness. After the candidates are selected, the product managers will perform costing estimation with the suppliers, including tooling, investment in production, and unit cost. At the

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(a)

(b)

Fig. 5.8 Products developed from the competition winners. a GOrb II ball type laptop cooler. b Satellite portable laptop cooler

same time, the marketing department executes marking research, such as feedback on user experience, relative product price, and competitor information. Based on this marketing research information, the firm assesses whether the candidate has sufficient market differentiation and whether it meets users’ demand. “We have already held six design competitions, and it is the 7th this year. There are several spiritual implications for hosting this competition. First of all, we hope to provide students with an innovative platform for competition. Before graduation, they can join the company early on the design platform. Also, we hope to be able to create more sparks of creativity through how we hold design competitions” says Kenny, discussing the Thermaltake design competition.

5.5 Analysis of Kenny Lin’s Entrepreneurship (1) His Dream and His Goal Outside of Japan and Korea, most industries in Asia focus on providing OEM services for Western countries; this business is labor-intensive and easily accessed but with limited margins and little innovation. Mr. Kenny Lin did not like to engage in OEM for other companies because, the OEM are far away from the end users, they take risks and are subject to the operating ability of their customers. His dream was to have his own products and brand, to provide a product that truly met the customer’s needs and to decide the company’s marketing direction by himself. (2) His Ability to Forecast the Future Business Environment The Thermaltake Corporation started with computer cooling products. At that time, the producers of CPU coolers in Taiwan were almost all OEMs, and they were not interested in their own brand. However, when computer DIY became popular, Mr. Kenny Lin accurately understood the needs and preferences of consumers for PC modifications and seized the business opportunity to provide these DIY players with computer components. Thermaltake chose the CPU cooler as its first product when

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it founded its business, set up the first milestone in the company’s development path, established its own brand, Thermaltake, and actively expanded its global market. However, modern industries, especially electronic industries, develop quickly, and their products have increasingly short lifespans. Therefore, the long-term development of the company, as it exists today, depends on continuously forecasting new markets and new developing products. Therefore, Thermaltake became involved in peripheral products for Apple and E-sport games. Although some of these have not been successful and failed in terms of price competition, Thermaltake built up its brand and image in the company development process and through its social responsibilities. There are many successful cases showing the importance of branding to companies. However, many companies have gone from major success to failure, such as Motorola mobile phones or Kodak film. Thus it is important for entrepreneurs, in addition to operating ability, to have the ability to forecast the future business environment. The Thermaltake case shows that Mr. Kenny Lin has done this well to some degree. (3) His Core Resources or Core Technologies (Capabilities) The Thermaltake brand first specialized in the PC air cooling system; it successfully launched the world’s first turbine cooler, the Golden Orb, branched into computer cases and power supplies, and then gradually changed to become IT company integrating R&D into PC peripheral products, production and sales. As Kenny said, there was no core technology for peripheral products, so he made invested in product innovation, such as breaking with the traditional concept that CPU coolers were black cubes and designing the world’s first golden circular cooler; developing the world’s first case where the window opened; and developing a fan that emitted light to meet customers’ need in unique requirements. However, modern industries, especially electronics industries, develop quickly, and product lifespans are growing increasingly short. Therefore, the long-term development of the company, as it exists today, depends on continuously forecasting new markets and developing new products. Therefore, Thermaltake continues to be involved in producing peripheral products for Apple and E-sport games. Due to the wide range of product lines under the three brands and to maintain its market competitiveness, the company needs continuous innovative product development, and thus needs to nourish this development with a steady stream of innovative product ideas and concepts. For new product development projects, in addition to using its internal design department, the company also actively cooperates with external design resources on new product concept design. Based on its positive experience of cooperating with external design resources, such as BMW Designworks USA, Thermaltake is maintaining open innovation by periodically cooperating with external design resources, even extending into product innovation as an enterprise social responsibility by holding design competitions in universities, obtaining suggestions on product development, and showing a positive innovative image.

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(4) How to Manage His Company or Conduct Business (Capabilities) Since the company’s establishment, its strategy has been to build its own brand. When first established, the Thermaltake brand specialized in PC air cooling systems, next branched into computer cases and power supplies, and then gradually changed to become an IT company integrating R&D into PC peripheral products, production and sales. With the development of the tablet, in 2009, the company established the simple but fashionable mobile accessory brand LUXA2. To expand its esports market. Tt eSPORTS was established in 2010, as was the professional e-sport team, Tt Apollos. However, considering the investment in branding and product innovation, Kenny faced both internal and external challenges, and he almost gave in on some occasions. However, fortunately, he did not give up his faith in branding. After he reclarified his aim for branding, he transferred this information to the whole staff through management, company culture and the work environment, particularly committing to innovation, including product innovation. The company continues to improve its capability and innovation research and development experience, with four departments cooperating to work on product innovation: the Creative Design Center, Engineering Department, Marketing Department and Business Department. Thermal Technology also holds the Creative Design Competition, taking it as a social responsibility to shape the company’s innovative image in public. For high value-added products, from a long-term marketing perspective, it is important to establish a brand and to improve it. A good brand image can attract customer loyalty. The Thermaltake brand focuses on product innovation to create unique, aggressive, vivid, and stylish products. After it became the leading brand in computer hardware and peripherals in the PC DIY and MOD markets and the top choice for PC DIY enthusiasts worldwide, he extended the brand to other related products, Esports gaming devices and Apple peripherals, to create higher brand benefits. Under the OEM environment in Taiwan, the average gross profit of manufacturers is under 20%, and some industries only gross 10–15%. In comparison, Thermaltake’s average gross profit has been higher than 30% in recent years. (5) His Way of Life, His Value Sense (Desires) Kenny’s intention for entrepreneurship is to create a product that truly meets the customer’s needs. He did not want to provide OEM services for other companies because he thought that OEMs are far away from the end user. In addition to his ability to forecast the potential market, research on customers’ needs helped him reach his first achievement in business. As he continued standing in the customers’ shoes, when he saw a potential market, he created the right products to launch into that market. For example, when he saw the PC assembly DIY market opportunity among young people, he focused on the KEY 3 Brand (CPU cooler, chassis and power supply) to meet their needs and shaped these products as professional PC assembly and MOD solutions. When he observed the online game market, he created the Tt eSPORTS brand and cooperated with the professional gaming team Tt Apollo to meet these gamers’ needs. In addition, when

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he expected a potential market in iPhone and iPad peripherals, he released LUXA2 to meet the needs of Apple fans.

5.6 Prospects and Expectations Thermaltake stresses that the company has more than 18 years of professional experience in a computer cooling system. Tt eSPORTS continues to launch multiple, professional liquid-cooling gaming products, chassis, digital and analog power supplies, liquid-cooling and air cooling accessories, esports keyboards, gaming mice, gaming headsets and other esports equipment. TT Premium (TT Premium.com), the most comprehensive liquid-cooling and modding online, was established in 2016 to provide exceptional high-end products and services to customers worldwide (Fig. 5.9). After the decline in the major markets of Europe and America, sales returned to warmer temperatures. Liquid-cooling products responded well at the CES and the Taipei Game Show. In March 2018, the sales revenue reached NT$312 million, a monthly increase of 20.8%, an increase of 24.5% over the same period last year, and a breakthrough past NT$300 million. Today, the company’s main revenues come from its three major brands. The Thermaltake brand currently accounts for approximately 80% of its revenue, Tt eSPORTS, the second brand that specializes in gaming peripheral markets, accounts for 10–15% of sales revenues, and the mobile device accessories brand, LUXA2, accounts for

Fig. 5.9 Liquid-cooling TT Premium in the flagship store (https://store.ttesports.com.tw/news_ detail.aspx?s=531&url=news.aspx)

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only 5% of revenue. By region, current revenue from North America accounts for approximately 42–45%, pan-Europe accounts for 23–25%, and Asia Pacific is 30%. “Keep the state of mind at “zero” at any time and think about the next growth momentum. If an operator always has a “full” mentality, many words will not be heard. If you keep your mind to zero and listen carefully, listening will have strength. Second is “enthusiasm”. When you burn your enthusiasm, others will feel your warmth. If you don’t have enthusiasm, you always want others to help you create value. Basically, this is more passive. In the end, leaders need to have a vision and a goal, and the manager is to implement it. Therefore, as a leader, you must constantly think about the vision and goals. When the past vision is not in line with the status, is it necessary to refine it? If you do not do this, your manager will be lost” says Kenny, commenting on leadership. Looking to the future, Kenny says, “Thermaltake Technology hopes to upgrade the brand’s business to the service industry, or even to a cultural level. It is not only selling computer peripheral products but also selling esports culture in an attempt to build Thermaltake Technology. Become a cultural brand company that enjoys entertainment, gaming, technology, and life.”

References Chang, W.C., Chao, L.C., Chen, C.H. (2018). Using Design Competitions as an Open Innovation Method-and Lessons from the Thermaltake Creative Design Competition. 21st DMI: Academic Design Management Conference. https://tw.thermaltake.com/. https://goodinfo.tw/StockInfo/StockBzPerformance.asp?STOCK_ID=3540.

Chapter 6

Qian Wang and Taibei Environmental Protection Equipment Ltd. Co.—Environmental Entrepreneurial Road of Shandong Taibei Limited Company: The Importance of Forecasting Industry Development Ning Ding and Jing Wang

6.1 Introduction This case discusses the entrepreneurship and innovation path of entrepreneurs at a small microenterprise in China by analyzing its development characteristics. In Weifang City, Shandong Province, there is a group of invisible champions in the subdivision industry. Although these companies do not have the reputation of the world’s top 500, they closely follow the national industry policy, adopt an extreme “craftsman spirit”, and adhere to the “specialized, refined, special, new” development path and in this way have quickly occupied the leading position in the subdivision industry. Shandong Taibei Environmental Protection Equipment Co. Ltd. (Taibei) is one of these firms. This case is written based on interviews with Mr. Qian Wang, who is the founder of the company, and by collecting and analyzing the internal information of the enterprise. The case highlights the driving role of the internal culture of small and medium-sized environmental protection enterprises, the supporting role of technological innovation and the guiding role of national policies for the development of the company. Mr. Qian Wang, with his integrity, trustworthiness, down-to-earth personality and charm, is growing and strengthening Taibei step by step. Given economic development, China’s government is paying increasing attention to environmental protection and building environmental law. Taibei is designated a national innovative technology enterprise. It first worked toward pure water treatment in the pharmaceutical industry and then shifted to produce equipment to treat polluted water and gas. When it was established, Taibei was just a supplier engaged N. Ding (B) · J. Wang School of Economics and Management, Beihang University, Beijing, China e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_6

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in the manufacture of pure water equipment. With China’s increasing emphasis on environmental protection, Taibei targeted new business opportunities and changed its business to the production of sewage product and air treatment equipment. Taibei has many years of professional production management experience, with advanced science and technology, sophisticated processing equipment, excellent product quality and a perfect customer service reputation at home and abroad. Given the strong support of national policies for strict environmental standards, it is difficult for environmental protection enterprises to continue developing. These enterprises face the risks of low profits, high R&D requirements and strict national policies. Therefore, this case hopes to determine how Taibei is able to continue to expand under strict national environmental conditions. This case depicts the entrepreneurship and history of Qian Wang and concludes by describing the success factors of this company, (1) adhering to the corporate culture, (2) constantly innovating industry technology, and (3) keeping up with the development of national policies. In this case study, all content was obtained from internal company information and face-to-face interviews (refer to Fig 6.1).

Fig. 6.1 Interview photo in Qian Wang’s office

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6.2 Outline of Shandong Taibei Environmental Protection Equipment Co., Ltd Mr. Qian Wang was born in Shandong, Weifang, in March 1965. In July 1990, he graduated from Shandong University, with a bachelor’s degree in the automation of industrial electrical apparatus. In March 2010, he founded Shanghai Taibei Industrial Co., Ltd., and in September 2010, he became chairman of Shandong Taibei Environmental Protection Equipment Limited (Taibei). A description of Taibei and its accomplishments is summarized as follows. (1) Technical Achievements Taibei company has obtained environmental engineering design and construction qualification, professional contract qualification, safety production license qualification, and high-technique enterprise qualifications, among others. It has obtained 31 national patents, including 2 invention patents and 28 utility model patents (refer to Fig 6.2). (2) Talent Results The company’s annual investment in research is never below 6% of sales. It has established three research centers: Weifang Enterprise Technology Center, Weifang Flue Gas Denitrification Equipment Research Center and Weifang Noise Pollution Control Research Center. The company has also actively developed an industry— university research platform and has worked closely with the Chinese Academy of

Fig. 6.2 A wall of patents in Qian Wang’s office

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Environmental Sciences, Tsinghua University, Beijing Institute of Labor Protection, Shandong University, Tongji University and other research institutes. (3) Production Results At present, international denitrification processes are either SNCR (selective noncatalytic reduction) and SCR (selective catalytic reduction). The SNCR process not only cannot meet China’s current ultralow emissions requirements but also has an apparent corrosion effect on the boiler and its auxiliary machinery. Meanwhile, for SCR, the catalyst is likely to be blocked and poisoned and needs to be replaced regularly, so the operating cost is high (refer to Fig. 6.3). The dry spray denitrification technology made by Taibei company not only can reach the ultralow emission standard but also avoids the abovementioned problems. This technique is at the highest international level. (4) Financial Data of the Company In 2016, Taibei achieved sales revenue of 24,650,000 yuan and a net profit of 4660,000 yuan. In 2017, sales revenue was 600,00,000 yuan and expected net profit was approxFig. 6.3 SNCR4.0 amino compound denitrification equipment

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imately 2000,000. During 2017–2019, the expected growth rate of annual sales revenue is expected to be more than 100%, with a net profit margin of more than 20%. The company has nearly 100 employees, including more than 20 with technical skills and 43 employees with bachelor’s degrees.

6.3 Background of the Environmental Protection Industry For the special field of environmental protection in China, enterprise development is more dependent on national policies than in other industries. There are three main reasons for this. First, the production and manufacturing standards of enterprises must keep up with the requirements of the state. Only when the wastewater and exhaust gas meet the discharge targets set by the state can the quality of products produced by environmental protection enterprises meet the standards. Second, by examining the development of national policies, enterprises need to predict the future development of environmental protection products and areas under the supervision of the state, find new market demand, adjust future enterprise development in real time and formulate new strategies. Third, environmental protection enterprises need to pay attention to national financial support policies that, for example, identify enterprise projects as crucial national investment projects, provide financial support, or provide preferential tax policies. The following is the current policy support, development status and future development of the Chinese government for the development of environmental protection enterprises such as Taibei. (1) Investment in Gas Control Project During China’s 12th Five-Year Plan industry investment period, China’s air pollution control work received a high degree of focus during the years 2011–2014. The result can be seen in Fig 6.1. The investment in an exhaust gas control project achieved a compound growth rate as high as 55.07% and created a favorable growth space for desulfurization, denitration and dust subdivision industry enterprises (refer to Fig. 6.4). During 2011–2014, the flue gas industry of China achieved significant development. Benefiting from high attention to reducing flue gas in China, investment in related areas increased, and this strong focus promoted the recognition of environmental protection. Under the “ultralow emission” high pollution control standards (2016–2020), the existing industrial smoke gas environmental protection equipment has been unable to achieve the targets; proposing new technology and new product requirements has thus created a new market demand space for the industrial flue gas industry in China. During 2011–2014, Taibei saw great market potential in the gas industry, so it planned to develop desulfurization and denitrification in the power industry, desulfurization and denitrification in iron and steel sintering plants, industrial boiler den-

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Investment (Hundreds of millions of dollars) 900 800 700 600 500 400 300 200 100 0 2011

2012

2013

2014

Investment Fig. 6.4 2011–2014 annual waste management project completed investment

itration and other air pollutant emission reduction projects as the key projects in environmental protection. (2) 13th Five-Year Plan of China and Wide Demand for Control of Pollution Over the past five years, as global pollution has spread, China’s air pollution has become increasingly serious. The Chinese government has gradually stepped up its efforts to control pollution. The 13th Five-Year Plan of China (2016–2020) enforces ultralow emission standards, including control of sulfur dioxide and nitrogen oxides and smoke (powder) dust emissions. Although desulfurization, denitrification, and dust removal equipment became popular during the 12th Five-Year Plan, companies still need to upgrade their technical skills for similar equipment with the 13th Five-Year Plan. The development of more precise products to meet more stringent emission standards has brought high market demand, opportunities for enterprises to develop and challenges for companies. The flue gas denitrification industry in China started later than the desulfurization process, and it began to achieve high growth after entering the “12th Five-Year Plan of China” (refer to Fig. 6.5 and Table 6.1).

6.4 History of the Entrepreneur and His Psychological Journey After interviewing Mr. Qian Wang, we conclude that he experienced four turning points in his history. (1) First job—salesman (1990) (2) Founded Taibei (1999)

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Fig. 6.5 Air quality distribution map of the world in 2016

Table 6.1 A comparison of the industrial flue gas emission standards from the 12th Five-Year Plan of China and the 13th Five-Year Plan of China

Project

12th Five-year plan period

13th Five-year plan period

Carbon dioxide emissions

New boiler

200

50

Existing boilers

400

Key areas

50

Nitrogen oxide emissions

All

200

Key areas

100

Emissions of smoke (dust)

All

30

Key areas

20

35 10

Unit mg/m3 Note 1 The emission standard of the 12th Five-Year Plan is selected from the emission standard for atmospheric pollutants in thermal power plants (GB13223-2011) Note 2 The 13th Five-Year Plan during “the full implementation of emission standards from coal-fired power plants with ultralow emission and energy saving work program” (UNCED No. [2015]164)

(3) The decision regarding main production (2003) (4) Difficulty during development (2008). (1) First Job: Salesman (1990–1995) Qian Wang graduated from university in 1990, and his first job was at Shandong Wohua Business Technology Co. Ltd. On the first day of his career, he thought that he should try his best to work hard, so he brought a toothbrush and a lunch box in

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case he needed to work overtime. After 5 years, he was dispatched to Guangzhou by the company for sales because of his excellent performance (refer to Fig. 6.6). “The feeling about going to Guangzhou was not good” he said. The company’s daily allowance was only 30 yuan, but rent for his house rent was 50 yuan per day, and prices in Guangzhou were high. Even a small bowl of noodles cost five yuan and were not sufficient to stave off hunger. In Guangdong, to save money and eat enough, Qian Wang had to ride a rented bike to the far east of Guangzhou, which took 30–40 min, to obtain a larger bowl of noodles at the same price. During the Mid-Autumn Festival in 1995, Qian Wang had business in Huangpu, Guangzhou. Near noon, he was hungry but still needed to finish his job. He did not have enough money to eat at a restaurant but only enough to buy some small bananas, which he ate at under the shade of the trees. In the afternoon, at almost four o’clock, he felt almost too hungry to continue working. Finally, he decided to buy a beverage (3 yuan) to maintain his energy. After working, Qian Wang sat on the bus that would bring him, exhausted and almost fainting, home. When he arrived at his destination, he squatted down and started vomiting. “At that time”, he said, “I still remember the weather in the South of China was very hot, so many mosquitoes had been biting me”. When he got home, he dropped into bed and did not wake up until noon the next day. Qian Wang lived in the Fang Cun area of Guandong, which was a slum. People might only have bricks in the structure of their house, and roofs were built with small tiles. “There was a big hole in the roof of my house. I could see the clear sky every night” he said. It was often rainy in Guangzhou, and rain leaked through the hole. His room held only a simple bed that consisted of two stools with a plate in the middle. He slept using his books as a pillow and his clothes as a quilt. Sometimes, he needed to return to Wo Hua company, and then he had to ask his neighbor to turn on the light in his room or the mice would chew on his clothes. When Qian Wang arrived at Guangzhou, the pharmaceutical industry market was struggling. He felt very tired, not only physically but also due to the pressure and suffering of those early years. He remembered once during his journey home sitting in the ferry and experiencing the rippling water and inner peace. Despite his difficult Fig. 6.6 Qian Wang

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situation, Qian Wang still tried his best to complete both his work for his company and that for himself. His conscientious attitude made him the top salesman in Guangdong at that time. Qian Wang said, “The only way to make better choices is to make yourself stronger.” (2) Founding Taibei (1999) Qian Wang started his business accidentally. He had been a salesman since 1996, and his performance was outstanding, once serving as a sales model in the factory. Two years later, there was a major problem in a company: actual income was less than accounts receivable because too much had been shipped. Qian Wang thought “the company should reduce shipments; otherwise, the company can’t increase profit and employees can’t increase work efficiency”. Knowing how Qian Wang felt, the leader of company he didn’t do his job seriously, and had the prejudice against on him. From that day on, the leader could not treat Qian Wang’s work in a fairly. During that time, Qian Wang’s life was in a low ebb and he felt treated unfairly at work; he wanted to quit. His friend encouraged him in this: “Qian, no one can replace you in the management of medical equipment. You have talent in this field. It is a pity to quit now, and you should do something for society.” After talking with his friend, Qian Wang thought “I can start my own business and use my talent.” At that time, both the 2nd and 3rd pharmaceutical factories of Wohua Technology Pharmaceutical Group went bankrupt. To maintain their livelihood, many unemployed workers started working in the local food market, small convenience stores, and even streetside food stands. Qian Wang believed that “starting up can not only achieve personal value and can better give full play to my expertise of the pharmaceutical sales industry but also help the unemployed find jobs and let these people have the power to support themselves and their families”. Every start-up company must always focus on the future, have a vision, establish high standards, and dare to allow employees to shoulder responsibilities, even if it is difficult to fight for the honor of the company. Therefore, Qian Wang said “We must aim to do business for a hundred years”. Concerning the location of the company’s establishment, he thought “Shandong is my hometown, and I don’t want to work too far away from home. Also, Shanghai is the cradle of industry and technology is advanced. There are so many cooperative units that can help businesses to plan better goals, and the company’s goals can be achieved.” Thus, Qian Wang chose both Shandong and Shanghai as locations. Why did he want to register a listed company? He listed two main reasons: (a) “If we want to carry out standardized management for a long time, the company must have the ability to resist risks”. If not, even if enterprises decide upon a standardization system, there would be no way to predict the trend of national and international development. A listed company has standard management and can thus better avoid risk. Therefore, he chose to build a listed company. (b) “I wanted every employee in my company to have a share, so my own company could help them solve their life’s financial problems.”

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(3) Deciding Upon a Main Product (2003) When he started up the company, he helped other companies sell blood pressure meters. However, he started thinking that they should have their own products instead of helping others to sell theirs: “We should have our own unique product!” Wang conducted extensive research, consulted experts, and finally decided to make pure water. At that time, the Chinese government had stipulated that the pharmaceutical industry should use pure water for large infusions. Because he wanted his main product to be in line with policy, they decided to make pure water. Later, the idea of turning to sewage treatment was gradually generated. Qian Wang said “There are three reasons why I decided to switch products: (a) I have confidence in our government; (b) I attach great importance to environmental protection. Not only do I think the environmental protection industry brings value to customers, but also I think the elimination of pollution is a good thing for mankind; (c) I also consider the technical feasibility of the company. Since our company used to produce pure medical water equipment, it will not be very difficult to transfer to the field of sewage treatment”. In 2003, the Chinese government strongly advocated the cause of sewage treatment, realizing that serious pollution would lead to more sick people. The government attached great importance to people’s livelihood, so it started managing pollution. It started carrying out sewage testing in Qingdao, even though the water quality in Qingdao was good compared with that in other provinces. Based on the trend of government policy, Qian Wang thought that Weifang would also soon begin controlling the water quality, although the state policy had not yet been issued, and he decided to take the lead in sewage treatment. At that time, many people were opposed to selling sewage equipment because it was not easy to achieve the national requirement for water quality but it was easy to experience problems, and money was not easy to earn. Qian Wang insisted, however, that “if you want to be a hundred-year business, entrepreneurs must look forward. Even though it is not easy to earn money in the environmental protection industry, it is beneficial to society, and the prospect of its future is bright”. In approximately 2012, Taibei began to conduct both polluted water and waste gas treatment. At that time, the government did not manage air pollution, and haze began to appear in most parts of northern China. Qian Wang thought that the future must hold some policies on air pollution. In 2015, the mayor of Linyi, Shandong Province talked with the central government about air pollution. The local Chinese governments began to pay attention to the treatment of exhaust gas. Taibei needed to be more forward-looking than other companies, so that regardless of how policies changed, any series of initiatives would have little impact on the company’s development. The government’s national policy strongly guided the development trend of Chinese enterprises. Qian Wang said, “This is the way enterprises have to go. If we want to be a hundred year company, we must follow the national policy”. Qian Wang also led the team to study and learn the Nineteenth Session of the People’s Congress report, which is a programmatic document that guides the further devel-

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opment of the nation and enterprises. Following the policy is a core development principle for environmental enterprises. (4) Difficulties During Development (2008) In 2008, Taibei needed to hire cement firms to build wastewater treatment pools. Surprisingly, the stock price of cement building materials had doubled since March 6th of that year. Some of his employees said to Qian Wang “Many related companies stop producing cement until customers add more money.” In the market, 11 million yuan contracts can increase to 17 million, and 8 million yuan contracts can increase to 12 million. Although the surrounding enterprises were profiting, Wang did not agree to stop producing to make more profit for the company. Wang said “Profit is up, but what you do is not satisfy the customer”. Because Taibei did not increase prices or stop producing, those who signed contract with Taibei in 2008 became loyal customers and build continuous corporation. In mid-2008, the contractor fled from the construction site for his own reasons, and the workers’ tension spread. Qian Wang drove to the site immediately and spoke firmly to the workers: “Everyone please calm down! I will not only check the quality and process of this project personally for every day but also pay wages as usual and compensate all money taken away by contractor”. At that time, the profitability of the company was very poor, but Qian Wang did not want to put wages in arrears and spread unrest among workers. During that difficult period, Qian Wang arrived at the site every day and worked with his employees. Because of his engagement, the project team was willing to work for Qian Wang on every project, and the project’s quality was very high. His responsibility led his partner to trust in his reliability. “I believe that there is justice in this world. Be good to every business partner who has worked, and they will be willing to cooperate with you in the future. At the same time, the customer’s interests should be put in first place: not only satisfying customers but also moving customers.”

6.5 Pursuit of the Entrepreneur 6.5.1 His Entrepreneurship (1) Adjust the State of Mind and Plunge into the Work When Wang just went to the medical factory (his first job), he worked very hard. He faced his work struggles with a positive attitude and made full use of his rest time to learn. Wang would tell himself “This is your study opportunity. Why don’t you do it well?” When it was lunchtime, he always studied with pen and paper. He would write down details about the equipment and record the problems for every part and the differences between parts one by one. After an internship in the first workshop, he wrote the best report and was promoted to become the youngest deputy director.

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(2) Never Yield Despite Reverses “I always inspire myself with the unyielding Arafat, who led the Palestinian people to pursue national liberation”. When Qian Wang was a salesman for hospital equipment, he finished his appointed task in the first year, but the market changed in the next years. The hospital had established a drug trial committee, which made it difficult for pharmaceutical companies to sell drugs to the hospital. Therefore, in the second half of the year, he worked with only one hospital and found himself in a low mood. One night, when out for a walk, Qian Wang saw some old books in bookstore, one of which was “My Way to Go” by Nie Weiping, a famous professional Go athlete. He thought of the spirit of Nie Weiping: perseverance, determination and confidence. He bought the book immediately, and from then on, he often took out the book to read and encouraged himself. “Life is like a chess game. Only if you can stand the loneliness, you can enjoy a long time. The growth and development of the company also like playing cheese, and you need to get rid of a lot of difficulties. Never give up when you are in trouble. When you come out of the difficulty, you will have a great sense of achievement”. When Wang described these years of his sales experience, he likened himself to a Lu You poem (Lu You: a famous poet in the Song Dynasty of China): “Where hills bend, streams wind and the pathway seems to end, past dark willows and flowers in bloom lies another village”. (3) Professional Ethics to Win Respect In 2000, Qian Wang was offered the opportunity to obtain a more lucrative job. At that time, he still worked for Wo Hua and sold medicine to hospitals, but an enterprise in Hebei wanted him to go to Guangzhou to promote the capsule. The salary would be at least 2 million a year, but he rejected it. “I was in the traditional Chinese medicine factory staff of the Guangzhou market, so I do not want to help launch the capsule (Western Medicine) and work for another company. It would impact the Chinese medicine market”. At the time, Qian Wang was still a salesman of traditional Chinese medicine and did not want to create a loss for his employer. In 2008, Wang’s start-up company launched its first sewage project. Due to the new participation in the bid, the chances of winning the bid were very small. Coincidentally, the judges were his previous employers, and they voted for his business. They believed that Wang was a reliable person who could do his best to protect the interests of the company and that he was a reputable businessman. (4) Learning and Creating Innovation plays a decisive role in the development of enterprises. Qian Wang describes the spirit of entrepreneurship with two words: “responsible” and “innovation”. “Responsible” signifies that the one should be responsible to the state, society, the enterprise and the family. Qian Wang said, “I felt that it was not easy to do a good job. I also saw the idea of giving up. However, when I think of the elderly and my siblings in the family who need me to take care of them, I will grin and stick to it because I have an obligation to earn money to support them. Although it is difficult

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to open up the market, I cannot be a deserter, and I can only do the business as well as I can.” “If we want to be a hundred-year company, innovation is the first principle”. For example, although Taibei’s products do stem from some study of foreign technology, most of the improvement and innovation have been created within the firm. “In many cases, you can’t copy the foreign technology, because every national condition is different” said Qian Wang. “Our difficulties in production are unique. We need to solve them independently”. When he started the company, he led the staff to learn from the experts, partners, technology and design every day according to the actual operating conditions of the equipment to improve innovation. Therefore, innovation is a learning principle, the principle of practice, discover problems, and solve problems. As the leader of the enterprise, Qian Wang has to be the first to learn new technology, not only to promote the study of the staff but also to be the “bargaining tool”. Only knowing the premise of a technical advantage and of quality can the foundation of trust built in the past play a role and increase persuasiveness during negotiation. “Of course, the most important problem for our team is that employees can’t keep up with the development of enterprise innovation”. In Wang’s enterprises, many problems are urgent problems that must be addressed on the spot. Many employees cannot keep up with progress, and they cannot solve these problems in a timely manner. Wang often organizes learning activities to encourage employees to learn more new technologies and to innovate.

6.5.2 His Managemt (1) Focus on National Policy “Enterprises should select products according to the direction of national industrial policy” Qian Wang said. At present, China strongly advocates for environmental protection. At the same time, different aspects of governance affect the products produced by environmental protection equipment manufacturers. For example, Taibei changed from producing pure water equipment to producing sewage and wasted gas treatment equipment; this decision was determined by predicting national industrial policy. The nation sent an inspection team to check the quality of water in Qingdao, Shandong. At that time, the water quality of Qingdao was better than that of other cities, but the state still invested great effort to further rectify it. The state had not yet issued a relevant sewage treatment policy. Later, Taibei began to produce waste gas treatment equipment also based on the state’s attention to environmental protection. In 2012, haze in China began to worsen. As a steel manufacturing city, Weifang’s air quality had always been a major concern, and in fact, as early as 2005, the state introduced relevant air control policies, but their implementation was weak. In 2012, believing that the state would once again increase the intensity of waste gas treatment, Taibei began to develop and produce related equipment. As the firm had believed, in 2015, the mayor of Linyi City in Shandong Province was interviewed by the central

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government due to its air quality problems, and the state began to more attention to waste gas control. As business leaders, predicting policy development is a crucial ability for entrepreneurs. Qian Wang could always shift the corporation strategy at the right time. He could predict national action, but there were two other reasons that Qian Wang could make decisions precisely and successfully. First, he has confidence in the Chinese government and believes that it will consider the well-being of the people. As a Communist Party member, he trusts the Chinese government. He believes that even when relevant policies have not yet been implemented, people will see the government’s efforts to improve the environment in the near future. Second, as the manager of the enterprise, he has also conducted in-depth research and considers the feasibility of technology. For Taibei, sewage and pure water equipment have similar technologies, so transformation is feasible and the risks are controllable. “Chinese enterprises are strongly guided by the government’s national policy, which is the only way to go. If we want to be a 100-year enterprise, we must follow the national policy. The core of enterprise development is the national policy!” Taibei focused on the Nineteenth National People’s Congress of China. Qian Wang organized employees to watch the TV and study the report of the Nineteenth National Congress. He believed that this was a programmatic document that would provide guidance for the further development of the nation and thus that entrepreneurs must seriously study the government’s plan for national development. (2) Focus on Product Quality Qian Wang is driving quality control. In his office, there is a silver commemorative medal in a hidden spot on the cabinet. Speaking of this medal, Qian Wang becomes immediately excited. In 2015, the country’s largest potassium sulfate manufacturer Trilateral Chemical Enterprises celebrated their 40th anniversary. As a special guest, Qian Wang participated “During the government examining period, the examining group closed 57 enterprises in Linyi City, and only Trilateral Chemical Enterprises passed the “exam” and normally produced”, said the CEO of Trilateral Chemical Enterprise, adding “Fortunately, we used your equipment; otherwise, we might be shut down like them!” Even more surprising, in 2017, during the supervision of the Central Environmental Protection Group in Shandong Province, the equipment supplied by Taibei Environmental Protection again withstood various rigorous inspections. Excited, the three chemical leaders again called Qian Wang again to thank him. “How to satisfy the users and how to move the users is to bring out high-quality products and conquer them through high-quality products”, said Qian Wang. (3) Focus on Innovation Traditional environmental protection technology has the characteristics of requiring large investment, occupying a large land area, having high operating cost, and imposing major corrosion to the boiler. The only way to overcome these problems and obtain sustainable development is through innovation. In the past five to six years,

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the R&D team of Taibei Environmental Protection has carried out many experiments to overcome the shortcomings of the traditional process. Thousands of experiments have been conducted, and nearly one million dollars has been invested. Finally, they were able to wear down the various challenges and independently master the trinity of desulfurization, denitrification and mercury removal. “Our integrated technology can desulfurize and denitrification at the same time. At the same time, it can remove mercury, which greatly improves the efficiency. At the same time, it solves the problem of desulfurization and denitrification, which has been puzzling the industry for many years”, one staff member at Taibei said. Taibei not only overcame the National 863 environmental protection issue of desulfurization and denitrification but also solved the issues with sewage sludge treatment equipment. Supporting this series of achievements, the R&D investment of Taibei’s enterprises was increasing annually, which created new momentum for the firm: “At present, more than 30 scientific researchers have been engaged, and the annual investment in scientific research has reached 5.2% of the total annual sales”. In 2018, Taibei won three honors. In February, the Ministry of Industry and Information Technology listed it as the “catalog of major environmental protection technology and equipment encouraged by the state”, and it was declared a “major special enterprise of technological innovation in Shandong Province” in March and an “academician workstation of Shandong Province” in April. (4) Focus on Corporate Culture Taibei has consistently applied “protecting the environment and benefiting mankind” as its business mission, vigorously building harmonious and innovative enterprises and guiding its employees to integrate their personal projects into the common vision of the enterprise and to achieving their own value in realizing the strategic objectives of the enterprise. In the past few years, the culture of the company can be refined into “six, three, two”. The six sentences defining marketing principles and after-sales service. (a) (b) (c) (d) (e) (f)

“Business can be ended, but friends cannot” “Guard worthy companions” “We should think of what users think of” “Overfulfill the target” “There are no differences with friends” “There are no differences with businesses. Pay attention to both big business and small business”.

The six lines are summed in two sentences: (1) Don’t let users down and (2) Don’t let friends down.

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The three sentences describing enterprise positioning: (a) “What we do is a world event in which energy conservation and environmental protection reduce natural disasters.” (b) “We do a thing to protect the environment because kindness knows no bounds, to the benefit of mankind.” (c) (c)”If you cannot do well, it will be an evil thing.” The two sentences characterizing the reputation of the enterprise: (a) “Dare to ‘gnaw’ on a hard bone; engineering is how we wear down many bones” (b) “If the contract is signed, the loss of money should be done well”. Wang firmly implements his ideas in the practice of operating his enterprise. As some examples, of how Taibei lived up to its own rules. Shandong Wohua Pharmaceutical Science and Technology Co., Ltd. is a listed company in the field of Chinese patent medicine. Taibei signed a contract with them in January 2008, But just before the Olympic Games, steel prices rose sharply, cement prices doubled and labor costs doubled. Many companies asked for price increases, but Taibei did not ask users for more money because if they stopped working or increased their prices, they would not be able to “satisfy” or “impress” their users, which is contrary to the enterprise concept. The project was completed on time in July 2008. Further, some users did not have sewage before the project finished, so Taibei could not test their equipment. To debug the project as soon as possible, Taibei bought seven vehicle loads of sludge, added flour and urea and debugged the project successfully in 20 days. After this project, clients were very moved and satisfied and awarded Taibei two stainless steel alcohol can processing projects. The contract stipulated the wall thickness as 6 mm, but the drawings were marked at 5 mm. If the cans were manufactured according to the 6 mm specification, there would be almost no profit, but if manufactured at 5 mm, Taibei would make considerable profits. Taibei agreed that the enterprise should not make money from users’ mistakes. After receiving the orders, the client companies carefully measured the thickness of each container. Only Taibei manufactured at 6 mm and did not cheat the user, which once again touched the clients. In 2012, Wohua Holding Company, Liaoning Kangchen Pharmaceutical Company, again signed a high concentration wastewater treatment contract with Taibei and then signed several processing contracts for stainless steel alcohol cans. Taibei always complies with corporate culture when working with other companies. Regardless of how the market environment changes or how competitors change, Taibei always adheres to its own values and treats every customer seriously. The culture of an enterprise is not just a slogan; more often, it is a beacon when the enterprise is in confusion.

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6.6 Considerations of Success Factors Why did Taibei choose to develop an environmental protection business and how did it establish its success? Through interviews with Qian Wang, the founder of Taibei Industry, the success of the enterprise appears to mainly stem from the following reasons. (1) The Development of the Company Should Keep Pace with National Policy In China, the cause of environmental protection is becoming increasingly serious, and the country is stepping up its efforts to rectify environmental damage. Environmental protection enterprises that profits through water filtration must constantly predict the changes in national policies and keep up with their development. Taibei supports changes to strategy based on national policy. Taibei changed pure water production to waste water and later added waste gas as their main product. These changes depended on predicting national policy. Subsequently, in the process of several national spot-checks of environmental protection equipment, Taibei was unaffected. Taibei benefited from the constant attention on renewing the national pollution index policy. (2) Maintain Innovation During the interview, the wall of Qian Wang’s office, which was full of patents, made quite an impression. As an environmental protection enterprise, excellent technology is the prerequisite to winning the market. Qian Wang is a very eager learner. He routinely attends training seminars and invites experts to the company to conduct lectures, MBA training projects and so on. Although he learns about innovative technology at home and abroad, he always considers his own enterprise specificity and reinnovates a good technology. In several large project bidding activities, Qian Wang has been able to accurately explain the technical advantages when negotiating with the project participants and can point out the innovative points in detail, giving the project participants a sense of his reliability, so that they can ultimately award the project to Taibei Group with confidence. At the same time, due to the technological innovation, Taibei has provided a guarantee that they will meet the national requirements. In recent years, China’s environmental protection requirements have become increasingly stringent, including those governing waste treatment, wastewater treatment, and pure water treatment. As a heavy industrial base in China, Shandong is stricter with the supervision of Shandong enterprises. In 2012, the Chinese government conducted a comprehensive survey of environmental protection in Shandong Province. Under this national investigation, many enterprises failed to meet the equipment standards, meaning that they failed to meet national requirements. However, a small number of enterprises used Taibei products, and all of them survived. Since then, the excellent technology of Taibei has begun to enjoy a reputation in the industry. Only by constantly innovating can enterprises continuously strengthen their business, gain a foothold in the industry, and become a century—old enterprise.

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(3) Responsibility Qian Wang has a strong sense of responsibility. His entrepreneurship, his selection of products, and his handling of several business crises are all due to his sense of responsibility. He assumes responsibility for his employees. To fulfill this responsibility, he decided to help laid-off colleagues and establish a limited company so that all employees could enjoy the benefits of the company. He assumes responsibility for his business partners. Qian Wang will never deliberately raise prices after signing a contract, even if the price increases in the market. If client companies have problems, he will not cancel a contract but will work with them to overcome the difficulties. Therefore, those who work with Qian Wang want to work with him again. He is accountable to the nation. When determining the main products of his start-up company, he hoped to give China green hills and green water to benefit the people, so he chose the environmental protection industry, with its low-profit margins and high risk. He is accountable to his customers. Taibei sells their products to customers every time, and the customers come back to buy more”. Their company slogan is “not only to satisfy customers but also to move customers”. Moving the customer means always considering any situation from the customer’s point of view. For example, the price of environmental protection equipment is high, and many small enterprises cannot pay for it in one payment; Qian Wang immediately agreed to installment payments to allow them use their products immediately. He is also responsible for his family. The company was founded in Shandong Province so that he could be closer to the family and take better care of his and his wife’s mothers. Are these entrepreneurs who are responsible for their families, employees and society afraid of failing to develop their enterprises?

6.7 Analysis of Qian Wang’s Entrepreneurship (1) His Dream and Objectives Qian Wang’s dream was to start a hundred—year enterprise and become an internationally influential company, and Qian Wang’s corporate governance and personal principles embody this goal. Additionally, he believes in Chinese government policy. He said, “China’s enterprises are strongly guided by the government’s national policy, which is the only way to go. If we want to be a 100—year enterprise, we must follow the national policy. The core of enterprise development is the national policy!” and “Enterprises should select products according to the direction of national industrial policy”. At present, China strongly advocates for environmental protection. Therefore, his dream and objective are to make Taibei one of the strongest companies in the environmental protection equipment production industry in China. (2) His Ability to Forecast the Future Business Environment Qian Wang’s perceptive insight into the direction of environmental monitoring has positioned every product of Taibei enterprises for success. Pure water equipment,

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sewage treatment equipment, the commissioning of waste gas treatment equipment and other new positions adopted by the company are determined by Qian Wang by considering a combination of national policy development and current environmental status. Taibei can develop very rapidly because he is able to predict government policies. The relevant regulations related to environmental protection promulgated by the state will affect the product positioning and regional development positioning of such enterprises. To predict the development direction of the government macro environment, enterprises need sufficient time to formulate development strategies. When the market produces demand, enterprises can actively attract demand rather than passively cater to it. Thus, Qian Wang is always looking at government policy and the future needs for environmental protection in China. (3) His Core Resources or Technologies As an environmental protection enterprise, excellent technology is a prerequisite to win the market. Although Qian Wang often learns the innovative technology from other firms at home and abroad, he always considers the specificity of his own enterprise and reinnovates based on good technologies In several large project bidding activities, Qian Wang was able to accurately explain the technical advantages when negotiating with the project participants and to point out the innovative points in detail, giving the project participants a sense of his reliability, allowing them to ultimately award the project to Taibei Group with confidence. Since then, the excellent technology of Taibei has begun to enjoy a reputation in the industry. Only by constantly innovating can enterprises continuously strengthen their business, gain a foothold in the industry, and become a hundred—year enterprise. Qian Wang understands that technologies related to environmental protection are the core resources for Taibei’s successful business. (4) How to Manage his Company Qian Wang always thinks of others when he manages his company. He treats his family, friends, business partners and even customers with consideration. He chose to be an environmental protection enterprise because he felt that the products of such enterprises could provide real benefits to people. He chose to start an enterprise in Shandong because he hoped not only to be closer to his family but also to revitalize his hometown. He chose to start a joint-stock enterprise because he wanted every employee to have a guaranteed living through this job.. He abides by his contracts and does his best for his business partners. Qian Wang’s thoughtfulness have helped him form strong internal cohesion within Taibei, won him reliable business partners, and attracted loyal customers. (5) His Way and his Value Sense Qian Wang is an entrepreneur with a small enterprise who is responsible, never forgets his original intentions and loves learning. Qian Wang is a responsible entrepreneur. When he first chose his products, he shouldered the responsibility of an entrepreneur to his country. He selected an industry with low profits that would benefit people—environmental protection. He started

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Taibei because he did not want his former coworkers to be laid off when the previous factory closed, and he chose his hometown, Shandong, to be close to his family when he started up his business. His duty to his country, his commitment to his employees, and his duty to his family were the basis of the company he founded. Qian Wang is an entrepreneur who never forgets his original intention. He produces environmental protection products at a quality that is always higher than the national standard. He is never confused by the interests of the enterprise, loses his sense of responsibility for his customers and society, or forgets the original Taibei slogan “What we do is a meritorious deed, but if we cannot do it well, it will be a harmful event. His original intention is the foundation upon which Taibei established its reputation. Qian Wang is an entrepreneur who loves learning. He often leads his employees to learn new technologies, is keen on studying equipment, and applies for national patents, making the company an innovative enterprise. His creative spirit is the driving force in the future development of Taibei.

6.8 Conclusions This case mainly describes the development path of a high-tech small enterprise, Taibei, and the path of its founder Qian Wang’s entrepreneurship. This article mainly outlines the current situation of the enterprise, its industry background, stories of entrepreneurship, the business characteristics of the enterprise, the entrepreneurs’ management, and entrepreneurship. Taibei will broaden their business. They are building a team and a business in the northwest. With the Belt and Road project, the Chinese government will build a platform for companies, providing more opportunities for Taibei. Taibei will establish a branch in Beijing to accelerate cooperation, taking advantage of high-speed rail between Beijing and Qingdao. In the future, Taibei intends to set up the academician workstation, energy conservation and an Environmental Research Institute, among other activities. At the same time, with the rapid speed development of big data, cloud computing and other AI techniques, Taibei products will be further promoted. This case shows how an innovative enterprise becomes the leading enterprise in the subdivision industry and how to plan the development path according to the characteristics of the industry. The insights offered here are of great significance and value for the innovation and development of small and medium-sized microenterprises.

Part II

Entrepreneurship in Services Industry

Chapter 7

Dato Michael Tio and PKT Logistics—A Knowledge Creating Service Company Growing into a Global Logistics Company H. M. Belal, Quamrul Hasan, Norani Nordin and Michitaka Kosaka

7.1 Introduction New knowledge creation and managing its structure successfully are now the main concerns for companies who innovate with the aim of sustainable growth. Knowledge has provided a competitive advantage for companies, regions, and even nations (Toffler 1990; Drucker 1993a, b). Nonaka’s (1994) world-famous knowledge creation theory and model clearly specify the knowledge-creating process for a company, in which all members interact and gain information by going outside their own “borders,” thereby motivating themselves and encouraging participation with other partners (Bratianu and Orzea 2010). Nonaka saw employees as individual members and the market and customers as outside their borders. Nevertheless, the customer is an important part of an organization’s service value chain; they are not outsiders. Ideas and experiences are to be gained from the customer in a service-value-driven organization. Therefore, to meet this aim, a traditional company should prepare for business opportunities on the basis of new knowledge creation. To do this, a company’s design should be restructured to facilitate connections between individuals, and partners. Thus, a firm can improve its performance by acting on creative insight, and it can offer recipients actual value that increases consumer participation. H. M. Belal (B) Liverpool Business School, Liverpool John Moores University, Liverpool, UK e-mail: [email protected] Q. Hasan Center for Global Initiatives, Osaka University, Osaka, Japan N. Nordin School of Technology Management and Logistics, Universiti Utara Malaysia, Sintok, Malaysia M. Kosaka Japan Advanced Institute of Science and Technology, Nomi, Japan e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_7

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In this chapter, we introduced PKT Logistics Group Sdn Bhd. (PKT) and its CEO: Dato’ Michael B. Y. Tio (DMT) as a successful Malaysian knowledge creating service company. We examined how PKT designed and adapted the knowledgecreating system into their company’s philosophy towards business operation, thereby innovating service and acquiring more of the global market. We used a qualitative approach to conduct this research. Data was collected from interviews with a selected number of top-, mid-, and low-level employees and a questionnaire rom the case company’s customers. We also collected secondary data related to the case company from the official company and CEO Facebook pages, its website, business magazines, newspapers, and other publications. The rest of this chapter is structured as follows: reviewing the background and the outline of PKT Logistics, introducing DMT’s entrepreneurship and policies in the development of PKT, DMT’s leadership, examining the Facebook community as a success factor for a knowledge creating service company, the future vision of PKT, the analysis of DMT’s entrepreneurship and briefly summarizing.

7.2 The Business Background and the Outline of PKT 7.2.1 The Business Background In the Asia-Pacific region, Singapore leads the logistics industry. As of 2017, based on the logistics performance index of World Bank ranking, it is the No. 1 logistics hub in Asia. The Singaporean government introduced the Logistics Industry Transformation Map (ITM) scheme in 2016 with goals of optimizing the current logistics systems through more effective resource allocation (e.g., professionals, managers, executives, and technicians) and attaining advanced technology (e.g., cloud computing system). Therefore, due to the collaboration between industry and government, the Singapore logistics industry has gained infrastructure effective for providing added-value service to customers. In addition, the strategic location of Singapore at the heart of the Asia-Pacific region serves as the geographical linkage between Europe, India, China, and the U.S. Its prime location makes Singapore the ideal springboard for logistics and provides excellent connectivity that shapes Singapore as one of the busiest ports worldwide (Garner 2017). All these factors (e.g., advanced technology, excellent infrastructure, and service-oriented supply chain management) have contributed to making Singapore the best global logistics hub. Other countries in the Asia-Pacific region, particularly developing countries, may not be able to perform like Singapore because of their location, limited resources, capability, or capacity, but they can compete in global logistics by restructuring organizational policies and strategies. Malaysia is a good example of this. Singapore also considers Malaysia to have a good opportunity to become next logistics hub in Asia, making it one of the biggest threats to Singapore’s logistics industry. The Malaysian

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government is collaborating with China, who plans to invest in the construction of Malaysian ports through its “Obor Project” (Sun 2017). Additionally, Malaysian logistics industry individuals (e.g., Top-Mech, PKT, Dietrich, KGW, etc.) are very eager to increase their capabilities and their capacity to combine their services with core products for meeting customers’ needs by innovating their business models. They realized that new knowledge creation is a driving force to combine services. Therefore, they tried to restructure their business model with aim of adapting to the knowledge creation process. Thus, Asian and ASEAN business opportunities and changes have had great significance in the logistics industry due to positive shifts in the economy and improvement in market competitiveness. Nevertheless, it is critical for developing countries’ logistics companies to connect to global trade and reap the benefits of Asian economic stability and globalization through their organizational philosophy, capability, and capacity. Leading global logistics companies such as XPO Logistics, Inc., UPS Supply Chain Solutions, DHL Supply Chain Solutions, Schenker, and other logistics companies of high-income countries are operating well globally. In order to compete with high-income countries and leading logistics companies, logistics services in developing countries need to restructure their business models to gain technological advancement and use the knowledge creation process to innovate service. In such business environment, PKT Logistics Group Sdn Bhd. (PKT) in Malaysia is a successful logistics company, which designs itself as a knowledge-creating company with a service-oriented view towards global business.

7.2.2 The Outline of PKT In 1974, Dato’ Tio Sook Keo founded a trading company called Port Klang Trading in Shah Alam, Malaysia. The company was renamed and is operating today as PKT Logistics Group Sdn Bhd. Their motto is “We serve… with passion.” PKT is currently considered a leading logistics company not only in Malaysia but also in the Asia Pacific region. To reach this position, PKT had to differentiate itself by changing its business philosophy from the standard to the service concept perspective. In doing this, they are strongly committed to providing a total logistics service-based solution to customers through mutual cooperation among stakeholders. The services include end-to-end design, implementation, and operation of logistics solutions in freight forwarding, customs brokering, contract logistics, haulage, and distribution management for large and medium-sized national and multinational companies (Business Times, Oct 25, 2016). The leadership of DMT, Group Chief Executive & MD of the company, was behind this change and the eventual success of PKT. However, it was initially a partnership company whose customers thought PKT was a very small company because only small companies do a partnership. The turnover was only 2 million Malaysian ringgit (MYR) per annum. Now, PKT is a

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Fig. 7.1 PKT new warehouse ‘The 12 Waves’ at Penang, Malaysia

limited company (Sdn. Bhd.) and ranked fifth in Malaysia in the logistics service industry with the turnover 300 times what it was before. PKT has created its own brand image, and it has the top ten licenses for costumed brokerage including other services. PKT has expanded its business with international collaborators. PKT has already formed a venture business with Japanese company Utoc Express (whose name changed from Utoc Corporation). Utoc Logistics is a subsidiary of Mitsui groups (e.g., Mitsui Sumitomo, Mitsui O.S.K. Lines, Ltd., and Mitsui Bussan trading house, which are all restructured and owned by MOL Logistics). PKT also joined a venture with a Korean company called Asia Pacific Express that led PKT into the Korean market. PKT has also started another joint venture with Massa Logistics and Okamoto Logistics Co., Ltd. to become an automotive specialist. Furthermore, PKT has expanded its business into non-automotive sectors as well. It has focused on fast-moving consumer goods (FMCG), Food & Beverage (F&B), and energy segments with the plan of earning 40% of company’s total revenues. PKT is operated by about 400 energetic employees who are eager to manage almost 200 hundred high-profile customers such as Kia Motors, Hyundai Motor Company, Mitsui O.S.K. Lines, Ltd. (MOL), Mazda Logistics Co., Ltd. (Malox). In this, to manage the all business aspects, PKT developed its physical infrastructure as well such as the company built new advanced generation warehouse called ‘The 12 Waves’ (as shown in Fig. 7.1).

7.3 DMT’s Entrepreneurship and Policy in the Development of PKT DMT returned to Malaysia from the United Kingdom after finishing his study in January 1996 and took over the operating responsibilities from his father. At that time, PKT was operating from a shoplot with an annual turnover of MYR 2 million. However, his goals were a greater annual turnover, a greater market share, and to see his company as a logistics leader in Malaysia as well as attain a reputable position

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Fig. 7.2 DMT and his philosophy

in the global logistics market. In addition, the broader goal was to make Malaysia the logistics hub of the region rather than Singapore. But, how? He found the answer by realizing that making his company different from its competitors with a serviceoriented view rather than the standard view of business is possible with the philosophy of “Dream of it, Talk about it, Plan for it, Work on it, and Get it” (Fig. 7.2 DMT and his philosophy). Therefore, he restructured his business model as a continuous knowledge creation process by redesigning the company internally and externally to offer service-based value. They focused on internal issues such as the company’s availability of favorable infrastructure for logistics support such as advanced structured buildings (STARBIZ 6 Feb. 2017), vehicles, workplace design, service-minded human resources that were highly motivated and skilled (e.g., smart truckers), ICT, and relationship platforms. Again, the external issues focused on customer accessibility systems to the company for co-producing value, the company’s social responsibilities (CSR), building trust, etc. PKT adapted the restructured business model and practiced it by managing the PKT-DMT Facebook community (described in Sect. 7.5.2) as “Ba.” To strategically operate PKT’s business, DMT gave priority to employees and customers. He preferred to put employees first because customers tend to remember employees’ service as what made them happy and loyal rather than the product itself. Thus, he aimed to take care of PKT’s people first. He saw having a happy workforce as equal to productive talents. DMT designed PKT’s workplace to be fun, to have a knowledge creation environment, and to have a culture of service. PKT offers employees an indoor gym and counts time spent in the gym towards their health benefits (Fig. 7.3 PKT indoor gym for employees’ health benefits). DMT focuses on keeping employees of PKT healthy. The company also offers annual retreats to exotic locations around the world. Not only that, every floor in the workplace is designed with the images of the seven continents of the world, giving additional enjoyment to the employees and the customers. It attracts everyone and gives a positive first impression of the

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Fig. 7.3 PKT indoor gym for employees’ health benefits

company. DMT and his employees work together, eat together, chat together, and brainstorm together during office hours. He can communicate with his large number of employees within 30 s via the PKT-DMT Facebook community and can share his knowledge, achievements, and future plans with the employees as a co-worker, not a boss. Therefore, employees form an attachment to him and are motivated to give their best efforts for him as well as for PKT. Regarding the customer’s, DMT believes that connecting the customers to every system of his business is crucial. Therefore, he aimed to make a beneficial relationship platform for himself, customers, employees, partners, and society. With this in mind, he relied on ICT and, more specifically, on Facebook as a communication method. He created a PKT-DMT Facebook community where his entire staff communicates. They even conduct and record meetings via Facebook. In their Facebook community, customers and partners also interact to create new knowledge for a desired solution. It is happening in Malaysia, and DMT made it happen in PKT though usage of Facebook is restricted or even prohibited during office hours in most Malaysian companies and in other companies around the world. DMT made PKT a well-known social entrepreneurship that delivers beneficial service to society as well as creates new entrepreneurs. His philosophy is Corporate Social Responsibility (CSR) is not about how you spend your profits; CSR is about how responsibly you make your profits,” which has made PKT’s CSR stand out among the rest. He introduced many wellness-related facilities for his employees, consumers, and society such as a full facility gym, a daycare center for staff to send their kids, lounges for staff to relax, management and company trips, an honesty corner, a spa, and many more facilities that serve to further elevate his employees’ happiness and confidence. For the community, there is the Anak Belajar Ibu Bekerja (ABIB) program that is focused on giving job opportunities to mothers who live in the villages surrounding PKT’s facilities (Fig. 7.4 ABIB Program to community development), a Career Day for Facebook fans to come and seek job opportunities from PKT’s customers and clients with job matching done by PKT’s Human Resources

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Fig. 7.4 ABIB Program to community development

Fig. 7.5 Business expansion in education sectors

team, and the Smart Trucker program to motivate new graduates to work four years as a trucker with high wages and career progression guaranteed after the four years. These programs also aim to ensure reductions in road accidents and national unemployment and ensure customer satisfaction with deliveries. In this way, PKT has improved its brand image. DMT has also tried to diversify PKT for market growth and long-term sustainability. For example, they are now focusing on not only logistics but also other segments of businesses, i.e., education, FMCG, F&B, and energy (Fig. 7.5 Business expansion in education sectors).

7.4 Development of PKT Under the Leadership of DMT The true growth of PKT and its position in the market today is the result of DMT’s leadership in implementing his strategies in business. We found that DMT is a serviceoriented solution thinker and a visionary leader. He is a progressive and inspirational vision creator for the future, able to share his vision with his employees, followers, and society and make them commit to them. The name value of DMT and his vision creates a sense of harmony within the employees-followers-consumer society. Consequently, today PKT is an organizational knowledge creator, leading in the

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logistics service industry in Malaysia. Here, we would like to present some examples of his leadership to develop PKT by winning employees and customers. Generally in Malaysia, a traditional business management system is top-down. In other words, it is a single leadership business operating system. During DMT’s father’s period, PKT’s management system was based on top management, which was his father. According to DMT, his father wanted to show to customers that he could meet their requirements by himself. However, customers (especially Japanese corporations) were not satisfied with his views. Customers thought that an autocratic (one person-based) management style might not be able to suitably generate business. Consequently, the company did not grow as DMT wanted. DMT understood the customers’ concerns, so he changed the perspective of PKT’s business operating management system from “I” to “We,” meaning not “I,” as in him doing it alone but “We” as in working as a team with employees and customers on business projects. Then, DMT restructured the layout of the company internally and externally, including management as well. He empowered employees and included other benefits, creating a constructive continuous relationship platform for sharing and gathering knowledge or experience from employees, customers, mentees, and society through the Facebook community. In addition, DMT’s personal skills and ability to understand market situations also helped the development of PKT. PKT uses Facebook as a recruitment channel and no longer advertises in newspapers, job vacancy boards, or job portals like JobStreet. Now, recruitment is only through one channel, the PKT-DMT Facebook community. PKT also believes that Facebook is a great way to build the brand of a business. It is a fantastic way to grow a brand, and with over 800,000 fans already, it is like having 800,000 salespeople promoting and talking about PKT and its products. In this way, PKT has already built a strong brand image in the logistics industry in Malaysia as well as in the region. It has become a limited company, has increased annual turnover, and has achieved rank among the top five in Malaysia. Furthermore, PKT is expanding its business with international collaborators (Fig. 7.6 Business expansion and collaboration with other sectors).

Fig. 7.6 Business expansion and collaboration with other sectors

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7.5 Facebook Community as a Success Factor for a Knowledge Creating Service Company 7.5.1 Basics of Knowledge Creating Company In order to become a knowledge creating service company, it is thought that a company should understand and try to practice the theory of organizational knowledge creation (Nonaka 1991; Nonaka and Takeuchi 1995; Nonaka et al. 1996, 2000a, 2000b; von Krogh et al. 1997; Nonaka and Konno 1998; von Krogh et al. 2000). Three elements are significant as shown in Fig. 7.7, which are (i) SECI Model: the process of knowledge creation through conversion between tacit and explicit knowledge, (ii) Ba: the shared context for knowledge creation, and (iii) Knowledge Assets: the inputs, outputs, and moderator of the knowledge creation process (Nonaka et al. 2000, p. 8). (i)

SECI: Since we know SECI is the knowledge conversion continuoual process between tacit and explicit, this section presents the mechanism of SECI’s knowledge conversion process. According to Umemoto (2002) at the very first of SECI model, the knowledge-creating process proceeds from “knowledge spiral,” and the relationship between tacit and explicit knowledge is intensified through the four modes of knowledge conversion namely socialization, externalization, combination, and internalization. In the socialization mode, tacit knowledge is converse to tacit knowledge. Wherever individuals create mental models by sharing practical thinking, understanding, ideas, or experiences with others (e.g., partners, subordinates, and collogues) at the same time and place. Which is still fresh or raw ideas and in concept level. In the externalization mode, the tacit knowledge is converse to explicit knowledge. In this, those separate tacit knowledge (i.e., individuals’ mental models) is shared and integrated

Fig. 7.7 Three elements of the knowledge creation process. Source Nonaka et al. (2000, p. 8)

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within a group and get dialogue, thereby the group able to create a constructive concept. In combination mode, the explicit knowledge is inverse into new explicit knowledge. The constructive concept are combined with the organizational technologies, systems or other components to processed at the aim of forming a systemic knowledge that is a new product or service (Umemoto 2002). Finally, in the mode of internalization, the explicit knowledge is again converse to the tacit knowledge. Here, individuals such as company employees/factory workers, service engineers, users, and partners shares or gathers new ideas, feedback, and know-how on or by this by the produced product or service (Nonaka et al. 2000). Accordingly, this tacit knowledge moves up to the organizational group level and then it again combined with company’s resources for producing product or service and all over again back into the individual level. Consequently, it is a dynamic process (Umemoto 2002). (ii) Ba: In knowledge management, Nonaka and Konno (1998) have introduced the concept of Ba. It is as “a shared context in which knowledge is created, shared, and utilized.” Ba can be physical (e.g., office), virtual (e.g., teleconference), mental (e.g., shared experiences, ideas, or ideals), or any combination of them” (Umemoto 2002, pp. 5). In other word, Ba is a place that considered as shared context in motion for knowledge creation (Nonaka et al. 2000). It is stated, the knowledge creation nature depend on the context. In view of this, social, cultural, historical, spiritual, and regional aspects can provide necessary data or information to create meaningful and beneficial knowledge (Umemoto, 2002). However, to understand Ba, the main perception is making a communicative platform among individuals, recipients, partners and their surroundings. Four types of Ba are available in knowledge creating process; these are originating, dialoguing, systemizing, and exercising. Respectively all of them relates directly or indirectly to socialization, externalization, combination, and internalization (Umemoto 2002). The originating Ba is considered as place of real and face-to-face communications to share and create practical experiences, thoughts, reactions and emotions as tacit knowledge. Dialoguing Ba is a place of collective and face-to-face interactions of sharing personal thoughts and translating into common and productive concepts as tacit knowledge. Systemizing ba is more about virtual, which is making interactions collectively via information technology (e.g., skype, telephone, whatsapp, messanger etc.). It is not face-to-face or real. It deals for the combination of transform a tacit knowdge into explicit one. Exercising Ba gives opportunity to interact with explicit knowledge by activities. Individuals can acquire explicit knowledge by practicing Exercising Ba. Participants can do it by physically or virtually. (iii) Knowledge assets: Knowledge assets are a moderating factor of knowledge creating process by the internal and external resources such as trust amongst organizational members, collaboration amongst partners as well as customers. It also moderates how Ba functions as a platform for the knowledge-creating process (Nonaka et al. 2000). Four categories knowledge assets are proposed as follows: (1) experiential knowledge assets, (2) conceptual knowledge assets, (3) systemic knowledge assets, and (4) routine knowledge assets (Nonaka et al.

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2000). Experiential knowledge assets are creates over shared practical work experience within firm members or among firm members, partners, and customers that considered as tacit knowledge. The experiential knowledge assets are difficult to capture, evaluate, or exchange for money. Conceptual knowledge assets are includes with words numbers, and diagrams (e.g., corporate strategies, product concepts, designs, brand value, models etc.) that formed based on the concepts of the members of a company and its customers. The systemic knowledge assets are consisted with systematic package of explicit knowledge such as integrated technologies, product specifications, manuals, and documented and packaged information about customers or suppliers. Routine knowledge assets are also signify as tacit knowledge, which implanted by organizational daily actions and practices such as know-how, culture, business nature, customer focused value, and functional activity (Umemoto 2002). However, in the practical field, it is truly difficult for a company to represent all aspects of Nonaka’s knowledge creation theory, and practice of organization may not be the same as theory (Umemoto 2002). We present a case of a Malaysian logistics company that are practicing “Ba” using a social network system like Facebook and creating new knowledge by applying the SECI model approach and knowledge assets.

7.5.2 PKT-DMT Facebook Community The Facebook trend of effective communication via social media and the opportunity it presents to gain competitive advantages when used commercially has been recognized by DMT. Therefore, since 2009 PKT has strategically made Facebook compulsory for its employees, customers, and mentees. The application of this strategy was very challenging and risky, as it was a completely new approach to networking in a business generating system compared to emails or phone calls. DMT has managed it very carefully by understanding his employees’ state of mind. He knew that his employees like using Facebook and he believed that using it could create a fun environment for his company, essential for getting his employees’ best efforts. DMT also wanted to keep them up to date on what was going on with him. He also wished to always be available to communicate with PKT’s customers, his mentees’, and society to inform them of every situation of PKT and to gather knowledge from them. So, he thought creating a Facebook community could become very strategic for the company’s business operation system. He chose Facebook because methods of communication are changing and Facebook is seen as the next wave of future communication between people. Functionally, Facebook is more progressive than other social media. Meanwhile, other social media like Twitter is limited to a certain number of characters, Instagram is only for sharing pictures, and Whatsapp requires invitations for users to join specific groups. So, Facebook is the biggest platform for media without producing any content. Additionally, DMT wanted to have an

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enjoyable, cool, and fun working environment in the company. Thus, he decided to create the PKT Logistics Group Sdn. Bhd. and Dato’ Michael Tio’ Facebook pages, which are considered the “PKT-DMT Facebook community.” He structured it correctly and set some rules that transformed all partners’ mentality. As of May 1, 2017, there are more than 800,000 followers in this Facebook community (Dato’ Michael Tio’s Facebook page has 732,372 followers and PKT Logistics Group Sdn. Bhd.’s page has 70,000 followers). In addition, there are some other PKT-related Facebook pages for departments and decision-making management that are special and secret. All human resource information is usually shared internally in those groups. However, the main characteristic of this PKT-DMT Facebook community is sharing updated information and activities regarding PKT Logistics, such as its upcoming services and benefits for customers-employees society (Fig. 7.8 Information sharing at PKT-DMT Facebook page). PKT-DMT’s Facebook community also shares DMT’s way of thinking to generate business for the new era, DMT’s philosophy towards attaining business success and his successful experiences, PKT’s and DMT’s achievements, concepts and policies for young or potential entrepreneurs, PKT’s programs and events, introducing customers’ and mantees’ products and benefits, directions on how to achieve national business and economic progress, encouraging education to increase employability, the job creation service for housewives and many more by status, and images and live videos. Characteristics differ between DMT’s and PKT’s Facebook pages. DMT’s page is more like an entrepreneurship page. It also creates an image for PKT. DMT pages manage internal postings that are more about entrepreneurship, leadership, and corporate social responsibility (CSR). PKT’s page is for the company’s overall business operations.

Fig. 7.8 Information sharing at PKT-DMT Facebook page

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Currently, in PKT, the PKT-DMT Facebook pages are seen as the most practical way to operate business. It is used for every business procedure, such as meeting arrangements, customer linking, marketing, value propositions, managing CSR program, mentoring program, new product launching, event organizing, discussion, and data storage. In addition, PKT now uses Facebook as a recruitment channel. Currently, the PKT-DMT Facebook community has over 800,000 fans, who are indirectly helping to create a strong brand image for PKT.

7.5.3 PKT-DMT Facebook Community as “Ba” DMT’s vision changed the company’s business culture from a typical logistics service to a total solutions provider in terms of the value chain. They are not limited to only products like freighting, customs clearance (custom brokerage services), trucking, warehousing, and outsourcing, but are progressing to another level, such as procurement services (on behalf of clients) and sub-assembly services (picking and packing for clients). Innovation and adding new services is at the core. With this in mind, DMT has become conscious of the importance of working with employees and customers to share experiences and implement a knowledge creation process platform with a continuous connection and interactive relationship. Thus, he utilized the PKT-DMT Facebook community (as shown in Fig. 7.9) as a platform of continuous connection and interactive relationships between himself, his employees, and the customers. At the same time, he demanded its mandatory use for PKT employees and requested that PKT’s customers communicate and share their experiences and demands via this platform. Functionally, the PKT-DMT Facebook community is set up as a three-way relationship. The three-way relationship areas are the correlations between DMT and PKT’s employees, DMT and PKT’s customers, and PKT’s employees and its customers, respectively. This Facebook community encourages all parties to contribute and update every single piece of information, thought, and experience regarding the company, its services, or users’ requirements, and to keep in constant touch daily for new knowledge creation as well as service-based value. More specifically, the PKT-DMT Facebook community is effective as a knowledge-gathering space, which is considered systematic “Ba.” In doing this, DMT is taking the lead role in creating an individual mental model and showing the path to new knowledge creation for service-based solutions by sharing and gathering the successful experiences, ideas, and ideals of PKT’s employees and customers. In DMT and PKT’s employee dimension area, DMT shares his thoughts, experiences, and knowledge with employees regarding value propositions for them and the customers. He also does Facebook live dialogues to direct them and to form a close relationship. On the other hand, employees also share their experiences, opinions, reviews, and customer data with DMT to verify proposed values. They also

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Fig. 7.9 PKT-DMT Facebook community as “Ba”

join Facebook live conversations with DMT to update every single fact with details (i.e., socialization and externalization: tacit to tacit knowledge and convert it into explicit knowledge). Once more, in DMT and PKT’s customers dimension area, DMT collects customer expectations and needs in particular by effective communication for recognizing and proposing customer value. He shares his experiences and knowledge with the customers with the aim of empowering them as co-partners of the company. DMT also ensures consumer well-being by creating a brand image for the customer by Facebook and other necessary solutions. Using Facebook live dialogue to achieve an interactive relationship with customers is common for him. At the same time, customers participate with DMT by sharing their expectations, needs, and experiences to determine value. They also contribute to design value as well. Finally, in the PKT employees and customers’ dimension area, PKT’s employees recognize customer needs and expectations to understand customer value and its delivery process. They share their experiences and knowledge with customers and use Facebook live dialogue to create an interactive relationship and for market updating. Customers also reply to them to determine and design value by giving their opinions, thoughts, critiques, reviews, and experiences and by receiving a market update (i.e., externalization: explicit to explicit knowledge). In this way, all data, information, and/or knowledge are gathered from all participating partners and PKT analyzes it to create new knowledge for service-oriented solutions as innovative products or services (i.e., combination and internalization: explicit to tacit knowledge)

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at meetings to determine customers’ value. After marketing the innovative service, PKT again collects updated information or ideas as tacit knowledge of expertise by producing, performing, or using that product or service (i.e., internalization). Consequently, PKT’s solutions are co-produced by all of DMT-PKT Facebook community associates’ active participation and their beneficial relationships. This means it is a continuous new knowledge creation process to co-create value for recipients by using the Facebook community. As a result, PKT is signifying itself as a knowledge creating service company with the sustainable growth to become one of the leading logistics service companies in Malaysia and eventually on a global scale.

7.6 Future Vision In the early 21st century, PKT realized that operating a business with a low value could not achieve business sustainability. Therefore, they changed their business philosophy as service-based value co-creator and redesigned their organizational layout as a knowledge creating service company for two specific future goals. The first is establishing PKT as the most competitive multinational corporation (MNC) logistics service provider and acquiring more of the global market. The second is improving the world ranking of the Malaysian logistics industry by creating a logistics hub in Malaysia with government support. To satisfy the first goal, PKT’s concept is attracting MNCs as their customers because PKT is not fighting locally or at the level of small and medium enterprises (SME) anymore. They are signifying themselves as a high-value logistics company and a champion in Malaysia. They are leading the local logistics companies in the same direction by showing examples of how a Malaysian logistics company can become a good international player by offering knowledge-oriented service value. They have done low-value business for many years but now is the time to challenge MNCs and gain a better margin. In this, PKT considers itself a sustainable, socially responsible entity. Their growth is through the community, and they are trying to develop the community by settling social and national issues. They believe that first they must show that they are good locally before extending their business internationally because their main target is not only making a profit but also offering local solutions. Thus, PKT is pursuing their globalization process with their principles and core values in place, which are excellent green infrastructure and social and environmental solutions. The Smart Trucker program is a package that introduced by PKT can be a good example for understanding their first goal. To meet the social and environmental solution this mentioned program is well initiative by them. It is because; PKT realized the unemployment problem is becoming one of the core issue in Malaysia. On the otherhand, the road accident is another problem that happens very often in Malaysia. To findout those two local solution together the Smart Trucker program designed as a service by PKT, which is open for fresh university graduates. In this program, PKT is committed to provide all necessary supports such as training to achieve truck driving license, advanced technology, well designed office, refreshment

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environment, logistics training including smartly handling of documents, handsome salary, ethical and moral training, delivery approach of product to customers and so on. Additionally, PKT confirmed to promote the smart trucker as a manager after finishing four years of successful working. Hence, the company believe, this program of PKT will bring a solution to reduce unemployment and road accident problem in Malaysia. PKT also aims to conduct business in other countries by finding out the local social issues and providing solutions that are not given by other companies or competitors like Malaysia. They are eager to create new knowledge to solve the anticipated issues locally by adapting their business. This is how they justify believing that the PKT is ready to go global (Fig. 7.10 Logistics business activity). Currently, the biggest chunk of PKT’s logistics business is from MNCs that are 60% with a higher margin. According to the world logistics industry rankings, Malaysia is far behind Singapore. Nevertheless, Malaysia intends to compete with Singapore. To do this, they have to make a logistics hub and improve industrial service to a world-class level. In doing so, PKT and DMT respectively consider themselves a platform and a mentor producing increasingly more socially responsible entrepreneurship in the logistics industry and other supportive industries. PKT is showing the ways to redesign his mentees business as new knowledge creation for services that offer socially responsible and innovative solutions not provided by other companies, which may helpful for

Fig. 7.10 Logistics business activity

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brand creation. For example, to help the Malaysian logistics industry, PKT has added a “smart trucking” service with highly professional truckers for delivering products on-time and safely that described earlier. PKT is also involved with the government to address and work to solve the issues in the Malaysian logistics industry.

7.7 Analysis of DMT’s Entrepreneurship With the view of DMT’s business philosophy and leadership, PKT developed well towards global and socially responsible logistics company. We analyze his entrepreneurship according to the following attributes. (1) His Dream and Objectives DMT’s broader goal is to make Malaysia the logistics hub of the region and to fill-up this objectives. To realize his goal, he is changing PKT’s organizational structute and ways of doing business. He is also involved with the government to address and work to solve the issues in the Malaysian logistics industry. (2) His Ability of Forecasting the Future Business Environment DMT’s personal skills and ability to understand market situations, which is helped to development of PKT. DMT believes that Facebook is a great way to build important information channel for understanding current and future market situations and employees motivation. Furthermore, PKT is expanding its business with international collaborators. (3) His Core Resources and Technologies He believes that the employees are main resources for PKT. Hence, employees’ well-being is more significant than others are. Rewarding to society by reducing unemployment problem, smart trucking program to minimize road accident in Malaysia, creating job opportunities for mothers and others social beneficial activities, those are appreciated for the long run sustainability. Additionally, ethical business behavior of PKT, customers’ service-oriented values proposition as a total solution with appropriate technologies are also core resources for PKT’s business. (4) How to Manage his Company He restructured his business model as a continuous knowledge creation process by redesigning the company internally and externally to offer service-based value. In this, he applied his value of sense. He recognized the concept of globalization with social media, as it is more common, faster, popular, cheaper, global, and reliable to communicate, marketing, share and receive the data or news among all partners (e.g., employees, customers, collaborators, or potential parties) than other mass media. He is very care around utilization of his soft and hard resources to make happen the things according to his or company’s philosophy. We observed, DMT’s leadership style to manage his company almost two years and found, one belief he shared to all of his partners, which is ‘I’ as a leader may not meet the recipients’ goal but ‘we’ may meet that. So, operate

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company by ‘we’ as a partner not by ‘I’. The Facebook community supports his management. (5) His Way and his Value Sense His way and philosophy is “Dream of it, Talk about it, Plan for it, Work on it, and Get it.” Because he think that in order to realize his goal, it is necessary to make his company different from its competitors with a service-oriented view rather than the standard view of business by using his way.

7.8 Conclusion In this chapter, we analyzed DMT and PKT as a knowledge creating service company by generating continuous knowledge and innovating services to deliver value. We argued that adopting the knowledge creation theory in organizational, functional, and philosophical views is important and that top management, employees, stakeholders, and customers should work together to apply it. PKT logistics is an example of a successful case shown in this study, a company that is creating continuous knowledge through applying “Ba” concept (PKT-DMT Facebook community as a platform of knowledge gathering and sharing) while ensuing the SECI process and knowledge assets to create a competitive service for their partners. In doing this, DMT (top management) created a Facebook community for his company’s employees and customers and made it a compulsory communication method in his company for everyone rather than emails, faxes, or phone calls. All of PKT’s project discussions, value propositions, information, experiences, knowledge, etc. are shared among employees and customers in the PKT-DMT Facebook community. In addition, document disbursal, report sharing-sending-reviewing, policies and plan finalization, and even recruitment are in this Facebook community. All of the aforementioned things have been managed by the PKT-DMT Facebook community because of PKT’s “Ba.” Moreover, this “Ba” is helping to PKT for create new knowledge at the aim of innovating desired and anticipated services for customers as a value. This kind of successful use of Facebook in the shared context of knowledge creation has made PKT different from its competitors and has signified it as a service-based value cocreator. In that way, PKT is gaining competitive advantages in the Malaysian logistics market and setting itself up as a competitive logistics company globally as well. Acknowledgements The authors gratefully acknowledge the contributions and the warm cooperation of the PKT Logistics Group Sdn Bhd (PKT) for their valuable practical data. The authors also acknowledge the Institute for Management and Business Research (IMBRe) of University Utara Malaysia (UUM) for awarding us with the AgensiLr (DN) Grant 777371/6655 to carry out this research project.

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References Bratianu, C., & Orzea, I. (2010). Tacit knowledge sharing in organizational knowledge dynamics. Proceedings of the 2nd European Conference on Intellectual Capital, 107–114. Business Times, http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId= 50275851, Retrieved on Oct 25, 2016. Drucker, P. F. (1993a). The rise of the knowledge society. Wilson Quarterly, 17(2), 52–71. Drucker, P. (1993). Post-Capitalist Society. London: Butterworth Heinemann. Haley Garner. (2017). 2017 Global Logistics Report.https://jda.com/-/media/jda/knowledge-center/ white-papers/2017-eft-global-logistics-report.ashx. Nonaka, I. (1991). The Knowledge-Creating Company. Harvard Business Review NovemberDecember, 96–104. Nonaka, I. (1994). A dynamic theory of organizational knowledge creation. Organization Science, 5(1), 14–37. Nonaka, I., & Takeuchi, H. (1995). The knowledge-creating company: How Japanese companies create the dynamics of innovation. Oxford university press. Nonaka, I., & Konno, N. (1998). The concept of “Ba”: Building a foundation for knowledge creation. California management review, 40(3), 40–54. Nonaka, I., Umemoto, K., & Senoo, D. (1996). From information processing to knowledge creation: a paradigm shift in business management. Technology in society, 18(2), 203–218. Nonaka, I., Toyama, R., & Nagata, A. (2000a). A firm as a knowledge-creating entity: a new perspective on the theory of the firm. Industrial and corporate change, 9(1), 1–20. Nonaka, I., Toyama, R., & Konno, N. (2000b). SECI, Ba and leadership: a unified model of dynamic knowledge creation. Long range planning, 33(1), 5–34. New Straits Times, Retrieved on February 5, 2018 https://www.nst.com.my/news/nation/2018/02/ 332261/higher-education-ministry-get-more-ceos-join-faculty-programme. Sun, Y. (2017). Asia drives the global logistics industry. ShanghaiDaily.Com, https://www.shine. cn/archive/business/Asia-drives-the-global-logistics-industry/shdaily.shtml. Toffler, A. (1990). Powershift: Knowledge. Wealth, and Violence at the Edge of the 21st Century, 43–57. Umemoto, K. (2002). Managing existing knowledge is not enough. The strategic management of intellectual capital and organizational knowledge, 463–476. Von Krogh, G., Nonaka, I., Ichijo, K. (1997). Develop Knowledge Activists! European Management Journal, 15(5), 475–483. Von Krogh, G., Nonaka, I., Nishiguchi, T. (eds.) (2000). Knowledge Creation: A Source of Value. London: Macmillan.

Chapter 8

Airlock Digital—Australian Information Security Systems Startup to Scaleup—Where Trust is a Must Michelle Leanne Oppert and Tristan Haines

8.1 Introduction Entrepreneurship is actively setting up a business and taking risks in order to profit. Entrepreneurs who create a business with a new product or service that does not currently exist come under the terminology as a ‘startup’. Moving on from this stage, if successful, a startup will become a ‘scaleup’. Scaleups still lack a rigid definition but can be described as the exponential growth of a startup in revenue, market access and employees. Australia fits into the Asia Pacific region as part of the Oceania region. There is a startling paucity of information in reference to Australian entrepreneurial and startup pursuits. The current information available surrounding Australian startups appears to be disorganised with a negative rhetoric exemplified with comments such as ‘Australia does not need more startups, it needs startups that can scaleup’ (Mazzarol 2015), or that 97% of Australian startups exit or fail to grow despite innovative ideas (McLeod 2017). While this is not encouraging for budding entrepreneurs, startups can be created and nurtured to scale up, however the correct factors need to be in place. Entrepreneurs need to be open to change and uncertainty and, importantly, attain trusting relationships with potential co-founders and stakeholders. Utilising the key segments of the Business Model Canvas (BMC) (Osterwalder 2004) approach the following case investigates the journey of Airlock Digital and their path from inception to a successful scaleup. The BMC, as explained by Osterwalder and Pigneur (2010), has nine primary segments that are typically formed prior to business creation. These include identifying the following: (1) Customer M. L. Oppert (B) School of Engineering, Asia Pacific Centre for Work Health & Safety and Centre for Workplace Excellence, University of South Australia, Adelaide, SA, Australia e-mail: [email protected] T. Haines Indsutry Expert, Adelaide, Australia e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_8

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Segments; (2) Value Propositions; (3) Channels; (4) Customer Relationships; (5) Revenue Streams; (6) Key Resources; (7) Key Activities; (8) Key Partnerships; and (9) Cost Structure. The co-founders of Airlock Digital admit that they did not use any business modeling, such as the BMC, and that “the creation of Airlock Digital was mostly iterative and intuitive.” This is exemplified in the following case study and the BMC segments are applied accordingly.

8.2 Overview of the Company: What is Airlock Digital About? Before sharing the journey Airlock Digital has endured, it is important to understand what they do. At Airlock Digital they have created a solution that enables organisations to implement Application Whitelisting (AW), which co-founder Daniel describes as “antivirus software turned on its head.” Antivirus software is based on file blocking, also known as blacklisting, of bad files such as worms, viruses and ransomware, and prevents them from accessing digital devices, but there are limitations with this method, allowing threats to get through undetected and run. With AW the system can only run trusted, pre-approved code so threats are prevented from running by default. Airlock Digital enables customers to easily create and manage secure whitelists (opposed to blacklists). A customer will decide what files are added to the whitelist and unless a file is on this list it will not run, irrespective of whether it is a good, bad or indifferent file. The primary purpose of AW is to proactively prevent malicious code from running on customers systems before any damage can occur. While it could be argued that Airlock Digital is a disrupter as they are providing solutions that have not been met by other products, technically they are not a disrupter as disrupters tend to first appeal to a lower-end or underserved customers then move up to the mainstream market; they create a market where no market previously existed (Christensen et al. 2015). Airlock Digital is an incremental innovator by finding improved solutions to an already existing problem (Cropley and Oppert, 2018). Co-founder David explains, “AW as a concept has been around since the mid-90s for computing, however by 2014 there were still very limited examples of it being implemented at scale.”

8.3 Startup to Scaleup—The Current State of Airlock Digital Airlock Digital is now six years old and has come a long way since a chance meeting at a tradeshow in 2013. Airlock Digital is a well-known product in the Australian security market and is actively breaking through into the US market. Earlier in 2019, co-founder Daniel participated in a delegation and pitched Airlock Digital in both

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the east and west coast of the US. They have just opened an Airlock Digital office in Washington DC with a second Sales Director, Jake, based there to further grow their US market. Currently, their solution is exported to customers in over eight countries and the team is now focused on further expanding their customer base locally and overseas by partnering with other global organisations on delivering Airlock Digital AW as a service to their customers. Current sales figures report that Airlock Digital has 65 customers with 60,000 seats1 under management. Figure 8.1 represent a timeline of Airlock Digital’s journey from inception to scaleup.

Fig. 8.1 Timeline of Airlock Digital’s business milestone progression

1 ‘Seats’

is the terminology used to indicate how many software licenses are required.

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8.4 History of the Entrepreneurs: Who are the Co-founders? What are Their Expertise, Aspirations and Values? The co-founders, Daniel Schell, David Cottingham, and Richard Rundle, all have long-spanning careers in the Information Security sector; a combined total of approximately 60 years of experience. Their educational and employment backgrounds are varied and complimentary lending to a specialised but diverse team. Daniel (Fig. 8.2) had been representing many international software security vendors for approximately 15 years, including managing interpersonal relationships and building teams in small business for approximately 20 years. After completing high school with a DUX in Information Technology (IT), he began a Computer Science Bachelors but ended up leaving the degree and working in an IT firm (owned by co-founder Richard) where he learned many of his skills through mentorship and self-education. He was later accepted into a Master of Information Systems Security based on his experience and graduated in 2009. Daniel also studied a graduate certificate in Business Administration to provide an understanding of leadership and team dynamics, self-awareness, and recognition of others needs and wants as he recognised these to be important in team management. Daniel describes himself as a “pragmatic problem solver who thinks logically, and this is what leads me to find sound solutions.” While Daniel has been successful in his other roles and employment pursuits, he was getting bored with building other companies’ businesses for them. Using the culmination of skills, education, and knowledge he has acquired over the past years leant him to feel confident in pursuing Airlock Digital. Daniel explains that for him he values team cohesion and has a vision to create a team that people want to be a part of. What he personally hopes to get out of this journey is to solve the challenges in AW and for Airlock Digital to achieve recognition for doing so. He aspires to achieve financial success and independence by successfully delivering this solution as a product to customers. Daniel states, “I would like to see Fig. 8.2 Daniel Schell (co-founder)

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Fig. 8.3 David Cottingham (co-founder)

Airlock reach the stage where all of us can focus on this exclusively and continue to grow the business with even more like-minded people with similar values and a passion for problem solving.” David (Fig. 8.3) has been working for over a decade in enterprise security operations for both the Australian Federal Government and in the private sector. He began his career in a help desk role for the Department of Industry where he learned a significant amount about enterprise technologies and how to troubleshoot and triage technical issues. Over the years David progressed from the service desk to the IT Security Team and moved up from a junior to a team leader. Since 2012 he has been working as an IT Security consultant, consulting for a wide variety of organisations both locally and overseas. The role provided exposure in over 30 firms and highlighted insights into different companies and, he says, “most importantly, operational deficiencies.” His ability to translate real world experience into the development of the software was an asset to the development of Airlock Digital. David’s years of experience in the sector, including as a SANS2 Course Author (which he credits to helping shape what Airlock Digital is today) and a regular conference speaker placed him in a good position to use his sound tacit knowledge to add to the creation of Airlock Digital. David describes that he too wished to solve a problem that was clearly an industry-wide challenge. He witnessed people “swapping stories about how difficult AW was but no one was doing anything about it.” So, he wanted to make it easier for people to implement good security and he finds satisfaction in hearing about organisations preventing attacks by using Airlock Digitals’ solution. He reports that “having a meaningful project in my life is key for me, and I get a lot of satisfaction from taking ownership of problems and solving them.” Airlock Digital allows him to do this over a long-term and in turn he profits from ownership of the end results. Richard (Fig. 8.4) is an experienced executive with 30 years in managerial and enterprise involvement in the information security industry. Richard was, and is, an entrepreneur. After completing an accounting degree and obtaining a summer vacation graduate role, thereupon spending 6 years employed in the government, 2 SANS

is the largest information security training resource in the world www.sans.org.

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Fig. 8.4 Richard Rundle (co-founder)

he also completed a Bachelor of Computer Science and decided to start his own IT consultancy and software business. Subsequently, Richard had a, “whole lot of fun and strange engagements during the dot com boom.” He claims that, “once the dust settled from that wild ride, I started a software development business.” That firm was later sold but remains highly profitable to this day. What Richard could bring to the team was investment, leadership, and access to a pool of talent through years of connections. Richard reports that he values loyalty over most other human traits and that loyalty is returned in equal measure. He feels most fulfilled when spending time with intelligent people and when he hires, nurtures, and mentors young people. He recalls, “when I reflect on my time starting and growing businesses, I never knew I had mentors, but they were there and I recognise them now. These are the best kind.” He explains that he has never had time for paid coaches or grant-based mentor programs and that they may be of value to some people, but, “if you need one to make the leap into a startup, then you are probably not going to make it.” His personal success has allowed him to have the investing capacity to now give back to others and he finds this “very rewarding.” Richard’s current aspirations are to make Airlock Digital an organic growth success, which he describes as “nicely on track” to do so. Daniel and David had bonded over their common interest in wanting to solve a problem together. Daniel and Richard knew each other from when Daniel began working for Richard nearly two decades ago, as it was Richard whom first hired Daniel while he was still enrolled in the Computer Science degree. Consequently, the trust between all three co-founders was present. Daniel and David’s positioning as experts in their field provided confidence to Richard who, crucially, had the ability to invest in their innovative idea. Convergently, the core aspirations of Airlock Digital are a joint direction for success for the product and the company. They personally value team cohesion, trusting relationships, intrinsic motivation and finding meaning

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in their work. Their Value Proposition3 is based in trustworthiness, problem solving, and providing quality service and products to their customers.

8.5 History of the Company’s Development 8.5.1 How did the Idea for Airlock Digital Come About? Two of the three co-founders, Daniel and David, met in 2013 on the Gold Coast of Queensland, Australia, at an industry event tradeshow, AusCERT (2019). Here they discovered a mutual interest. David had been working in the Department of Industry on the Information Technology Security Team for the Australian Federal Government attempting to implement AW and was using a product Daniel was selling. David approached Daniel and explained the angst this process was putting him through, particularly with the software option being utilised. Daniel agreed to write some scripts for the software that David was currently using; these scripts were to aid in better AW automation. Daniel then considered another way of helping David to make AW easier and started writing a tool that could further assist him. It was at this junction that they started writing code together to solve this problem David was having while trying to implement AW.

8.5.2 Identification of Need The Australian Signals Directorate (2019) (ASD) has recognised AW as the most effective control based on their incident response work and created a need in the market by making it a mandatory control in Australian Federal Government departments. In fact, at the time of writing this chapter, AW is placed at the top of the Essential Eight, which lists the current top eight strategies to mitigate cyber security incidents. The identification of a gap was here as industry had so far failed in this vendor space, as the AW solutions are too complex to maintain. The AW solutions require many resources and were found to be technically insufficient to meet compliance requirements. What this did was place AW in a ‘too hard basket’ where it was viewed as difficult, or even impossible. Over the following months since first meeting and establishing a professional relationship, Daniel and David had written a few tools together and began to fully comprehend the problems found in AW. During this time David had written a SANS Security Training course on how to implement AW with already existing solutions resulting in feedback from the students attending the course that “it was still too hard.” Simultaneously, Daniel was working with vendors and suggested to one of them to create their own AW product, but they were 3 Value

Proposition seeks to solve customer problems while satisfying needs (Osterwalder and Pigneur 2010).

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not interested. Daniels exclaimed, “we nearly gave it away!” After these experiences Daniel and David agreed after their initial tinkering with the other software that they could fill this gap and own it by creating their own purpose—built solution to this problem. Their Customer Segments4 were already identified and are considered mass market as the Australian Federal Government is mandating AW and private sector organisations are prescribing AW. Fundamentally, any organisation, no matter how big or small, that uses information technology requires security measures.

8.5.3 Starting a Business After Daniel and David agreed they could start a company together they approached Richard to discuss their idea. At this junction Daniel was employed by Richard in a Chief Technical Officer role. Daniel explained their AW concept to Richard and he agreed there was an opportunity here. Richard proposed that this venture would result in Daniel having have less time working his day job in the existing business and would result in more work load for Richard. So, if Daniel and David put in the time, Richard would put in the money, therefore making Richard Airlock Digital’s Key Resource.5 Due to the accumulated experience of the co-founders they had ample intellectual resources and, fortunately, with software development it can all be run and created with little physical resources required. After this agreement they reached a significant hurdle: they needed a company name. They agree that divergent thinking was required to come up with something novel and meaningful, but it all boiled down to finding an elusive .com domain. They spent days on the Internet with a thesaurus trying to find something unique. Daniel explains they eventually settled on the name ‘Airlock Digital’, mostly because of domain name availability. Their logo (Fig. 8.5) was created using an online graphic design community called 99designs6 where the co-founders were able to choose from approximately 20 different designs. This process was very affordable equating to less than $100 Australian dollars. Richard invested in Airlock Digital by ‘drip feeding’ the business to cover customary incorporation and startup costs, salaries of the developers (described below), trade show costs and other sundries by way of an interest free at will loan. Another administration issue that required immediate attention was a shareholder’s agreeFig. 8.5 Airlock Digital logo

4 Customer

Segments include what type of market is served (Osterwalder and Pigneur 2010).

5 Key Resources include the assets required to offer and deliver the product or service from the idea

stage (Osterwalder and Pigneur 2010). is a global community of online graphic designers: https://99designs.com.au.

6 99designs

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ment. Daniel reports that this took a long time, “around 3 months as we had to run through all these scenarios. What if one of us died? What if someone wanted to exit or sell their share?” This was eventually sorted and implement through the use of solicitors. They agreed to split the shareholding equally and that for any major changes or decision they would need two of the three founders to agree. After the tedious yet critical administrative tasks were the next big steps of creating a website and a twitter account. Daniel and David were well versed in how quickly information spreads in their industry circles and knew that this small step was a big one in planting their flag in the AW realm. At this stage the three co-founders were all working their day jobs as none of them had the financial security to be able to risk quitting and working solely on Airlock Digital, as much as they would have liked to. This is where Richard’s capacity to invest came into play. Through their years, Richard and Daniel had worked closely with two high performing colleagues in the Philippines whom have expertise as Full Stack Developers,7 Eleoson and Joey. Contrary to some beliefs, outsourcing an employee in the Philippines was not an appealing economical option. Richard has always paid these developers an Australian equivalent salary for their work. They elected to employ these developers based on already established relationships rather than geographical location. As previously stated, the benefit of software is that it can be created and worked on from any location across the globe. With Daniel and David instructing the developers through product mockups, designs, product testing, website creation and so forth, they established a minimum viable product (MVP).8 The prototype was finished in time to take their solution to a significant Australian trade show in Melbourne at the Australian Information Security Association (AISA) National Conference. Daniel reports that unfortunately they did not get any customers from this event however it did prompt many worthy conversations and interest, which boosted their confidence. These Key Activities9 all contributed to Airlock Digital moving forward and confirming to the team that they were solving a real-world problem and helped provide direction moving forward.

8.5.4 Version 1 Release Three years after inception Airlock Digital Version 1 was released. Airlock Digital celebrated acquiring their first customer, a South Australian government organisation with over 1000 seats which was very exciting and “quite a big deal.” Daniel had worked with this department previously and the trust and rapport he had built went 7A

full stack developer engineers both client and server software technology with the use of programming language on multiple platforms. 8 Ries (2011) coined this term MVP and uses it akin to ‘prototype’, except that the point of a MVP is to test a businesses’ hypothesis. 9 Key Activities are the number of actions performed such as reaching their market (Osterwalder and Pigneur 2010).

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a long way in securing this deal. Daniel said, “landing this deal made it all become pretty real, we had committed to supporting the customer with Airlock for a year.” The co-founders felt exhilarated that they were able to finally deploy the product they had worked on for so long into a real-world production environment. Daniel said, “there were initial teething issues” but the Airlock Digital team worked through them all and provided a quick turnaround to correcting any issues, something which Daniel reports is critical for their reputation. At the time of this chapter, their first customer is still a customer having renewed their subscription. Daniel also shared his satisfaction in this firm also being South Australian based, exemplifying local business support. All the co-founders are still working their day jobs because as great as a single customer is; it is not enough to pay five salaries. It was, however, enough for Richard to cease his drip-feeding investment as Airlock Digital was now accruing enough income to begin supporting itself.

8.5.5 Action Oriented Daniel reports that by 2017 it felt like it was really time to start moving. The team had been working on Airlock Digital for four years now and while they were happy with their one customer, it was still only one customer. Daniel and David attended three integral conferences, AusCERT, Australian Cyber Security Centre (ACSC), and AISA National Conference. As it happened, Airlock Digital won a ‘new player’ booth at this ACSC conference, a prize awarded to a promising Australian startup in the cyber security sector. This was advantageous as the cost to hire a booth to exhibit at a conference such as this can cost at least $10,000 AUD. At these conferences they made the most of their speaking engagements to educate the market about AW, which helped recruit more customers. At the ACSC they came across AustCyber,10 which is an Australian Government non-profit organisation whose primary role is dedicated to growing Australia’s cyber security sector. Daniel cannot praise AustCyber enough. He states, “that their support over the recent years has been integral to our success, and to the wider cyber security community in Australia.” In August 2017 AustCyber invited Airlock Digital to participate in a Federal Government Pitch event at the Prime Minister and Cabinet. Daniel states that it was “incredibly exciting as it was the perfect chance to pitch to our target audience” and that he expected big things. He said the pitch went really well but resulted in no initial leads (however, they did obtain a customer as a result of this event, as discussed below). A few months following this event Airlock Digital closed a small deal for 50 seats with a defence contractor as they had experienced a security breach and were working with another defence contractor to implement AW. At this stage, Airlock Digital’s product was maturing, and Daniel reported, “How great it was to see it deployed within two weeks allowing the customer to become compliant and 10 AustCyber is the Australian Cyber Security Growth Network supported by the Australian Government, Department of Industry, Innovation and Science.

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uplift their security posture.” This deal resulted in another 50 seats and further market exposure. At this stage all of Airlock Digital’s customers were inbound early adopters, or people that the co-founders already had relationships with. Daniel and David are technical people and Richard more of a silent investor and leader when required. Daniel would do a demonstration of their product to an interested customer but would fail to follow it up. He states that he “didn’t enjoy the sales and marketing part of the business” and recognised this was not a good strategy to grow their business. At this stage all the co-founders are still working day jobs. So, they took a big leap. They had an opportunity to hire a Sales Director, Glenn, who had over a decade of experience in enterprise sales. Again, much like the developers, the team had worked with this person before. Recruiting a Sales Director was a major turning point for Airlock Digital. They were at the end of their 5th year and had only five customers.

8.5.6 Make or Break Daniel said they really felt like this time was ‘make or break’ for the company. The co-founders desired to transition from their day jobs to running Airlock Digital fulltime and see significant uptake of their solution. At this point in time, of the co-founders, Daniel has been able complete this transition. The team was putting out new releases and updates frequently and they equate this success to being only a small team of six. With a small team they were able to communicate effectively, despite being interstate and international most of the time. They found it easy to quickly make changes and improve the product based on customer feedback and implement the new features. Daniel reports that they always felt that with each new release they would now be able to “sit back, relax, and promote that version.” David said, “The reality is each new release made us realise how many more improvements were possible.” They were being agile as they went along, learning how to navigate barriers and take advantage of opportunities. In October of 2018 Airlock Digital released Version 3 and they believed it was the first version they considered a feature complete version that customers could deploy themselves and required minimal handling from the team. Earlier that year a small Australian Federal Government portfolio department who remembered them from the Federal Government Pitch Event the year prior contacted Airlock Digital. The proof of concept (the trial) was a success and this department purchased the product. When it comes to the Australian Government, particularly in Canberra, Daniel reports, “it is all about whom else is using it” and that this onboarding led to two more deals with separate government departments. Airlock Digital now had a foothold with a large governmental department using their solution and it became easier to sell other department and agencies with this backing. Later that year in 2018 AustCyber sponsored Airlock Digital to talk on a popular information security podcast, Risky Business (Gray 2018). David did the talking and this led to the team closing more new deals with the savvy sales skills of the Sales

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Director following up on leads created by the podcast spot. In 2018 Airlock Digital partnered with Gartner (2019), a global research and advisory firm that specialise in IT. The team admit it was expensive and a large and risky commitment from them, but report that it did educate them on the market and what to do with advice provided from industry experts on how to make Airlock Digital a more recognisable brand. Daniel reports they have currently renewed their contract with Gartner for another 12 months. Airlock Digital’s reach was expanding. During the middle of 2018 an early adopter customer of Airlock Digital, Rob, approached the team. He was working at a Canadian financial institution and was dissatisfied there, but he expressed his admiration of the AW product and requested to work for Airlock Digital. Rob was familiar with Airlock Digital as a customer, predominantly in a support perspective, and the team flew him to an annual conference the co-founders regularly attend, Black Hat,11 in Nevada for an interview, resulting in a three-month probation period. Daniel reports that “we didn’t really need the resource at the time, but we really liked working with Rob and said, ‘yes!’ to an AW champion who didn’t need any training.” Rob is employed as a Security Automation/Engineer based in Canada. A benefit of this is having a Northern Hemisphere technical resource makes it easier for Canadian and US firms to feel comfortable to purchase Airlock Digital’s product and for the company’s capacity to meet international time zone barriers.

8.6 The Success of the Company 8.6.1 What Lessons Were Learnt? The most important lesson was that it took Airlock Digital three years to get their first customer. Daniel said, “If you’d asked us when we set up the company [how long it would take to get a customer] we would have thought we’d have been selling with that first year.” The team believed their Channels12 for success were solid, including an already existing relationship with a software distributor. However, Daniel further goes on to explain, “Engineering, particularly for a technical solution like ours, always take longer than you would expect.” And it did. Richard recalls Daniel and David proposing an MVP within 6 months of the startup and that, “I still get a smile when I think of it. Software products always take longer than anyone expects, even with all the modern development tools and workflow technology.” Being aware of this and being clear with your co-founders, team, and investors is important. A lack of transparency can put a strain on the startup and can force haste which can lead to a reduction in quality control, shortcuts, debt, missed deadlines and likely poor 11 Black

Hat (2019) is considered the most technical and relevant information security event series in the world. 12 Channels are how the solution would be delivered to customers via communication, distribution and sales (Osterwalder and Pigneur 2010).

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revenue. Poor revenue and/or poor performance are likely to limit future funding and investment. It is this risk that is biggest to startups and can potentially be the proverbial nail-in-the-coffin if resources are already stretched to the limit. So, ‘don’t quit your day job’ can be good advice to take in the early years of your startup. Another area the team assumed would be easy was selling their AW to the Australian Federal Government as they were solving a known problem that required a mandatory solution. With David having an established and extensive network existing in Canberra they thought that it would be an “easy nut to crack.” This turned out to not be the case and that they needed to have an already established customer base to be able to get a foot in the door of the Australian Federal Government. Airlock Digital’s customer numbers only really started to increase once the team had a dedicated sales employee in place. Daniel explains that they think they were just lucky that the product was mature (Version 3) when they made the decision to hire their Sales Director. Daniel suspects that if they had made the decision to hire someone in this role earlier it may have done more harm than good as they would have ‘over-promised and under-delivered.’ Daniel and David admit that they do not always agree on the product or business decisions. Daniel says, “sometimes it might appear to the rest of the staff that mum and dad are fighting” by clashing about product offerings and features but they agree that challenging each other is how they prefer to work. The debates they share are considered ‘good’ and always lead to the best outcome for Airlock Digital. Being able to have this open form of communication allows them to be honest, share ideas, and reach a consensus. In fact, effective communication is critical. From the descriptions provided from the team it appears that they use ‘validating communication’ which is described by Carlopio and Andrewartha (2012, pp. 247) as egalitarian, flexible, two-way, and based on agreement. Daniel and David agree that creating a startup is “all consuming” and that your work-life-balance “goes out the door.” They found that running a small business like theirs “takes over your life” and provide examples of being on the road travelling a lot, feeling that pressure to succeed, and a responsibility to your employees as you grow. Daniel describes the past few years as “definitely an emotional roller-coaster and it did impact my relationship with family and friends, but it is also extremely rewarding when you do get wins.” Richard recalls one of his favourite life realisations was that, “some people actually believe ‘overnight success’ really happens when, in fact, it is lots of very, very hard work.”

8.6.2 What Advice Could They Provide? Daniel and David agree that you really need to understand the problem you are solving, particularly from a customer’s point of view. They explain that lots of companies in the Information Security space are making solutions (products) for which there is no actual problem to solve. In general, if one is hoping to invent a product or service then you need to find the gap in the market.

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Another key piece of advice from the co-founders of Airlock Digital is “don’t focus on what everyone else is doing.” Daniel reports that looking back at all the time they spent worrying about competition or what it was other Australian startups were doing was wasted. He says, “if you are chasing the competition you will always be behind them” and that “people won’t take a risk on your company unless you are doing something dramatically different.” In regard to team dynamics, the Airlock Digital team is proud of their complimentary skills. Daniel and Richard are university educated (as well as highly experienced) but David brought to the company a plethora of real-world experience that bolstered their teamwork and direction. Richard’s trust, tacit knowledge and leadership has been integral to their team and cannot be understated. The secondary skills the team had were of immense benefit too and should not be overlooked. Simple things like Daniel being able to make the Airlock Digital website and David being able to make the marketing videos. The team certainly agrees that having a ‘that’s not my job’ mindset was something they could not have dealt with as a small company. They needed teamwork and a shared passion for the direction of the startup. With both Daniel and David living interstate from one another, and Daniel and Richard being abroad for significant amounts of time, and all of the co-founders still working day jobs meant that communication was paramount. Fortunately, with the current state of technology they were able to facilitate effective communication irrespective of their location. The technology, such as cloud-based group chats, allowed the team to build the product remotely with the use of collaborations tools. In relation to customers, the team feels that the ability to provide high quality and fast service was key to their success. Customers could report bugs or question issues and the teamwork’s agility meant that they could quickly diagnose and correct any issues, lending customers to having more confidence in their ability to look after them going forward. The AW solution requires ongoing maintenance and support through contracts, therefore making Customer Relationships13 a primary concern for Airlock Digital irrespective of how many seats a customer purchases. Creating a foundation of integrity as a company led to trust from customers. The team never applied for any grants despite there being lots of Federal and State Government options available but now that they are in the position to make the best of the momentum of being a scaleup they would encourage others to make the most of these grants rather than venture capitalist investments. This opinion is formed primarily due to ‘control’. Airlock Digital has had complete control of their business and direction as they did not have to answer to anyone except themselves. Grants can come with strict criteria, pre-requisites and auditing and often require an outcome. Private investment typically has revenue as a focus and may have less regard for quality and reputation; this depends on the investor of course! There are certainly pros and cons for all funding sources however if internal investment is not an option, such as it were for Airlock Digital, then the team would recommend taking advantage of other opportunities. 13 Customer Relationships are established and maintained within each customer segment (Osterwalder and Pigneur 2010).

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Daniel reports, “finally, we have been lucky enough to bootstrap Airlock Digital and get it to being profitable without outside investment.” For Airlock Digital to be able to support themselves with their existing resources is a significant step for the firm and moves them from the startup to the scaleup category. Key Partnerships14 are only now being formed as the team begins to expand. Osterwalder and Pigneur (2010) state that is illogical for a company to own all resources and perform all activities, however this is exactly what Airlock Digital did and their grit and determination for success pushed them to the scaleup stage. David is still working his day job as his family has been growing, however having the additional hires within the Airlock Digital team and Daniel working fulltime for Airlock Digital will suffice for the meantime. Daniel says, “over the past six years we’ve moved from a napkin-stage to a startup phase and now a scaleup phase and we are excited to now export our solution overseas.” See Table 8.1 for a summary of the BMC and Airlock Digital’s positioning on these factors.

8.7 Future Vision and Conclusion This chapter represents how a chance meeting, a gap in the market for solutions, and the correct factors led to an exciting and life changing opportunity for a number of people, not least the co-founders. At this point in time, Airlock Digital is profitable, but the vast majority of their Revenue Streams15 are re-invested into the business allowing Airlock Digital to accrue more sales, facilitating further team recruitment, and increasing their presence, for example, by appearing at more tradeshows (Fig. 8.6). Their Cost Structure16 remains the same for software development, however as Airlock Digital acquires more customers and seats, they will need to provide proportional support to customers. The short-term goal is to continue growing in order to cover all co-founder salaries at industry rates. The team will continue to revisit their progress and adjust as required, keeping in mind competitors with potentially bigger budgets. Airlock Digital’s quality and reputation, and Australian-owned status, may mitigate some of the potential future competitors’ impact. After reading this chapter, and ostensibly this book, it is of no surprise now that successful entrepreneurship takes hard work, vision, and resilience. It is equally important to recognise that behind every startup is a person or persons working extremely hard to generate success. These people all have personal aspirations, values and desires. Reflecting on their journey, it becomes clear that the emerging themes that arise from this case study are the combined years of expertise, experience and 14 Key Partnerships include outsourcing activities and acquiring resources outside of the firm (Oster-

walder and Pigneur 2010). 15 Revenue Streams are the result of meeting the Value Propositions successfully offered to customers (Osterwalder and Pigneur 2010). 16 Cost Structure refers to business elements that influence the business model (Osterwalder and Pigneur 2010).

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Table 8.1 Business model canvas key segments including Airlock Digital’s positioning Key Segment

Description

Airlock Digital’s position

Customer segments

A firm may group customers into segments with commonalities. Once the customers are defined, a business model can be designed around knowledge of customer needs

Their customers are considered Mass Market. The inception for Airlock Digital arose from prior knowledge of customer needs and has been designed around this information

Value propositions

The reasons why customers will turn to one firm over another. It solves a customer problem or satisfies a customer need

They value trustworthiness, quality, and effective problem solving

Channels

A firm must find the correct mix of channels (communication, distribution and sales) to reach the customer.

They moved forward being aware of most channels including a software distributor to assist in sales. Communication platforms and networking have been an important factor

Customer relationships

Type of relationship that firms want to establish with their customer segments and include acquisition, retention and/or upselling

Their solution requires installation, software support, and renewals which meets their Value Propositions

Revenue streams

A firm has to establish what revenue streams they access from each customer segment. These are typically transactional or recurring

Their revenue streams are initially transactional, but the solution includes ongoing support and then subscription renewal

Key resources

Different key resources are needed depending on the type of business and include physical, financial, intellectual, and/or human

For Airlock Digital, they required intellectual, financial and human resources. The co-founders already possessed the intellectual resources, and Richard provided the initial financial resources. As their revenue stream increases, they are investing in more human resources

Key activities

A firm must take important actions to operate successfully such as problem solving, production and/or networks and platforms

The frim actively attends conferences, acquires vendor booths, joins delegations and generally self-promotes through networks and platforms (continued)

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Table 8.1 (continued) Key Segment

Description

Airlock Digital’s position

Key partnerships

These can be the cornerstone of many business models. A firm may create alliances to optimise their business model, reduce risk and/or acquire resources

They did much of this themselves in the initial years and are now beginning to outsource further partnerships

Cost structure

A firm must decide on operating because creating and delivering value, maintaining customer relationships and generating revenue all incur expenditure. A firm typically decides on whether they are cost-driven or value-driven

Their structure has remained much the same for the initial years but is now diverging as they grown and need to proportionally invest as more human resources are required

Note. Business Model Canvas (Osterwalder and Pigneur, 2010)

Fig. 8.6 Daniel and David at their vendor booth while at the 2019 AusCERT conference

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the formation of trusting relationships between the co-founders and other employees that enabled Airlock Digital to grow from ideation to creation to a now profitable scaleup.

References AusCERT. (2019). Protecting organisations from cyber threats since 1993. Retrieved from https:// www.auscert.org.au Australian Signals Directorate. (2019). Essential Eight Explained. Australia: Australian Government. Retrieved from https://www.cyber.gov.au/sites/default/files/2019-03/Essential_Eight_ Explained.pdf Black Hat. (2019). Black Hat: About Us. Retrieved from https://www.blackhat.com/about.html Carlopio, J., & Andrewartha, G. (2012). Developing management skills. A comprehensive guide for leaders. 5th ed. Australia, Pearson Christensen, C. M., Raynor, M. E., & McDonald, R. (2015). What is disruptive innovation? Harvard Business Review. Retrieved from http://pedrotrillo.com/wp-content/uploads/2016/01/ Whatisdisruptiveinnovation.pdf Cropley, D. H., & Oppert, M. L. (2018). The fuzzy front-end? How creativity drives organizational innovation. In R. Reiter-Palmon, V. L. Kennel, & J. C. Kaufman (Eds.), Individual Creativity in the Workplace (pp. 35-51). London: Academic Press Gartner. (2019). Gartner. Retrieved from https://www.gartner.com/en Gray, P. (2018). Snake Oilers 6 part : Insight from Rapid7, whitelising with Airlock Digital and testing your SOC personnel with AttackIQ. Risky.Biz [Audio podcast].Retrieved from https:// risky.biz/snakeoilers6pt1/ Mazzarol, T. (2015). Startup nation: the rhetoric and the reality. Retrieved from https:// theconversation.com/startup-nation-the-rhetoric-and-the-reality-48011 McLeod, C. (2017). Why are Australian start-ups failing? Retrieved from https://pursuit.unimelb. edu.au/articles/why-are-australian-start-ups-failing Osterwalder, A. (2004). The Business Model ontology - a proposition in a design science approach (Doctoral dissertation), University of Lausaane. Retrieved from http://www.hec.unil.ch/aosterwa/ PhD/Osterwalder_PhD_BM_Ontology.pdf Osterwalder, A., & Pigneur, Y. (2010). Business model generation: A handbook for visionaries, game changers, and challengers. New Jersey: John Wiley & Sons Inc Ries, E. (2011). Build Measure Learn. Inc, 33(8), 56–63

Chapter 9

Toshikazu Saito and RENAISSANCE—A Company for Creating Something to Live for Through a Fun and Active Lifestyle Daisuke Sugiyama and Michitaka Kosaka

9.1 Introduction Work style reform is a critical issue for corporations to realize personal well-being and social sustainability currently in Japan. However, the real target of this reform is not just to reduce working hours but to design a personal fruitful life by living another one in diversified values aside from your daily work. It is necessary to establish an enjoyable lifestyle, as well as favorable health condition, human connections and economic wealth in order to maintain work-life balance among office work, family life, hobbies, side jobs, and so on. This chapter covers the entrepreneurship of Mr. Toshikazu Saito, who founded a sport and health business to help people realize an active, healthy lifestyle. This case shows new values reflecting the demands of the times through an in-house venture business. He launched the RENAISSANCE sports club, established its business position successfully, and developed it into a comprehensive healthcare provider. This is quite a rare, notable example of successful entrepreneurship in Japan. This is also an interesting example of an advanced service model that provides people a place as a sports club and a community. Therefore, analysis of this case is based on three fundamental perspectives, i.e., healthcare as sports club, enjoyable places and lifestyle as entertainment/fitness, and communities for the comfortable places to be (Fig. 9.1). These are related not only to physical well-being but to social and community well-being (Bradley 2015).

D. Sugiyama (B) NCI SYSTEMS Integration, Inc., Tokyo, Japan e-mail: [email protected] M. Kosaka Japan Advanced Institute of Science and Technology, Nomi, Japan e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_9

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Fig. 9.1 Perspectives of the analysis

By analyzing the success factors of this business, we think it will be possible to extract the necessary components and critical success factor of a service business that helps people realize their well-being, and contributes to new innovations in service. On its homepage, RENAISSANCE’s Corporate Philosophy says, RENAISSANCE was chosen as the name for our company and facilities because of a founding spirit that believes ‘a movement of revitalization of humanity’—a response to an overly controlled and material-centered society. The company name embodies our desire to achieve the ideal society by providing the guests with physical health—the wellspring of energy and passion—in the best way possible. This is a good example of the future vision of service businesses aiming at wellbeing. Medical expenses in Japan are increasing rapidly according to the aging of the society. Health conscious and preventive medicines are serious issues. We need to redesign of our lives of over one hundred years. Promotion of healthcare and restoration of communities can be a fundamental solution to these social problems. RENAISSANCE has been trying to find good solutions to these issues. Our analysis showed the concept of RENAISSANCE is not feasible from a mere economic marketing standpoint but rather by reflecting the “strong desire” of the founder. Such desire of the leader is essential to the success of a new business (Nonaka and Katsumi 2004). In addition, we understood the flexibility to respond appropriately to the demands of the times, to transition from the leisure industry to the healthcare business, and to even support designing active lifestyles. This article analyzes the driving force and the critical success factor of the founder and how he manifested his mindset into a business model based on interview with Mr. Saito and literatures in References.

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9.2 Current Status of Sports Club Business and RENAISSANCE’s Activities 9.2.1 Current Status of Sports Club Business Let us overview the current sports club market. The current Japanese domestic market of sports clubs is about 400 billion yen. This market is glowing as in Fig. 9.2 which shows the ratio of number of people attending to sport facilities more than once a week. But the ratio to GDP is extremely small compared to international level. The number of people attending to the sports facilities more than once a week started to decline recent years. What is more, more than 30% of the customers are occupied by the elderly people over sixty years old. There are situations affecting the healthcare business, such as the declining birth rate, the aging population, diversified hobbies, and so on. Therefore, it has become important to meet the demand of seniors, women, senior women, housewives after birth, children, and health-conscious people. It is also important to give attention to requests for increasing life expectancy, to the worsening of nursing care, to dementia, etc., as well as to the aging population of Southeast Asian countries as well. Japan Sports Agency was established in 2015 for improving health awareness. In addition, it became legally obligatory for companies with over 50 employees to check employees’ stress levels periodically for the purpose of decreasing medical costs and promoting public health. It is expected that people will remain more conscious of healthcare and exercise habits until the Tokyo Olympic Games in 2020.

Fig. 9.2 The ratio of number of people attending to sport facilities more than once a week (Takahashi 2016)

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9.2.2 Change of the Role of Sports Clubs The role of sports clubs has been changing to provide various services according to individual requirements. Interest became strongly oriented towards comprehensive sports clubs that conveniently cover a wide variety of sports in one facility (universal model that develops chains of models), so large-scale enterprises were more advantageous. However, interest in specialized sports clubs (a local customized model specialized in specific fields such as hot yoga, stretch, cycling, etc.) has been growing recently. These two types co-exist with the recent hybrid types that combine the two requirements. Diverse requirements from various groups such as senior citizens, women, people fighting dementia, people in need of nursing care, and people just cured from illness, etc. need to be met. The facilities/contents of sports clubs have been changing to meet these requirements. In order to live a healthy life in a very stressful modern society, it is necessary to create human relationships and provide communities rather than just providing physical exercise facilities. The types of facilities targeted towards the Tokyo Olympic Games in 2020 have expanded (for example, popularity of bouldering, etc.). Senior generations are gradually getting away from gate ball, and popularity has shifted to activities such as bouldering. On the other hand, it is important for public comprehensive regional sports clubs and private sports clubs to collaborate. The public comprehensive club facilities are “expected to become the core of the local community because the local residents are actively participating and voluntarily carrying out activities.” However, they are not well managed yet, so evaluation indicators for the facilities need to be set. Generally speaking, we understand that the role of exercise facilities themselves is changing from health promotion to designing an enjoyable life and forming communities. The situation of the current industry is analyzed as follows in Club Business Japan (Fitness Business 2015): “While there are decreases in population and income, health needs are still high, and the fitness market will grow in the medium term. Only companies that can establish equations for combining multiple business models will survive. Business results are expected to be polarized. It is noted that the current leading companies will not necessarily continue to be leaders in the future.” We can find new business types, some of which are driven by foreign-affiliated companies. This is because business entities of a new service type, including foreignaffiliated companies, are entering the market. ‘Curves’ is a new type of facility that represents the diversification of a sports club. It is exclusively for women, especially targeting middle-aged and elderly women. It is located in urban areas for convenience, but at the same time, they have no showers or pools in order to reduce the investment amount. There are eight to twelve facilities in each studio. Guests use each machine for 30 s then rotate machines, resting for 30 s at a time. They design activities that total 30 min by going through 2 or 3 rounds of each machine. The components are muscle training, aerobic exercise, and stretch

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training. They developed a different business model for a sports club compared to standard ones. ‘Lava International’ is also a new type of sports club specialized to develop a hot yoga studio targeting young women. ‘Rizap’ is quite unique to develop a novel business model with a guarantee with the tagline “to commit to the result” and is rapidly growing. They are implementing overall weight control including exercise and meal guidance. In addition to this, they recently expanded to include new options such as a program to halt the postoperative muscle weakness (sarcopenia) of gastric cancer patients. Recently foreign capital has entered with a franchise system and the 24-h gym. “Anytime Fitness” is a typical representative case. These various new types of businesses have been growing rapidly. In summary, the role of the sports club, which was originally providing infrastructure mainly (facility type), is changing at the following stage. Convenience for the location and time, and diversity for various needs are the future form of fitness club stated in Fig. 9.3. (1) Health Orientation: Increasing concern about health, measures to increase medical expenses, and preventive measures for nursing care and diseases (2) Organizing community: Formation of a community by various groups in sports clubs (3) Sense of joy and cultural implications: Yoga, providing service spaces for specific types of customers, supporting lifestyles, creating an active life cycle, etc.

Fig. 9.3 Business model of fitness club (Fitness Business 2015)

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9.2.3 Establishment of RENAISSANCE and Its Current Activities RENAISSANCE was established in 1979. It now has more than 100 sports club facilities. Business has been excellent and has been improving throughout this decade, increasing in sales and profit except for in FY2011. It has established the third major business position, maintaining at the excellent level of 8% ordinary income and 23% return on equity. The company proposes an essential lifestyle for modern people that restore human nature in the midst of suffering through complex, pragmatic urban lives. RENAISSANCE is a unique company established as an in-house venture in DIC Corporation with the concept of “enjoying the life,” lead by Mr. Saito. The company came up with the concept of a sports club where people are better off sharing space and time with each other rather than the typical equipment-oriented physical facilities. This concept is connected to the history of the founder, Mr. Saito, and influenced strongly by The RENAISSANCE culture that Mr. Saito experienced during his time studying abroad. In response to the above trends of sports club business, RENAISSANCE has developed various types of businesses throughout the five phases explained in the Sect. 9.3. RENAISSANCE has transformed its business from tennis schools to culture centers to sports clubs and finally to comprehensive sports clubs. In addition, they expanded into the healthcare industry in general and promoted the development of a hybrid of a comprehensive sports club and a specialized service facility. Furthermore, they have been working on the program “synapseology” with the aim of connecting the mind and body in such a way as to prevent dementia by activating the brain and improving cognitive ability. In other words, the company’s service objectives have expanded from healthcare to a way of life itself. Thus, RENAISSANCE has pioneered extremely unique activities in response to current needs in the community. Figure 9.4 shows RENAISSANCE’s scope of business activities and Fig. 9.5 shows one of its current services as synapseology program.

9.2.4 Business Globalization to Asia RENAISSANCE started globalizing with business in Vietnam (Fig. 9.6). Vietnam is a country that has a well-established infrastructure. Vietnam has a relatively high population of about 65 million compared to other ASEAN countries except Indonesia (shown in Table 9.1), with a relatively long time before the end of population bonuses (in 2041). Expansion to overseas countries mainly in the ASEAN area is crucial considering the population decline in the domestic market. Given the number of water-related accidents in Vietnam, there was a strong demand for swimming schools (Fig. 9.7). RENAISSANCE was able to start their businesses with independent capital, although it is usually only allowed in joint ventures because of their foresight.

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Fig. 9.4 RENAISSANCE business RENAISSANCE.co.jp/about/business/)

overview

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(RENAISSANCE

HP,

https://www.s-

Fig. 9.5 Synapseology program—synapseology promoting brain activity and smile (https:// synapsology.com/sy/)

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Fig. 9.6 Developing sports club in Aeon Mall in Vietnam (RENAISSANCE HP, https://www.sRENAISSANCE.co.jp/about/overseas/)

Table 9.1 End year of population bonuses in ASEAN countries (JMASR 2016)

9.3 The History of RENAISSANCE’s Success Along with the Progression of Mr. Saito’s Ideas RENAISSANCE’s business history can be divided into five stages according to the transitions of Mr. Saito (Fig. 9.8)’s ideas. Phase 1: Chemistry engineers and extensive interests: He was a chemistry engineer until enrolling in the Central Research Laboratory of DIC Corporation.

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Fig. 9.7 Swimming schools in Vietnam

Fig. 9.8 Mr. Toshikazu Saito, chairman of RENAISSANCE

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Phase 2: Start-up of an in-house venture: After moving to the overseas business division, he set up an in-house venture and tried leisure activities such as tennis clubs and culture centers. Phase 3: Comprehensive sports club: He promoted expansion into a comprehensive sports club as sports clubs were becoming popular. Phase 4: Healthcare business: The sports club business developed into a healthcare business for health promotion under the circumstance of low birth rate and the aging society. Phase 5: Lifelong well-being: They shifted their role from health promotion support to an active lifestyle support. Below, we analyze the central events of each phase and explore the critical success factors of promoting the service business.

9.3.1 Phase 1: Before Becoming a Chemistry Technician RENAISSANCE is a company that Mr. Saito (now RENAISSANCE’s Chairman) launched in 1979 as a DIC’s in-house venture business, however Mr. Saito was an ordinary engineer who initially aimed at pursuing a career in chemistry. Mr. Saito was born in Sendai City in 1944. His parents were government officials of the National Tax Agency Sendai Taxation Bureau. He was fond of drawing pictures in childhood and was a positive, sensitive boy participating in a painting exhibition in Sendai City. Later, he also won a Miyagi Prefecture junior high school judo contest, showing he had leadership skills and was talented both academically and physically. After going on to Kyoto University, he studied chemistry and devoted himself to ballroom dancing and learned dandyism (Nakamura 2013). As a chemistry engineer, he encountered Dr. Koch of the Switzerland Federal Institute of Technology, and the encounter brought about an opportunity to study abroad later at the university. He was quite lucky to have an opportunity to study abroad after joining DIC Corporation which is a big ink company in Japan. This led to him becoming familiar with the history and culture of The RENAISSANCE in 14th–17th century Europe, which had a great influence on his life to follow. This formed an important connection between him and the top management of DIC, which also had a great impact on his life in the future. RENAISSANCE adopted the concept of recovering humanity from The RENAISSANCE in Europe as a corporate philosophy. In other words, the aim is to restore humanity and to design a healthy and prosperous life in a controlled and materialcentered modern society. This idea comes from Mr. Saito encountering The RENAISSANCE culture at the Uffizi Museum in Florence, Italy when he studied abroad in

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Switzerland while working for DIC. He pondered the fundamental questions of what real wealth is and what the recovery of humanity is. In other words, during his stay in Europe, he was able to learn about a different viewpoint regarding jobs compared to those in Japan and he could experience a more leisurely lifestyle. This difference may be due to not only a maturity of the society but also its cultural background. There are some arguments that Buddhists dedicate their labor to gods, but on the contrary, some Christians may regard it as punishment for the original sin. In the latter case, leisure can be regarded as freeing, a relief from punishment. Leisure corresponds with the RENAISSANCE’s concept of recovering humanity that relieves human nature and individual humanocentrism or realism. In such way, Mr. Saito’s sense for well-being was cultivated while he studied abroad in Switzerland, and his experiences were the driving force for promoting business development after that. However, Mr. Saito lived a life immersed in late-night research and experiments as a researcher of chemistry at the Central Research Laboratory. He said that it took a tendency to do what he thought was interesting and move forward on events with friends of similar concerns. It became more important for him to do these things when he moved to the engineering department close to the product.

9.3.2 Phase 2: Start-Up of In-House Venture This desire to get into the different business area became stronger and stronger after moving to the overseas business division of the Nihombashi head office. His interest shifted more towards occupying a role that connects and share delight among many people rather than remaining a chemical researcher. He borrowed free space in shopping malls and promoted activities such as culture centers in shopping malls, yoga schools, comic story theaters, tennis clubs, etc. He did his best to complete his ordinary work on time and engaged in these activities during his overtime. He started such activities from tennis schools in the first step. He opened the RENAISSANCE Tennis School Makuhari in 1979, remodeling a bowling facility as an in-house venture business. He expanded this into a comprehensive sports club in 1981 named Sports Club RENAISSANCE Makuhari. He established DIC Creation, a 100% subsidiary company of DIC, changing the name to DIC RENAISSANCE in 1992. Under the concept of developing downstream, he proposed that the company utilize the urethane resin business to provide material for tennis shoe soles and tennis courts and got the department’s cooperation. Keeping a contact point within the company, he shifted his concern from chemical technology to leisure and entertainment. He understood that it was time to focus on well-being when Kusaka Kimindo published the New Cultural Industry Theory (Kusaka 1978).

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9.3.3 Phase 3: Expansion of Sports Club Business After becoming a president in 1992, he planned to expand business into comprehensive sports clubs that offers various kinds of exercises for various kinds of customers (Fig. 9.9), and he withdrew from the culture center business based on the popularization of sports clubs. RENAISSANCE was successfully listed on JASDAQ in 2003, TSE II in 2004, and in the TSE in 2006. He steered in the direction of the large, comprehensive sports club trend rather than the tennis club standalone business. In addition, he successfully implemented mergers and acquisitions in the early 2000s and realized scale expansion. He got funded by listing on the stock exchange for investment. He adopted “The RENAISSANCE method,” a method of reducing the investment amount, such as asking a landowner to build a building to reduce the investment amount, reducing initial costs up to 200–300 million yen for the first year, utilizing lease contracts, to develop multiple stores. It is a practical methodology to reduce risk and to promote steady management (Nakamura 2013). He joined the industry group activities in this period at the same time. 2003 was to be the first year of corporate social responsibility (CSR) in Japan. He served as chairman of the committee, issuing the corporate white paper on the Japan Association of Corporate Executives and further expanded the connections of the business relationships. Market demands turned out to be more diversified from casual facilities to high grade ones, standardized services to personalized ones (Fig. 9.10).

Fig. 9.9 Exercise in a sports club

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Fig. 9.10 Personalized service

9.3.4 Phase 4: From Sports Clubs to Healthcare Business Mr. Saito expanded his business to healthcare in general in the 2010s, keeping the core business area comprehensive sports clubs. In order to respond to the demands of individual stakeholders, the company also advanced to specialized business categories. He set up a special rehabilitation facility and made the prototype of the present Genki Gym in 2012 (Fig. 9.11) (Nakamura 2013). In addition, they started a new business called Dumi RENAISSANCE, a studio for yoga and Pilates exclusively for women. CYCLE & STUDIO R Shibuya, the bicycle exercise studio utilizing virtual reality (VR) and augmented reality (AR) incorporating the evolution of IT, was also developed (Fig. 9.12).

Fig. 9.11 Genki Gym_ Special rehabilitation facility for body and mind

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Fig. 9.12 CYCLE & STUDIO augmented reality (AR) bicycle facilities

There is an urgent need to maintain good health both locally and globally in ASEAN countries, so global business started with a subsidiary company in Vietnam in 2014. It utilized RENAISSANCE’s experience and know-how of operating fitness clubs and swimming schools of Japanese quality standards with direct investment. RENAISSANC has been established the third position in the sports club industry that develops business in 100 locations nationwide in Japan in this phase.

9.3.5 Phase 5: Supporting an Active Lifestyle RENAISSANCE has developed a new business concept that covers healthcare and supports active lifestyles (Fig. 9.13) along with trends based on business experiences. It means that RENAISSANCE has progressed not only to satisfy requests such as yoga/Pilates, specific requirements of rehabilitation, and gyms to keep seniors citizens active, but to facilitate well-being and life enjoyment. The typical example of this concept is the program for activating the human brain, “synapseology.” RENAISSANCE insists that this can improve cognitive and physical functions and decrease anxiety. Mr. Saito said in an interview that the most important thing in life is “to work actively, have a point of contact with society, and continue feeling the significance to society and people.” It is well understood that he progressed from sports clubs to the healthcare business to the social role of supporting individual life revitalization through reflecting on the demands of the times. At the same time, he expanded the company’s range of activities to service industry activation committees and the hospitality promotion associations, etc. and began to carry out various activities to support the most essential roles.

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Fig. 9.13 Supporting active lifestyle

9.4 Critical Success Factors of RENAISSANCE’s Business The critical success factors of RENAISSANCE’s business are composed of the following three business elements and two human elements related to Mr. Saito. The business elements are: (1) Consistently maintaining a clear concept (2) Understanding and responding to age demands (3) Keeping careful control over business risks The human elements (related to Mr. Saito) are: (4) Having a rich human network (5) Having leadership abilities to attract people around him We understand that appropriate business strategies have been derived through these elements. (1) Consistently Maintaining a Clear Concept RENAISSANCE started from Mr. Saito’s strong desire to pursue a “RENAISSANCE way of life” when he learned about The RENAISSANCE culture in Florence, Italy when he studied abroad in Switzerland (Nakamura 2013). The basic values and concepts of the business reflect the philosophy of The RENAISSANCE. According to the message on its homepage, “RENAISSANCE was chosen as the name for our company and facilities because of a founding spirit that believes ‘a movement of revitalization of humanity’—a response to an overly controlled and material-centered society.” From the beginning, the concept of The RENAISSANCE has been to provide joy and empathy for the culture rather than just to provide exercise facilities for health and medical care. In other words, the company intends to foster well-being brought about

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by play and culture, with the goals of facilitating a satisfying life and providing places to form communities. This is exactly what they wanted to realize through adhering to the fundamental RENAISSANCE philosophy of having an enjoyable life. (2) Understanding and Responding to the Demands of the Times This philosophy allows the company to respond to social needs and demands while promoting business. It also gives them agility, flexibility, and vitality in execution. In Phase 2, at the start-up of the in-house venture business, they worked to understand modern business culture by following the New Cultural Industry Theory. In Phase 3, when promoting their comprehensive sports clubs, they responded to sports penetration and the popularization of sports clubs. In Phase 4, when promoting their healthcare business, they followed health consciousness and health promotion. In Phase 5, when promoting a positive individual quality of life, they worked to diversify what they offer. They have been successful in quickly fulfilling these requirements in each phase. This is due to the founder’s sharp sensitivity to the needs of the times and his response to those needs. At the same time, his extensive human network made the business complemented and sophisticated. This is related to two human elements described below. (3) Keeping Careful Control over Business Risks One of the most important characteristics of RENAISSANCE is that it was developed as an in-house venture business. Mr. Saito told us in an interview that people are more motivated to promote their businesses with financial support from a parent company rather than through tiresome fundraising. This is extremely important because there is not enough investment in entrepreneurs in Japan. It is also important that the founder was highly motivated to promote his business. He made sure to find a way to save on investment (known as “The RENAISSANCE method”) in order to cover the necessary funds when expanding. He was quite prepared for controlling risks to his businesses. (4) Having a Rich Human Network The human element supports the excellent business elements. Mr. Saito has a diverse human network and has had strong supporters and proponents at every stage. Trust from the top management of DIC facilitated the rapid success of his in-house venture business. His extensive human connections in various hobby communities were a great help with his expansion. The activities at the business association, Japan Association of Corporate Executives, were great help to expand human relationships. Both professional and personal connections are an important factor in the success of a business, particularly in the service industry where feedback and reviews have a great amount of influence. (5) Having Leadership Abilities to Attract People Around Him Lastly, we are certain that it is Mr. Saito’s personal leadership and charisma that fosters such personal connections. We experienced his remarkable, fascinating personality, responsiveness, and humanity in our interview with him. In addition, he is

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talkative, energetic, and frank, which are effective qualities when promoting humanoriented businesses. (6) Business Strategy that Meets the Demands of the Times for the Five Elements Above They have been working to promote their hybrid businesses that combine comprehensive sports clubs and specialized service facilities that include yoga/Pilates, female-oriented facilities, Augmented Reality (AR) bicycle facilities, and rehabilitation facilities. They expanded their business from physical exercise to brain activation with the “synapseology” program. They will help people innovate their lives. Internationally, they are focusing on one ASEAN country, Vietnam, using Japanese know-how to expand into the country step by step. (7) Summary of Success Factors Figure 9.14 is the summary of the critical success factor analysis. We analyzed how business promotion and human factors were interrelated and formed success factors in business. The core of business success is the fundamental idea that supports all the activities. In this case, an encounter with The RENAISSANCE culture in Italy and the thought of pursuing humanity’s well-being are the framework of all subsequent activities. It is important to accurately recognize the needs of the time and to have the flexibility to adopt changes in response. At the same time, it is also important to recognize risks and deal with them carefully in order to realize business goals. In some cases, the driving force of a project may be weakened as an in-house venture business. But RENAISSANCE has maintained a fundamental concept that

Fig. 9.14 Critical success factors of RENAISSANCE’s business

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has prevailed as the driving force of their business promotion. He formulated qualified business strategies on top of the concept, and his excellent team carries them out. In the future, he will face more difficulties with hybrid model and globalization, but the business elements he has acquired in the past may be the key to developing his business. Regarding the human factors supporting the business model, we found that the rich human network and the charismatic leadership of Mr. Saito are the most essential success factors.

9.5 Analysis of Saito’s Entrepreneurship We analyze his entrepreneurship according to the following five attributes. (1) His Dream and Objectives The fundamental idea of his business is not merely economic activity but to pursue human well-being based on RENAISANCE concept—revitalization of humanity. Enjoying life, restoring and relieving self seems to be the ultimate objectives, consistent goal and driver of this business. (2) His Ability of Forecasting the Future Business Environment He is always sensitive to the social demand of the time for healthcare, well-being in an aging society, CSR in business area and so on. He seems always to search for new activities enjoyable for better life doing variety of things at times. It was reasonable to approach to the senior market and healthcare market in such circumstances step by step. It is more important that he constantly learned from what he tried to do and found the new way that matched to the people’s preference and requirements. He was really a man of foresight, which is based on his experience and the ability to learn both from his success and failure. (3) His Core Resources or Technologies The most important element of promoting business is the human factor. He is so attractive that there are always many people around him to support his business. His human network is the source of idea and knowledge. He always had an ability to enjoy promoting his business. He had a talent to organize many people around him sympathetic and correspondent. It seems that he enjoys to realizing his ideas and dreams rather than merely searching business seeds. (4) How to Manage His Company He is aware of the way to control risks during expanding his business. He started his business utilizing in-house venture business scheme. He reduced the investment amount using RENAISSANCE method making use of existing facilities efficiently.

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(5) His Way and His Value Sense He always pioneered his future—entering DIC Corporation, getting opportunity to study abroad in Europe, developing new business in entertainment area which is quite different from the existing business area in DIC—one of the most major ink company in Japan. He seems to have some special ability to keep his curiosity and the sense of finding the way to realizing his desire. He always found his dream- what he is eager to realize and go for it step by step and finally he realized them actually.

9.6 Conclusion 9.6.1 The Framework to Create a New Business Model RENAISSANCE has been implementing comprehensive sports clubs under a clear vision of human recovery, with a company motto of creating something to live for. He supplies healthcare, nursing care for senior people, modern rehabilitation, and both care for physical and mental conditions with the goal of resolving social issues. He will continue to expand his overseas market mainly in ASEAN countries and will continue to grow in new markets by utilizing the five elements described in Sect. 9.4. In the interview and in our research, we came to realize that it was the in-house venture business that enabled the entrepreneurship, strongly supported by human relationships, leadership, and charisma of the founder.

9.6.2 Future Research We traced RENAISSANCE’s business history and examined his future direction by analyzing how Mr. Saito’s original strong desire was realized and expanded through the case analysis. In order to generalize this excellence model to healthcare related business, we would like to continue to research and to analyze from the perspectives as below: • To what extent can we generalize the model he developed in Japan? • How many country-specific requirements should be considered when expanding into ASEAN countries? • What kind of supplementary relationships will there be between the comprehensive model and the specialized model in future? • How will the communities formed through the services get settled in local areas? • What will the founder leave to his successor in this case? Promoting health and saving on healthcare costs is a global issue. We are convinced that RENAISSANCE will continue to resolve these issues and lead both in

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providing successful business model and in providing places where people can take control of their way of life and well-being.

References Bradley, B. (2015). Well-Being, Polity Press. Fitness Business Editorial department. (2015). Trends of Japanese sport club market. Fitness Business, vol. 47. JMA Research Institute Inc. (2016). Research on basic business information on expansion to ASEAN countries’. Kusaka, K. (1978). The New Cultural Industry, Toyo Keizai Inc. Nakamura, Y. (2013). Challenge of Toshikazu Saito on Sport Club RENAISSANCE, ‘Born to have fun’, TOYO KEIZAI Inc. Nonaka, I., & Katsumi, A. (2004). The essence of Innovation, Nikkei BP Inc. Takahashi, N. (2016). The concept of sports club based on comprehensive sports clubs, Japan Sports Agency.

Chapter 10

Shigemi Kawahara and IPPUDO—Having People All Over the World Taste the Japanese Ramen Shunichiro Morishita

10.1 Introduction Today while there are many restaurant chains in Japan, there are not many Japanese companies with which their founders have actually expanded their business globally. One of the few examples is Chikaranomoto Holdings Co, Ltd. which runs multiple restaurants with focus on their ramen shop IPPUDO. Chikaranomoto Holdings strengthened their overseas business development with the fund raised when they became listed on the Tokyo Stock Exchange Mothers (Market of the high-growth and emerging stocks) on March 21, 2017, and then announced their policy that they aimed at having 300 domestic and 300 overseas shops by 2025. Mr. Shigemi Kawahara, the founder and chairman as well as chief executive officer, has a plan to focus on development into North America and Southeast Asia and shows eagerness with saying “I want to spread ramen from Japan to all over the world, and take the initiative to overseas deployment on the occasion of being listed on the market.” IPPUDO opened their first shop in Fukuoka city Japan in 1985 and expanded to New York City in the United States in 2008. As the Japanese food boom has been spreading globally, they are also increasing the number of shops in Europe and Asia. IPPUDO’s ramen is characterized by the broth which is not thick but has a rich flavor of “tonkotsu” (pork bones), and noodles which are light and crisp with the scent of wheat. Their original taste born in Fukuoka has now been accepted in all over the world as IPPUDO brand. Originally Kawahara was the owner of a small restaurant bar in Fukuoka and opened his own ramen shop, and then founded Chikaranomoto Holdings, the global ramen chain. Many ramen shops’ owners in Japan are professionals at making ramen, and it is common for them to own only one shop or run a few shops in their local area. So, I wonder how Kawahara could have expanded his business as a manager at the same time as he was pursuing his own path to be a master ramen chef. This chapter outlines S. Morishita (B) Kyushu Sangyo University, Fukuoka, Japan e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_10

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Kawahara’s entrepreneurship and his history, and then clarifies the success factors. In this chapter, referential materials regarding Chikaranomoto Holdings including books written by Kawahara himself, which are open to the public, are organized and then a list of questions has been created and sent to the company. The analysis and discussion are added to the paper based on the answers from the company.

10.2 Current Business of IPPUDO (Chikaranomoto Holdings) Chikaranomoto Holdings originated with a ramen shop IPPUDO which was founded by Shigemi Kawahara in Fukuoka in 1986. The current capital stock is about 1.2 billion yen and the total sales of the group is 24.4 billion yen (fiscal term ended in March 31, 2018) as Fig. 10.1. The number of employees (consolidated) is 603 (as of the end of March 2018). Chikaranomoto Holdings does not only run the ramen shop IPPUDO but also operates several other restaurants focusing on ramen. The affiliated companies are also engaged in business operations such as overseas business strategies and its development, management guidance and starting up of new shops, and the manufacture and sale of noodles/broth etc. (WATANABE SEIMEN CO., LTD.) IPPUDO, which is their main business operation, has developed 144 shops in Japan and 82 shops in overseas (in 12 countries) as of March 31, 2018.

Fig. 10.1 Sales of IPPUDO

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Kawahara opened a restaurant bar, AFTER THE RAIN, in Fukuoka in 1979 and IPPUDO in 1985. He opened a branch of IPPUDO at Shin-Yokohama Ramen Museum in 1994 and expanded branches to Tokyo in 1995 and then to Osaka in 1999. In 2000, he won championships 3 times in a row at the Ramen Chef Championship on a TV program, TV Champion, and IPPUDO became known all over Japan. Since then, he has expanded the shops of IPPUDO and also expanded his business to including Chinese restaurant bar and bakery. The company’s philosophy is “to continuously innovate to remain true” and their entrepreneurial spirit is “We want to be a group that always creates new values. We spread the values to the world through a smile and thankfulness, which are the best sources of human communication.”

10.3 History of IPPUDO and the Founder Shigemi Kawahara The history of IPPUDO is also the history of founder Shigemi Kawahara (Fig. 10.2). Shigemi Kawahara was born in Fukuoka on December 18, 1952. He was the youngest of four brothers whose father was a teacher at a high school for arts. Later, while the eldest son became a pilot for an international airline, the second son became a journalist at a local newspaper, and the third son became a university professor at the Art Department, Kawahara, who was brought up spoiled as he was the youngest child, unlike the other brothers, could not become interested in studying. Kawahara liked drawing “manga” (Japanese comics) when he was in elementary school, so he was thinking to become a “manga” artist in the future. As he wanted to become a “manga” artist he attended a design department at his high school. But because he lost his confidence when he found out that many of classmates and older students were really good at drawings, he lost interested in studying design, and so he then began to devote himself to theatre (Kawahara 2004). Fig. 10.2 Shigemi Kawahara

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After graduating from the high school, and while living off his older brother who was already living in Tokyo, he started going to a preparatory school to study for the entrance examination to get into a university of the arts. At the same time, he entered a theatre training institute because his brother referred him, so he studied for the entrance examination during the daytime and attended the theatrical performance training at night. However, he failed the entrance examinations twice. After a year and a half of living in Tokyo, he left the theatre training institute and returned to Fukuoka. After returning to Fukuoka, he thought that business is more useful for the future than arts, so he entered a School of Commerce at a local university. Even when he entered the university, he could not focus on his study, and he was spending his entire time doing part time jobs that were related to the food industry as well as theatre practice at a local theater troupe. After graduating from the university, he got a job at a local supermarket. The job at the supermarket was fun, but as he gave up the arts and theatrical performance, he was spending his everyday life with no purpose and with anxiety and impatience. After that, while doing all sorts of part-time jobs such as working at restaurants, an advertising company and dinner ingredients delivery service etc. he was thinking “What can I do and continue?” What he decided was to return to the theatrical performance. As he always had his dream to become an actor since his school days, he entered a theatre troupe again at a local place in Fukuoka and made up his mind thinking “I will live in the world of the theatrical performance from now on.” (Aizu 2011) He has the five turning points in his history. (1) (2) (3) (4)

Opened a restaurant bar AFTER THE RAIN (1979) Founded IPPUDO (1985) Opened a shop in Shin-Yokohama Ramen Museum (1994) Developed two taste of ramen (1995) and Won the Ramen Chef Championship (1997–1999) (5) Expanded to overseas (2004, 2008). Based on these turning points, Kawahara’s background to IPPUDO in recent years is summarized in chronological order. (1) Opened a Restaurant Bar AFTER THE RAIN Because he could not make a living just from the theatrical performance, he continued doing a variety of work. Just at that time, he was informed of an empty shop which used to be a steak restaurant by one of his brother’s acquaintances. Because he had the experience of working as a chef when he was doing a variety of part time jobs, he finally decided to quit the theatrical performance and chose to pursue his carrier in business by taking this opportunity (Kawahara 2001). This was how he opened the restaurant bar, AFTER THE RAIN (Fig. 10.3), in 1979. He set three goals—“not having days off for three years,” “not having days with zero sales” and “finding his vocation by the age of 35” when he started the business. As he wanted to become an actor, he tried his best to entertain his customers by taking advantage of his experience in theatrical performance. He drank alcohol even though he could not drink a lot until he lost his memory having his belief that “the restaurant is a stage and I am a theatre director as well as an actor who entertains customers.” (Kawahara 2004) Three years

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Fig. 10.3 “AFTER THE RAIN” at the present

after he opened the restaurant bar, AFTER THE RAIN, it became popular in Fukuoka and it was crowded with lots of customers especially young people every night. After this success, he thought of opening a second restaurant bar, but he rather wanted to do something that would amaze people. So, he thought of creating a fashionable and cool ramen shop, where women in particular would feel free to come and visit. The reason why he chose a ramen shop was because a female customer at the bar said “I like ramen, but I don’t feel free to go in.” At that time, the idea of “dirty ramen shops are tastier” was widespread and even the basic customer service was not being provided. He thought that if he could open a clean ramen shop like a restaurant bar, he would have good sales. Because he was an amateur in regard to making ramen, he decided to receive training at a ramen shop that was said to be the most famous in Fukuoka at the time. When he told the shop manager that he wished to open his own shop after completing one year of training, he was told “Please get a millionyen ready” and he paid. At the shop, he was not really taught with great attention to detail but rather required to learn by just watching. Instead, he was free to use the ingredients and cookware, and the shop manager and experienced chefs were willing to answer any questions there. He worked at the ramen shop from daytime till evening and he then worked at his restaurant bar, AFTER THE RAIN. Moreover, he started visiting ramen shops around Kyushu on his days off. He continued visiting shops in Tokyo, Osaka and Hokkaido and visited 150 shops in total over the year with the aid of guidebooks. He learned various things about making ramen over the year, and tried all sorts of new ideas, and gained the knowledge and skill for making ramen (Kawahara 2001). (2) Founded IPPUDO In 1985, he opened his first ramen shop IPPUDO (Fig. 10.4), which was as small as 33 m2 , on a back street in the downtown area of Fukuoka. He struggled with sluggish sales in the beginning. One of the reasons was because his thought that the taste must be different from the ramen shop where he had his training was too strong to have the stable taste, so he did not gain regular customers. Also, the ramen of IPPUDO was as high as 400 yen at the time when the price of a bowl of ramen was about

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Fig. 10.4 IPPUDO’s first shop

250–300 yen. He did not try to increase the number of customers by cutting the price, but instead made efforts to improve the customer service to provide a feeling of satisfaction which could be worth the price. He was losing modesty and honesty due to the success of his restaurant bar, AFTER THE RAIN, but he started engaging in the business again with his simple honesty. He, himself, stood on streets, handed out leaflets and started marketing through media as well. As a result of his much effort, IPPUDO achieved monthly sales of over 6 million yen and became one of the successful shops when it was 4 years old (Aizu 2011). After that, he opened a suburban type ramen shop in 1988 and “izakaya” (Japanese gastropub) in 1989. The company which was always supported by IPPUDO expanded beyond their ability. At the same time, the sales of AFTER THE RAIN without his presence had dropped sharply. He said to himself “Why don’t the staff work if I am not there to monitor them and why do they try to do the minimum necessary work?” (Kawahara 2002) Although he became increasingly frustrated, he could not speak to them and there was a big gap between him and his staff. If a shop was in the red, he had to intervene and bring it back into the black. If another shop was in the red, he went there to improve the sales. But the sales at a different shop went down instead. This was repeated over and over. He busied himself with the multiple shop management and took it all on himself. He became increasingly dissatisfied and distrustful while thinking “Why don’t they understand my hardship?” and “Why does everyone think it is someone else’s problem?” But at the same time, it meant that he was also not trusted by his staff. He was always indeterminate if he was a ramen chef or a management person, and the increasing number of shops put his company in a difficult financial situation. Because he had left his shops entirely up to his staff, he did not have the control. The sales from IPPUDO, with which he was always directly involved, was going well, but while covering the other shops’ which were in the red with the profits from IPPUDO, the company’s debts went on increasing and the financial condition worsened.

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Fig. 10.5 Shin-Yokohama Ramen Museum

(3) Opened a Shop in Shin-Yokohama Ramen Museum Although he lost his goal by expanding into the “izakaya” (Japanese pub) business etc., he had a chance to revive, which was to have a shop at Shin-Yokohama Ramen Museum (Fig. 10.5) in 1994. Shin-Yokohama Ramen Museum is the Hall of Fame of ramen where local ramen shops from all over Japan gather in a place with a gallery that exhibits the history and culture of ramen at a place where the old townscape of the 1950s has been replicated. The head of the museum, Yoji Iwaoka, had decided 7 out of total 8 shops by visiting and eating at many ramen shops all over Japan with his staff. As Iwaoka decided the last position to be IPPUDO, he visited Fukuoka to negotiate with Kawahara about having a shop at the museum. Therefore, Kawahara finally went for a visit on the planned construction site for the museum in Yokohama with intention to say no. Since he found out the planned site was located in a deserted area where there was low-traffic, and also because the shop floor allocated for IPPUDO was so small, he judged that the chance of success would have been very low. However, when he visited the pre-opening office and met 6–7 staff who were working hard on their mission there, he was so impressed. It reminded him of that time when he opened his shop and he made a decision to have a shop at the ramen museum (Kawahara 2001). When the ramen museum opened, his shop became a popular one, and this was beyond his imagination. For the first 3 months after opening, only limited staff including Kawahara, himself, handled the large number of customers who always lined up in front of the shop. The average sleeping time was only 2–3 h a day. This ramen museum got a great deal of public attention as an unprecedented initiative, and it was covered by all sorts of media such as newspaper, television and radio. IPPUDO also became famous nationwide, and the number of customers doubled at the shops in Fukuoka, where he had now opened two shops. After that, he opened a shop in Tokyo in 1995 and in Osaka in 1999 and both shops succeeded. (4) Developed Two Tastes of Ramen, and Won the Ramen Chef Championship Taking the opportunity when 10 years had passed since IPPUDO was founded in 1995, he worked on developing new products as part of the project for improving business operations. He was conducting research on noodles and broth and was confident that he could make any ramen. Firstly, he decided the names of his two new

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types of ramen, Shiromaru Classic and Akamaru Modern (Fig. 10.6). The Shiromaru Classic with a richer flavor was created by maturing the existing broth, and the Akamaru Modern was created by adding spicy miso and garlic oil to the original one. Both have been signature items at current IPPUDO. He said “In order to be regarded as the unchanged taste, we must always improve it. To continue serving the taste of one step ahead, which makes our customers say it is delicious, without changing our base taste is the secret” and he never stopped striving for the taste and refining his skills (Kawahara 2004). In 1997, he received an offer from a TV station to compete in the Second Ramen Master Chef Competition hosted by a TV program, TV Champion. He competed with owners from other famous ramen shops and won the championship. He competed again in the third competition next year and forth in the following year and won the championship 3 times consecutively, so the name value of Kawahara as well as IPPUDO became nationwide. Taking this victory as an opportunity, he decided that ramen would be his lifework and gradually reduced the shops which were not ramen shops (Aizu 2011). In 2000, he jointly developed an IPPUDO original cup noodle (Fig. 10.7) with a food company. It was sold only at convenience stores but recorded sales far exceeding their expectations. (5) Overseas Expansion of IPPUDO Since he had his thoughts of making IPPUDO to be worldwide and spreading ramen to the world as a representative of Japanese food following sushi and tempura, he opened a ramen chain in Shanghai in 2004, when he was approached about a joint venture by a Chinese food service company over there. At the ramen shop, the price was set to be 20 yean which was quite high for a bowl of ramen in China, and the selling point was Japanese taste and service (Kawahara 2007). Although he started the joint venture in Shanghai, because of the lack of manpower in Japan, he could only bring two employees to Shanghai. He left the shop operation to these two employees, Fig. 10.6 Shiromaru (left) and Akamaru (right)

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Fig. 10.7 IPPUDO original cup noodle

and while always traveling between Japan and China, he checked out new products and shops. It was a fashionable and cool restaurant that was not common in China before and he successfully opened 6 shops in about one year. However, because those 2 employees from Japan could only manage local staff in two shops at the most, they became not able to maintain the taste and service of which Kawahara could be satisfied. There were conflicting views between the business partner who wanted to produce as many as possible using chemical additives and increase the number of shops quickly without enough staff training and Kawahara who wanted to serve authenticity-oriented broth and noodles similar to IPPUDO’s ramen in Japan, provide proper staff training and steadily open new shops. The gap in the policy with the local company with which he formed the capital alliance grew large. Since he judged that he did not achieve any result after 3 years, he terminated the joint venture and withdrew from the business in China (Aizu 2011). After coming back to Japan, he made a three-year plan under renewed organization, and put efforts into the expansion and reconstruction of the domestic shop network. On the other hand, since he aimed to provide ramen, store environment and service at a global standard, he worked on expanding to overseas under a directmanagement scheme and opened the first overseas shop IPPUDO NY (Fig. 10.8) in New York in the US in 2008. In New York, all ingredients except soy sauce were sourced locally, while the noodle machine was brought in from Japan, so that noodles and broth could be made with almost the same manufacturing method as they were in Japan. He tried to find ways to be friendly to the local customers. The noodles were made to be shorter than usual for the local customers who were not used to eating ramen noodles, and also teriyaki flavor dip was added to the ramen (Aizu 2011). 90% of the customers of IPPUDO NY were local people, and there were 500 to 600 customers a day. In one year after opening, the shop had 200,000 customers in total and achieved the sales which were comparable to the prosperous shops in Japan. The shop was selected to be in the 2009 “Michelin Guide New York City” for the first time for a Japanese ramen shop and also introduced in “Zagat NY”, the number one restaurant guide in all of the US.

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Fig. 10.8 IPPUDO NY

In 2009, he opened the second overseas shop, IPPUDO SG, in Singapore, which was a restaurant integrating Japanese food with “izakaya”, and served not only ramen with both noodles and broth being homemade, but also yakitori and rolled sushi as the main, and a la carte dishes such as deep-fried food and salad etc. The shop in Singapore also went well while having 700–800 customers a day, and he opened second shop there in 2010. Continuously, he opened a shop in Hong Kong in 2011, in Taiwan, China and Australia in 2012, in Malaysia in 2013, and as of 2017 there are 65 shops in 12 different countries. In 2014, Kawahara entrusted the practical company management to a new director. He became chairman as well as chief executive officer and put his effort into the development of human resources for the next generation that will bear the future of IPPUDO. Up until then, in 2009, he had introduced an overnight stay type training system for all the employees. He gathered the employees who were different ages, from different regions and departments throughout the country, and they learnt the meaning of the company philosophy and various business operations while staying for a week in a natural setting. In 2010, the company started a new system which allowed staff who satisfied certain conditions to become independent by setting up a branch of the same shop (Aizu 2011). In 2016, The Seven Habits® Things and IPPUDO (Fig. 10.9), which was specialized for business people in the food service industry was jointly developed with Franklin Covey Japan, and the company has been engaged not only in the in-house training but also in conducting training projects for employees in the food service industry and local university students. In addition to this, the company has also been working on various things to spread IPPUDO’s ramen to the world such as a language training to serve foreign tourist customers and “Next Generation of Entrepreneurs Development Program” to learn international management skills (Nishinippon Newspaper, March 22, 2017).

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Fig. 10.9 The Seven Habits® Things and IPPUDO

10.4 Founder Shigemi Kawahara’s Management and His Entrepreneurship As mentioned above, the process of establishing IPPUDO brand as it is now, was not always easy, but it was a repetition of failures, reflections and overcoming. He has been telling the lessons in his books (Kawahara 2006) which he has written so far, lectures, training and work sites. Among them, he has carefully selected messages with which he had particularly strong feelings and summarized them in 50 lessons in a book named IPPUDO kokoroe jou (IPPUDO business essentials) (Fig. 10.10). Next, it selects some of the lessons which particularly reflect Shigemi Kawahara’s entrepreneurial spirit and characteristics of his management style and then give explanations. (1) Ramen and Shop Development 1. Everything starts with one customer and one bowl of ramen.

For ramen shops, it is necessary to have unique characteristics which are different from other shops. For this reason, shop owners think deeply about what they want to express with their ramen while thinking of what they want to tell the customers through ramen, and then clarify the concept of the shop. The concept of the early IPPUDO was a “fashionable and clean ramen shop that even women would feel free to come and visit” and “becoming so powerful that all the new ramen shop owners who are opening new shops would come to IPPUDO.”

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Fig. 10.10 IPPUDO kokoroe jou (IPPUDO business essentials)

Once the concept of the shop is decided, development of ramen comes next. Because there are infinite combinations of taste, broth and ingredients for ramen, they choose a ramen which can be a model from existing shops at first, and try making one close to the model ramen. When succeeding in making one close to the model, they add their own touch following their concept. The creation of the story derived from the concept is important. Unless it has a certainty regarding the reason “why the ramen shop is at the particular place and offering the particular ramen,” the ramen could become superficial. Therefore, they start sorting things out by reviewing the reason why they aspired to be a ramen chef and open a shop and how they can use their own experiences in this etc. In this way, they finally become able to provide a customer with a bowl of ramen. Each customer has a different name and personality, and is independent and special. The time when the customers feel the most pleasure at a shop is the moment when they can feel that the shop owner and staff know them well. When the customers are respected as an individual, they feel delighted and become fans of the shop. Therefore, it is necessary to remember customers’ faces and names and become able to think not that this is just a customer but that this is a particular person coming instead. (2) Corporate Philosophy 2. Everyone’s smile is the source of power. 3. We are not making ramen but thankfulness. 34. To continuously innovate to remain true.

Kawahara thinks a great deal of the company philosophy, and it was created from the purpose of business operations based on the shop management. For example, the company philosophy of Chikaranomoto Holdings is to continuously innovate to remain true as stated in his lesson number 34. Also, their entrepreneurial spirit is stated to be “We want to be a group that always creates new values. We spread the values to the world through a smile and thankfulness, which are the best sources of

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human communication” and this is stated in lesson 2 and 3. In order to share the company philosophy with employees, they recite it at the morning assembly every morning or put it on a wall so that everyone can see it at each shop. He thinks that the company philosophy should be developed with the growth of the shops. For example, one philosophy in 1985 was to be raising IPPUDO to be a shop where people who open new ramen shops in Fukuoka will definitely come to, and according to their business growth, it changed to be “making ramen to be the world common language” in 1994. As a quality necessary to be a leader, he points out it is necessary to be a visionary, who has visions that can see into the future and always speak of the future’s dreams and goals to the staff. He thinks that employees will follow such a leader. (3) Setting Goals 16. Try for three years first.

He sets goals, especially when he had a 10-year vision at the time when he founded the company and set goals for 3 years to achieve it. He puts great importance on achieving certain results. For example, his goals at the time when he opened his first shop AFTER THE RAIN in 1979 were as followings: not having days off for three years, not having days with zero sales and finding his vocation by the age of 35. The goals are considered while looking over the next 3 years and imagining himself in 10 years from now. The shop goals are set while matching them with your own future life plan, for example, what kind of life you want to have in the future, what kind of experiences you want to have, places you want to go to and knowledge and education that you want to have etc. And the most important thing is to imagine what you want to be like when you achieve the goal. The goal you have set should be written in your notebook, which is always carried around and read back. In the case of opening a new shop, concrete images should be written in the notebook, such as the interior and exterior of the shop, candidates for the shop name and menu etc. (4) Cleaning and Keeping Tidy 11. The greatest secret of making prosperous shops is to be thorough with cleaning. 12. Keeping the kitchen tidy creates an ideal stage.

Kawahara tells his employees to be thorough with cleaning and keep things tidy with the IPPUDO 5S as follows. IPPUDO’s 5S

1S: Tidying up: To classify items as necessary and unnecessary and throw away unnecessary items. 2S: Organizing: To place what you need in an appointed place and make them available at any time. 3S: Cleaning: To always carry out cleaning and keep the work environment clean. 4S: Keeping clean: To maintain items 1–3.

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5S: Discipline: To make 1–4 a habit, and adhere to the specified rules and procedures. If the shelves are not tidy at a restaurant with an open kitchen and the cooking utensils and ingredients are scattered, the customers will see it and find out that the restaurant staff are lazy or confused. If the position of the cooking utensils in the kitchen is not appointed and organized, the staff will have to spend more time to find what they want, so the busier they become, the less efficient they will be. When they carry out stock control in the kitchen, if they do not know where the ingredients for the day are and end up using the new ones first, the old ingredients will remain unused and the waste ratio and food cost will increase. It is important that the shop and operation is in a safe condition from the viewpoint of food hygiene, that employees look clean and tidy and the inside and outside of the shop are always being thoroughly clean and are in the best condition. For example, tables are wiped properly, kitchen being kept tidy and outside the shop also being thoroughly clean etc. Kawahara thinks that if the kitchen is not neatly organized and the inside and outside of the shop are not cleaned properly, a good shop will never be created. (5) Greetings 13. Greetings are the most basic of basics to create a positive atmosphere in the shop. IPPUDO has their “Greeting Essentials” as below and emphasizes greetings.

IPPUDO greeting essentials (1) (2) (3) (4) (5) (6)

Greeting of your own accord. Greeting brightly and cheerfully. Look at the person’s face when greeting them. Do not forget to smile and bow along with saying some words. Be sure to reply if someone speaks to you. When you are in a situation where you cannot respond, be sure to respond with eye contact. (7) Do not use the word otsukaresama desu (which is a general Japanese greeting used when people are leaving work) but instead arigatou gozaimasu (thank you). Greeting is a communication method where people can infer other’s thinking, so they receive messages not only from the spoken words but also from the quality/pitch of voice, facial expression and gestures etc. Also, you can infer the other person’s current situation. To neglect of greeting means to put yourself before the other person, and a lukewarm greeting is the same as sending a message that tells them that you are not interested in him/her. Kawahara says that if he simply and honestly continues cheerful greetings to the employees for 3 months, the harmonious spirit will

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be propagated to them and then to the customers, so the shop will definitely change. When the employee’s welcome customers with the greeting,” irasshaimase” (welcome to our shop), in order to infer what kind of customers they are and why they are visiting the shop, they need to greet them with the best smile and vitality and read the customer’s situation at the moment of greeting. The same is applied for the greeting, “arigatou gozaimashita” (thank you for coming,) so that the employees greet heartily with gratitude. Kawahara believes that it is important to discuss with the employees about the best greetings for the shop and to carry this out while checking each other on the daily basis, so that the best greetings can be given to all the customers. (6) Human Resource Development 29. Leaders must scold in all seriousness.

Kawahara sometimes scolds his employees severely. When scolding them, it is necessary to have courage and affection while hoping strongly that the person will become better in the future. Also, if the rules in the shop are clear, it should not cause any unnecessary friction with the employee. For this reason, when someone notices anything which should been followed by all employees, it should have been written out as a rule from the very beginning when the shop was opened and observed by all employees. IPPUDO has written rules as follows. IPPUDO 10-site rules

I am proud of being a member of Chikaranomoto and observe the 10-site rules. (1) I will be always being careful about my personal appearance and greet the customers cheerfully. (2) I will use the names when speaking to other employees and greet them while looking at their eyes. (3) I will clean the kitchen, hall and toilet thoroughly and keep the space clean and hygienic. (4) I will keep the kitchen thoroughly tidy and create a work-friendly environment. (5) I will serve all items quickly. (6) I will take the empty plates away immediately after the customers leave their seats. (7) I will always be aware that I am being observed by the customers. (8) I will always remember to keep an eye on the customers, be attentive and take care of them. (9) I will see the customers off with a smile and look them in the eyes. (10) I will be aware that I am a member of Chikarano Holdings and dedicate myself to the team play. These rules should be considered from the point of view of the customers by imagining the ideal figure of the shop and employees. When scolding employees, it

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is necessary to tell them which rule has been broken and pay attention to this point. In the case that the employee still does not follow the rule, in order to make the person understand, it is necessary to discuss the reason and meaning of why the rule exists. The rules should be reviewed every time something happens and get sorted out while improving the level of sharing. They should be refined to be like the ones at shops with high originality. On the other hand, it is important to encourage employees to improve their strengths by praising them. It is also important to be strict on bad things, but make sure to praise the good things. When scolding, do not forget to pay close attention not to give them too much pressure and cheer them up afterwards. When finding good points in employees, it is important to have a habit of praising them. It is sometimes difficult to find the good point in each employee, but when finding something good, the moment must not be missed, and praise should be given to the employee straight away. The employees who are given praise will become aware of their strength. Kawahara thinks that when they become aware of their strength and improve it more and more, and it will become a strength that everyone will recognize.

10.5 Success Factors of IPPUDO As mentioned above, this raises the question of why IPPUDO has become a global ramen shop as it is now, from just beginning as a local ramen shop. Based on the answers from the questions to Chikaranomoto Holdings, I will discuss the success factors of IPPUDO. First, the difference between Kawahara at the time of founding and other ramen master chefs was that he provided new values, for example, shop establishment and product creation according to the point of view of customers. In order to get rid of the image of being a traditional ramen shop which was regarded as smelly and dirty, he focused on serving a mild flavored tonkotsu ramen without a strong smell as well as creating a clean and fashionable shop with a modern jazz back ground music and hearty customer service, which could be accepted by female customers. These efforts helped to differentiate them from the traditional ramen shops, and IPPUDO became a reputable shop in the local area, Fukuoka, and sales also increased. The greatest turning point that changed Kawahara and IPPUDO was to open a shop at the Shin-Yokohama Ramen Museum which was created as the world’s first food-themed amusement park in 1994. It was even the first time for IPPUDO to have a shop outside Fukuoka as well. The Shin-Yokohama Ramen Museum became a popular topic of conversation, and IPPUDO became famous nationwide. But on the other hand, the number of customers increased, and the shop became unmanageable. Therefore, he keenly realized the necessity of establishing the organization properly and educating staff. Based on the experience of opening a shop at the Shin-Yokohama Ramen Museum, he started focusing on management, including educating staff and creating a structure. Kawahara as a manager put particular emphasis on management to continuously innovate to remain true, which is the 34th lesson in the IPPUDO kokoroe

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jou (IPPUDO business essentials 50 lessons). He feels certain that it does not work even if one of them is lacking. In particular, this 34th lesson is also the company philosophy of the group company and they put importance on this one. “To continuously innovate to remain true” as is defined here is not only applied to ramen. As a company, even if they set a goal that should be achieved in three years, the goal itself might have deteriorated by the time it is completed. In IPPUDO, the plans for the goals are constantly updated according to times and circumstances. When people lose their motivation to deal with changes, the people, shops and company will become useless. Kawahara also tries not to be obsessed by anything while keeping “continuously innovating to remain true” in his mind and seeking growth rather than success. He always remembers having the life with high originality. Because the company has become as large as it is now, it became difficult for Kawahara to convey his thoughts for shops and the skill of making ramen to every employee one by one on site. Therefore, he has established a group training facility called “Kushifuruno Daichi” in Oita prefecture and provides all the training regarding shop management including learning knowledge of their ramen products and manufacturing as well as teamwork at the shops etc. to all the employees including staff at shops, headquarters and overseas. Not only learning knowledge but also practical training is included. They actually make their original noodles and broth, so these are handed down to the staff through the training. Besides having communication with the staff at the time of training at “Kushifuruno Daichi”, he also conveys his thoughts for the management and company culture as follows; (1) sending messages at the Management Policy Presentation Meeting and Foundation Day held once a year, (2) direct communication through Origin Day, (3) reading IPPUDO kokoroe jou (IPPUDO business essentials 50 lessons) at morning meetings at stores/headquarters and (4) spreading them intentionally to employees throughout the company using various tools such as news coverage/interview articles etc.

10.6 Analysis of Kawahara’s Entrepreneurship Shigemi Kawahara’s nature as an entrepreneur is analyzed from five viewpoints. Five viewpoints for value creation of the entrepreneur, Shigemi Kawahara Five view points for entrepreneur’s value creation

IPPUDO, Shigemi Kawahara

(1) His dream and objectives

Getting people all over the world to taste Japanese ramen

(2) His ability of forecasting the future business environment

Founding a fashionable and cool ramen shop

(3) His core resources or technologies

Employees working at IPPUDO

(4) How to manage his company

Keeping the shoptidy and clean. Balance of “praising” and “scolding” (continued)

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(continued) Five view points for entrepreneur’s value creation

IPPUDO, Shigemi Kawahara

(5) His way and his value sense

“To continuously innovate to remain true”

(1) His Dream and Objectives Kawahara’s dream is to spread the taste of Japanese ramen to the world through IPPUDO’s business activities. He had this thought of “making IPPUDO worldwide” and “spreading ramen to the world as a representative of Japanese food following sushi and tempura.” Although he opened several shops through a joint venture with a Chinese company in China in 2004, he withdrew from the business over there due to a disagreement with the partner in 2007. In 2008, he opened the first overseas shop IPPUDO NY in New York in the US as a direct-managed store. The shop became very popular, so it was even selected to be in a restaurant guidebook in the US. He opened the first shop in Singapore in 2009, the second one in 2010 and expanded into Hong Kong in 2011, and as of 2017 there are 65 shops in 12 different countries. When his company was listed on the Tokyo Stock Exchange in March 2017, he said “I want to spread ramen from Japan to all over the world, and take the initiative of overseas deployment on the occasion of being listed on the market,” and he announced a management policy which places importance on development into North America and Southeast Asia. (2) His Ability of Forecasting the Future Business Environment Kawahara was engaged in shop establishment and product creation aligned to the customer’s point of view and successfully provided new value to the customers by creating a fashionable and cool ramen shop that was totally different to other conventional ramen shops. In the 1980s, when he was running the restaurant and bar, AFTER THE RAIN, he heard a female customer say “I like ramen, but I don’t feel free to go in.” At that time, the concept of “dirty ramen shops are tastier” was widespread and even the basic customer service was not being provided. He thought that he would have good sales if he could open a clean ramen shop like a restaurant bar that even female customers could feel confident to enter alone. In order to get rid of the image of being a traditional ramen shop which was regarded as smelly and dirty, he focused on creating a clean and fashionable shop with modern jazz back ground music and hearty customer service, which would be accepted by female customers. While running the restaurant and bar, he had training at a ramen shop in Fukuoka. He also visited famous ramen shops all over Japan and tried out many types of ramen. It took a year, but he succeeded in creating a mild flavored tonkotsu ramen without a strong smell. In this way, the IPPUDO of today was formed. Kawahara has spread the IPPUDO not only in Japan, but also all over the world. It is his foresight that he believed that Japan’s unique ramen culture created by himself would be accepted by people around the world and expanded overseas.

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(3) His Core Resources or Technologies Kawahara’s core resource is the personnel who work under him. Because the company has become so large that it now has 600 employees, it has also become difficult for him to convey his thoughts on the shops and the skill of making ramen to every employee one by one on site. Therefore, in 2009, he gathered the employees who were of different ages, from different regions and departments throughout the country and introduced an overnight stay type training system for all the employees. They learnt the meaning of the company philosophy and various business operations while staying for a week in a natural setting. In order to serve his aim, he has established a group training facility called “Kushifuruno Daichi” and provides all the training regarding shop management including learning knowledge of their ramen products and manufacturing as well as teamwork at the shops etc. to all the employees including staff at shops, headquarters and overseas. Not only learning knowledge but also practical training is included. They actually make their original noodles and broth, so these are handed down to the staff through the training. In addition, in 2010, the company started a new system which allowed staff who are recognized as being fully qualified as ramen chefs as well as shop managers to become independent by setting up a branch of the same shop. He has been putting forth the effort to support and raise the next generation of staff who will bear the future of IPPUDO. (4) How to Manage his Company Opening a shop at Shin-Yokohama Ramen Museum was an opportunity to make Kawahara realize the importance of management such as human resource development and shop establishment etc. When IPPUDO became famous, the number of customers increased, and the shop became unmanageable. When this happened, he keenly realized the necessity of shop management and human resource development. His basics of shop management are being thorough with cleaning and keeping things tidy. If the cooking utensils and ingredients are scattered, staff always have to search for what they want so this decreases their work efficiency. If the management of food ingredients is not carried out properly, the waste ratio and food cost increases. Kawahara believes that a lack of tidiness in the kitchen and cleanness inside and outside of the shop is due to the shop employees’ laziness and confusion. Kawahara always keeps in his mind to both scold and praise staff. When he scolds his employees severely, he does it with his courage and affection while hoping strongly that the person will become better in the future. He scolds staff when they do not follow the rules. Those rules are documented in writing. He therefore gives the staff a warning by telling the which rule was broken and how it was not followed. On the other hand, he never forgets to find and praise the good points of individual staff. When he finds anything good, he praises them instantly on the spot. He is making this to be his habit. (5) His Way and his Value Sense Kawahara’s management philosophy is “to continuously innovate to remain true,” as stated in lesson number 34 in the IPPUDO kokoroe jou (IPPUDO business essentials).

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This is also the company’s philosophy. Even if each company sets their goal, the goal itself might have become not suited to their current situation or may have deteriorated during the process of achievement. The goals and plans are therefore constantly updated in his company. In order not to forget the willingness to challenge, he also tries not to be obsessed by anything while keeping “continuously innovating to remain true” in his mind and maintaining his motivation to keep up with the changing times. In order to share the company philosophy with employees, they recite it at the morning assembly every morning or put it on a wall so that everyone can see it at each shop. As a quality necessary to be a leader, he points out it is necessary to be a visionary and have the vision to see into the future and always tell his future dreams and goals to the staff. He thinks that employees will follow a leader who has a future vision and always talks about the company philosophy and goal at every opportunity together with staff.

10.7 Conclusion In this chapter, the history of Chikaranomoto Holdings (IPPUDO) which developed a ramen chain both in Japan and overseas and the founder, Shigemi Kawahara, was outlined. It is assumed that Kawahara had two different aspects of being an excellent ramen master chef and manager as the reason and background of his success as an entrepreneur. In 1985, when he opened IPPUDO, the taste of ramen was not determined, and he struggled to find his way out. He made efforts on his research and developed new types of ramen, Shiromaru Classic and Akamaru Modern, which are current signature items. In 2000, he won the championships 3 times in a row at the Ramen Chef Championship on a TV program, TV Champion, and became a master of ramen both in name and reality. Meanwhile, Kawahara as a manager opened a shop at the Shin-Yokohama Ramen Museum in 1994 although he did not know the chance of success at that time. As a result of the success, the name of IPPUDO became known nationwide. After that, he expanded branches to the whole country including Tokyo in 1995 and then to Osaka in 1999. In 2000, he developed an IPPUDO original cup noodle and kept demonstrating his management skills. In 2004, although he failed in operating shops in a joint venture in Shanghai in China, he successfully opened shops overseas one after another including a shop opened in New York in the US in 2008 and in Singapore in 2009. Kawahara was initially involved in the shop management directly, but while he was opening shops both at home and overseas one after another, he became able to entrust the shop management to managers of each shop. So, he started focusing on the overall management and its expansion for the group companies which made up Chikaranomoto Holdings as an executive. He heads towards his dream of “spreading ramen to the world” and is making various efforts to train excellent ramen chefs to allow people around the world to taste the ramen of IPPUDO.

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Kawahara went through all those twists and turns. When he was asked about the time when it was the most painful, he said “I do not particularly feel that I have had hardships.” Kawahara who once devoted himself to a theatrical performance thinks of the work at a ramen shop as a stage, and the restaurant business as an art. It is a wonderful job which can please the people in front of you. Things did not always go well for him as is so often the case with entrepreneurs. But every time he failed in something, he reflected on it and overcame it. It is assumed that Kawahara who was a ramen chef succeeded as a manager as a result that he repeated this cycle.

References Aizu, Y. (2011). IPPUDO Shigemi Kawahara: How an ordinary person defeats a genius, SHUEISHA. Kawahara, S. (2001). Secrets of IPPUDO: Methods of making a successful shop revealed by a ramen master chef, Shigemi Kawahara, Keizaikai. Kawahara, S. (2002). Mutter of Wind: When I am turning 50, Chikaranomoto Company. Kawahara, S. (2004). Esoteric Writings of IPPUDO: Secrets of life of Kawahara style - Living for your own life, Chishi Shuppan. Kawahara, S. (2006). IPPUDO kokoroe jou: IPPUDO business essentials (50 lessons), Chikaranomoto Company. Kawahara, S. (2007). IPPUDO’s challenge to the dragon (Chinese market)!: What a restaurant company which has expanded its market to China learned, Shibata Shoten. Nishinippon Newspaper, March 22, 2017 edition, morning paper, page 18 (Kyushu financial page).

Part III

Entrepreneurship in New Business and Social Innovation

Chapter 11

Tri Nguyen and MimosaTEK—Supercharging Agriculture in Vietnam with IoT Minh Chau Doan

11.1 Introduction Vietnam is well known for its agriculture, where its biggest strengths lie in the exports of specialties such as rice, coffee, black peppers, etc. While its government has been pushing for the industry and service sectors to take off, with the goal of become an “industrialized country” by 2020, agriculture still contributed 14.57% of the country’s GDP in 2017, exceeding US$34.33b in export revenue (Worldbank, 2019). However, throughout a long history of farming, Vietnamese farmers still mainly rely on experiences and implement what has been previously considered best practices available rather than scientifically-proven methods. Blessed with such great nature advantages like weather, soils and water supply, the results of yields are not as good as they are desired. Despite high investment costs and risk taking, the farmers’ efforts do not always result in high crop yields and high quality products. ‘Smart farming’ is a new term referring to the applications of information and communications technologies in machinery, equipment, and sensors for use in agricultural production systems (Dieisson et al. 2018). Whilst developed countries like the United States, Germany and Israel have developed and adopted practices of smart agriculture for years (Michael and Gregory 2017); farming that integrates smart applications is still a relatively unknown concept in most of Vietnam rural areas. Global innovations in the past decade have also given birth to the so-called Internet of Things (IoT), the concept of extending Internet connectivity beyond conventional computing platforms—personal computers and mobile devices—into any range of traditionally ‘dumb’ or non-internet-enabled physical devices and everyday objects. Embedded with electronics, Internet connectivity, and other forms of hardware (such as sensors), one device can communicate and interact with another over the Internet, and they can also be remotely monitored and controlled (Brown 2016). M. C. Doan (B) Hoa Sen University, Ho Chi Min City, Vietnam e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_11

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‘Supercharging’ agriculture in Vietnam with IoT technologies promises to unleash vast market potentials for Vietnamese produces in terms of productivity, quality, and market competitiveness. One particular example is ‘precision agriculture’, where most modern means of technology are used to optimize farming operations. IoT-based systems, supported by real-time data from sensors and big data analytics, provide farmers with further information regarding all farming decisions which otherwise may have not been visible. This helps farmers make better decisions, reduce waste and maximize efficiency (MimosaTEK, 2019). Realizing great efficiency improvement brought about by precision agriculture, Tri Nguyen—Founder of MimosaTEK has developed AgriTech solutions for Vietnamese farmers. Lessons learnt from the many failures of doing traditional agriculture have taught him the importance of smart farming. However, integrating such technologies in Vietnam poses various challenges. Firstly, most of agricultural production in Vietnam is carried out by small-scale farmers, who do not have the capital to invest in systems that could cost thousands of dollars. Secondly, the lack of awareness and understandings of IoT solutions for agriculture makes it hard to convince farmers of the benefits. Farming is still widely considered as a manual-labor job, and farmers persistently stick to traditional ways of farming, which do not guarantee high product quality and lead to low selling prices. Thus, the farmers are stuck with a vicious circle of poor farming and low profits. Therefore, MimosaTEK has decided to accompany the farmers in implementing world-class technologies, to provide local customer service to help the farmers achieve successful harvests, and increase their incomes. In the following chapter, we discuss Tri Nguyen’s idea, which initiated the launch of MimosaTEK, and the features of this business.

11.2 Overview of MimosaTEK We introduce the prominence of MimosaTEK by discussing the following aspects: Vision; Features of MimosaTEK; MimosaTEK solutions; Recent business situation; and Awards. Figure 11.1 illustrates the Logo of MimosaTEK. (1) Vision Having the ambition to change the future of Vietnam agriculture, MimosaTEK’s vision is: “MimosaTEK harnesses technology to improve the lives and livelihood of farmers by transforming from experience-based farming into information-driven” (MimosaTEK, 2019).

Fig. 11.1 Logo of MimosaTEK (MimosaTEK, 2019)

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Fig. 11.2 Products of MimosaTEK (MimosaTEK, 2019)

(2) Features of MimosaTEK • A solution for agricultural communities in Vietnam. • MimosaTEK’s precision irrigation solution has been proven to help save water and electricity usage up to 30%, and to increase crop yield by 25%. • Climatic parameters measured via sensors in MimosaTEK devices help farmers forecast certain conditions that would give rise to the development of harmful insects and diseases. (3) MimosaTEK Products & Solutions 【Products】: Fig. 11.2 introduces some products that MimosaTEK supply for customers. (a) (b) (c) (d) (e) (f)

soil moisture sensor weather station microclimate sensor (greenhouse only) irrigation controller smart automation irrigation and fertilization system MimosaTEK management software and mobile application

【Solutions】 】 MimosaTEK provides irrigation and fertigation solutions. Via the two services below, it helps farmers manage their yields and crops. Table 11.1 describes the two services in more detail. Precision irrigation solution for smallholder farmers: MGreenLite Precision fertigation solution for medium–large farms: RATA-FF. (4) Recent Business Situation Established in 2014, through five years of continuous development, MimosaTEK has now become one of the best ventures that provide the precision agriculture solutions for farming business in Vietnam. The company now serves over 300 business customers country-wide. Some well-known partners and customers to mention are The World Bank (IoT in agriculture project), TTC Group, Dalat Organik, VinEco, etc.

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Table 11.1 Comparison of MimosaTEK Solutions Range of applications

System functions

Main components

Extensions

MGreenLite

RATA-FF

Farm size

Small

Medium–Large

Type

Greenhouse & outdoor farming

Greenhouse & outdoor farming

Irrigation infrastructure

Nozzles, drip, etc.

Nozzles, drip, Pivot, etc.

Monitoring

– Soil moisture – Greenhouse’s microclimate

– Soil moisture – Greenhouse’s microclimate – PH & EC of water soluble fertilizers

Analysis

– Unfavourable conditions – Irrigation needs

– Unfavourable conditions – Irrigation needs – Nutrient absorption

Control

– Irrigation system

– Combination of irrigation system & fertilizer supply – Greenhouse’s microclimate

Traceability

– Agriculture diary – Barcode management

– Agriculture diary – Barcode management

Central control device

– 6 ports

– 8 ports (able to extend to 32 ports)

Soil humidity monitors

– Yes

– Yes

Weather station

– Depending the setup area

– Yes

Microclimate monitor

– Yes (Greenhouse only)

– Yes

Greenhouse control module

– Yes

– Yes

Control port extension

– Yes

– Yes

(5) Awards As a pioneer of IoT application in agriculture in Vietnam, MimosaTEK has received significant interests from the society, and the start-up has won a number of rewards: • Winner of Venture Cup 2015, a large venture contest organized by IDG Ventures Vietnam (Fig. 11.3) • Winner of Vietnamese Seedstars World

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Fig. 11.3 MimosaTEK wins the Venture Cup 2015 (MimosaTEK, 2019)

• Top 7 Asia Start-ups Shredding Spotlight on Agriculture • Agtech: 100 + Technology Company Changing the Farm (CBI, 2017)—Fig. 11.4 • Securing Water For Food 2017 Funding Initiative Winner (organized by USAID, SIDA, DST, and MFA-NL).

Fig. 11.4 100 + technology company changing the farm (CBI, 2017)

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11.3 Entrepreneur’s History and Vision (1) Tri Nguyen’s Career and Experiences Before the Start-up Tri Nguyen, CEO of MimosaTEK (Fig. 11.5) was born and raised in Da Lat, a city in the central highlands region of Vietnam, where the land is mountainous and fertile. He grew up surrounded by local farmers planting a rich variety of products—from bell peppers and flowers to coffee and bananas. After graduating from University of Technology (Ho Chi Minh City) majoring in Electronics and Telecommunications, Tri Nguyen was working for over ten years in Information Technology industry. He started as a Cisco professional engineer then managed the work of training. Later, he became director of a R&D center, and then CEO and CTO for some Information Technology solution organizations, such as DTS (Cisco partner) or CTT Vietnam. Working hard in Information Technology industry never stopped him from thinking about agriculture, with which he was growing up in his hometown Da Lat. The experiences in Information Technology area, on the other hand, equipped him with a strong foundation of Information Technology and when the era of Internet of Things arrived, he knew that it was the time to apply the Information Technology in agriculture. In 2012, he resigned from his Information Technology job and decided to return to his hometown Da Lat to start a strawberry farm with his friends. At that time,

Fig. 11.5 Mr. Tri Nguyen—Founder of MimosaTEK

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the strawberry crop was retrograding and Tri Nguyen tried to find a solution for it. With a support from a Japanese farmer by providing Japanese strawberry seeds, the project applied organic methods to cultivate strawberries. Yet, the project was still facing of a lot of difficulties. Tri Nguyen kept hearing something that did not seem right to him then: The farmers were instructing him to irrigate until he could see water dripping out of the soil—if he were to pick the soil with his hand. Tri Nguyen did some research that confirmed his instincts: The farmers had not needed to use that much of water. However, when he shared the learning with his neighbors, they insisted on continuing overwatering their crops. It was how they had been taught and how they had farmed all their lives. As there was not enough information and different experiences from various farmers to cross-validate, there was not a right pathway to cultivate. Although Tri Nguyen wanted to apply Information Technology knowledge to his strawberry farm, there were no system and completed solution for managing soil moisture and water irrigation. Moreover, the experiences shared among the farmer community were not organized and systematized. They were all passing on verbally and there was no repository for it. The failure of the first farming project urged Tri Nguyen to think of a complete solution for precision agriculture. “I realized then that the farmers based their decisions on experiences instead of scientific data,” says Tri Nguyen. Smallholders and family farmers in Da Lat were watering their crops based on what they saw and felt. They did not consult data regarding weather or rainfalls because they had never been taught to do so. This was leading to excessive irrigation, which eventually can stunt growth or kill crops, and deplete limited groundwater. On top of it, Vietnam was still recovering from its strongest-ever drought, and every drop of water counted. Many of Da Lat farmers had already been suffering from water shortages. Tri Nguyen wanted to help the farmers manage and control the moisture, watering, and other farming factors using data and technology. IoT was the best way to promote agriculture and change how Vietnam farmers cultivate. Digitization was the most helpful way to support farming operations and build efficient systems needed for better results. (2) Starting up a New Business Applying IoT in Agriculture Realizing an actual project from an idea was not an easy journey. To combat overirrigation, Tri Nguyen co-founded MimosaTEK—named after the famous mimosa flower found in Da Lat in 2014, with the vision to improve the agriculture through technologies. Tri Nguyen and his team at MimosaTEK were working to transform farming in Da Lat and throughout Vietnam to optimize water usage by changing individual farmers’ behaviors. The company created an internet-connected system for precision irrigation so that smallholder farmers could easily use to manage irrigation levels, saving both crops and water. MimosaTEK system worked by placing sensors in farmers’ greenhouses or fields, measuring environmental factors such as soil moisture, precipitation, air temperature, and wind speed. The sensors measured factors in real-time and then the system automatically recommended an irrigation schedule for the farmers. The farmers could read these recommendations via an app in their smartphones and plan their water use accordingly.

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It took nearly two years for the required R&D to complete. In the past, most of agricultural technologies in Vietnam had been the applications of foreign organizations. This was the first time that a Vietnamese company had researched and developed a completed system for precision agriculture, beginning with irrigation. When environmental factors and needs of plants can be measured precisely in realtime, it would provide the ideal basis for farmers to take proper care of their crops. Tri Nguyen would like to contribute something for the farmers in Vietnam: “The main reason that urged me to build MimosaTEK because the farmers have faced a lot of agricultural obstacles. They have solely followed the habits, been very passive with the weather factors and cannot evaluate the criteria for sufficient cultivation in detail. I hope that MimosaTEK solutions can help them”. Tri Nguyen said. MimosaTEK has provided farm management solutions for both smallholder farmers and large agricultural companies in different regions of Vietnam and for different types of crops. Its solutions have been applied for short-day plants, such as vegetables, and perennial plants, such as black pepper, coffee, or citrus trees. MimosaTEK has collaborated with reputable partners in irrigation infrastructure supplies and greenhouse construction to provide complete solutions for its customers.

11.4 MimosaTEK’s Innovation for Vietnamese Future Agriculture 11.4.1 Application of IoT in Agriculture (1) The Innovation in Precision Farming in Vietnam For thousands of years, Vietnamese farmers were using their hands and their senses in cultivating. Gifted by nature with tropical weather and alluvium from deltas such as Red River Delta or Mekong Delta, Vietnam has had all the advantages needed to develop agriculture. Yet the results of the crops never met their full potentials. Although Vietnam is one of the top agricultural export countries—third biggest rice export (The world atlas, 2017); second biggest in coffee export (The world atlas, 2018) and the world’s biggest black pepper export (The world atlas, 2017)—returns from exports have never been as significant as expected. Vietnam is not in the top 10 agricultural export countries (The world atlas, 2017). Moreover, products of the country’s farming are not highly evaluated compared with those of the U.S., Germany, Japan—the developed countries, or even compared with its neighbor country Thailand. Farming in Vietnam is almost like gambling for farmers: they invest their money, efforts and even their whole working lives just to hope that the crops will be fruitful thanks to nature. The whole process of crop producing usually bases on experience and know-how of the farmers, passed on verbally from generations to generations. As a result, yields’ productivity is not consistent and not reliable, caus-

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ing failure and losses for cultivators. Tri Nguyen believed that IoT could change this situation and benefit farmers. It took more than one year for Tri Nguyen and his team to develop a solution for precision irrigation called Mimosa Plant, the first product of MimosaTEK. MimosaTEK MGreen software can monitor evapotranspiration of plants and suggest the way to fulfill plants’ needs. As easy as it sounds, this in fact is the most important operation in a farming process. Lack of water or excessive water can severely affect the crops’ productivity and quality. It can even kill plants and destroy the entire field. MimosaTEK solution has helped the trees to ‘communicate’ with the farmers and alert them of when the trees are in need of certain cares. Up till now, the solution of MimosaTEK has not just been a software monitoring water data but also provided a complete system of water irrigation and fertilizer management, with core services MGreen Lite and RATA-FF as previously described in Table 11.1. (2) MimosaTEK as a Core Technology Innovation The core innovation of MimosaTEK is illustrated in Fig. 11.6. By using sensors that detect weather conditions and water supplies, Mimosa software (now can be used on mobile) can provide farmers with necessary information. All the information regarding weather and soil moisture can easily be tracked on the app. It also gives suggestions for watering or even can even help irrigate the farm automatically via certain settings. The system operations are as follow: – The farm or greenhouse is equipped with sensors which track weather conditions and soil moisture. After every five minutes, the data will be updated from the sensors to a centralized management software.

Fig. 11.6 Precision irrigation solution (MimosaTEK, 2019)

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– The database of the plants including development phase, drainage coefficients, lengths of plant roots, and structure of the soil, etc. are already setup in the software. – Every day, the management software synthesizes original specifications and data from the sensors to calculate the amounts of water or fertilizers per a day. This information is sent directly to the farmers’ mobile phones. – Apart from knowing the amounts of water or fertilizer needed, the farmers can control irrigation by using a remote irrigation system integrated in MimosaTEK software. With the remote irrigation system, supply of water is maintained accurately and conveniently. With the success of MimosaTEK solutions, the company affirms the benefit by cutting 30% of water usage. Moreover, the fertilizer control also helps reduce fertilizer residues which are bad for both plants and consumers. That helps the yields to be productive, minimizes possible damages, and saves costs for the farmers.

11.4.2 Challenges and Motivations to Overcome A long way from the starting point, MimosaTEK has overcome a lot of obstacles both from knowledge and social perspectives. To improve the accuracy of the system, the company has been through many ups and downs in research and development. The first challenge is that MimosaTEK had no previous experience in farming forecast and knowledge. Tri Nguyen has met a lot of people possessing the best knowledge in farming. They together investigated the environment factors and geological elements that affect the plants. However, Vietnam agriculture generally lacks data collection. While there are plenty of databases about plants & their growth information in developed countries, Vietnam is still behind in gathering such data. The information of plants and their development progresses have never been collected and recorded accordingly. Therefore, it is hard to access fundamental information of crops to set up the analysis. MimosaTEK has solved the problems by simulating using the information from FAO (Food & Agriculture Organization) and from real experiments on the field. It takes a long time and costly efforts to collect sufficient data for different types of plants. Tri Nguyen and his colleagues try their best to develop a system that is suitable for as many plants as possible, widening the horizon for their application in agriculture. The second challenge is that the farmers, with a long history of working based on experience and senses, are afraid to try new technology and smart devices. They hesitate to try alternative solution and they are skeptical of the system’s ability to succeed. In the beginning, the farmers believe in their instincts more than the technology. They think that nothing but their experiences can help them well in the field. Furthermore, the cost of setting such system is relatively high to many farmers in Vietnam. When MimosaTEK first released their products and service, their sales were significantly under-target. “We approached the product by inventing features we thought everyone would want, but it was too broad.”—explains Lan Anh Le,

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the COO of MimosaTEK. After communicating with the farmers and extract useful information, the company realizes their problems are as follow: – MimosaTEK’s exhaustive approach was overwhelming for small farms. – The extensive system means a steep learning curve as well as higher costs. – In some areas, farmers do not have the electric requirements needed for automated irrigation—to fully adopt the technology, they would have to upgrade the electrical boxes on their water pumps as well – Saving water and saving environment are not the farmers’ priorities at the moment as most of them need the immediate benefits from their investments. With these take-aways, MimosaTEK has changed their strategy and approached small farmers by offering prompt and visible benefits, such as how MimosaTEK’s solutions can save up to 80% of labor cost, time and even their electricity bills. Lastly, MimosaTEK has simplified its product to make adoption easier. “We’ve combined previously separate parts of the system into a single product to simplify automation.” And now farmers can ease into the system. “They can buy the irrigation automation first, since it is the easiest to understand. Then later, after they get used to using data in their farming, they can buy the soil moisture sensors and other greenhouse products. We now take a step-by-step approach,” she adds. Moreover, the farmers now can rent the system on a monthly basis to try the technology with an affordable price. When it yields good results, the farmers will choose MimosaTEK as a “must have system” instead of a “useful system”. The most important change, however, has been in MimosaTEK’s mindset. “We had this great idea and thought the customers would want our products to be more technology-oriented,” says Lan Anh. “But now we’re more focused on the farmers’ needs. We’re transforming the company to become more customer-oriented.”

11.5 Successful Factors of MimosaTEK (1) Management of Technologies: IoT and Agriculture AgriTech, a combination term by agriculture and technology, recently is widely used to describe the use of technology in agriculture with the aim of improving yield, efficiency, and profitability. This definition, while widely understood in countries with developed agriculture such as the U.S, Netherlands, Germany, Israel, etc., is still unfamiliar to rural farmers in Vietnam. Smart farming is a strange concept of which they are almost afraid to try. As the pioneer of using IoT in agriculture, MimosaTEK has aimed to change mindsets and behaviors of the farmhands. By developing original algorithm and software using its very own resources, MimosaTEK can proudly own the technologies in creating innovations. Tri Nguyen and his team take pride in the Vietnamese talents that build up one of the first applications of IoT in Agriculture in Vietnam. They apply multiple technologies, real-time analytics, machine learning, sensors, and embedded

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systems to activate IoT in agriculture through MimosaTEK solutions. Farmers who use MimosaTEK’s system see their crops grow healthier and more robust crops with less water. Conserving water increases the farmers’ incomes, with which they can then invest back into their farms. Farmers can also activate their irrigation systems remotely through the app, and this saves them time to focus on finding buyers for their crops or spending more quality time with their families. With MimosaTEK, Tri Nguyen has solved the problem of over-irrigation that has been a big problem for decades. (2) Management of Organization and Community from Knowledge Management Viewpoints To be successful, knowledge is MimosaTEK’s key power. Tri Nguyen has used his knowledge and education in IT to promote MimosaTEK solutions. To support the team and the entire company, knowledge management has been utilized to enable organizational learning. Knowledge management efforts typically focus on organizational objectives such as improved performance, competitive advantage, innovation, the sharing of lessons learned, integration and continuous improvement of the organization (Gupta and Sharma 2004). MimosaTEK’s core value is all about its people. “Our creative and dynamic working environment enables each individual to develop his/her strength in the development of MimosaTEK as a whole MimosaTEK appreciates and rewards contributions of our employees to the company”, says Tri Nguyen. At MimosaTEK, intellectual capital is the asset on which Tri Nguyen always focuses. A consensus has been established that intellectual capital can be characterized as consisting of three components: human capital, relational capital, and structural capital (Edvinsson and Malone 1997; Stewart 1997; Sveiby 1997). These sub-phenomena encompass the intelligence found in human beings, organizational routines and network relationships, respectively. In terms of human resources, MimosaTEK recruits talents who have passions for the future of agriculture in Vietnam. The COO Lan Anh Le herself graduated from National University of Singapore, and completed her high distinction CPA in Australia 2014. She worked for Pricewaterhouse Coopers, one of the “Big Four” accounting firms with a high salary. However, she left Singapore and came back to Vietnam looking for opportunities to change Vietnam agriculture. Thanh Danh, the Head of R&D, joined MimosaTEK when he was still a student of HCMC University of Technology and has continued to work in the company after his graduation to bring about real solutions to farmers. They all share the same dream of contributing something good to Vietnam agriculture. Wherever their origins were, all MimosaTEK team members put the hearts in the company’s every activity. That empowers their human capital. Figure 11.7 shows a team building event of MimosaTEK in which the whole team are happy and full of energy together. Relational capitals reveal all relations that a company maintains with external parties such as suppliers, partners, clients and other entities. MimosaTEK indeed has good connections with their outside associates. They accompany farmers with world-class, local customer service to help them achieve successful harvests. The farmers entrust MimosaTEK solutions to improve the quality of cultivation.

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Fig. 11.7 MimosaTEK’s people (MimosaTEK, 2019)

– “Besides helping us in saving water, energy and labor, 25% of tomato yield increasing by correct water applying was amazing”—says Nguyen Ba Hung, Director of Da Lat Organik. – “The solution interface and management tool are user-friendly, helping to manage the whole farm and know the daily water loss amount for sugar canes. The statistics feature is very useful for analyzing the water needs of our sugar cane farms; helping us to set appropriate irrigation schedules”—adds Truong Truong Tho, Irrigation Management Specialist of TTC corporation. – “MimosaTEK solution not only helps me maintain healthy crops by using water wisely but also frees me from daily irrigation management”—speaks Vu Van Dung, Black pepper grower in Gia Lai. Furthermore, MimosaTEK has also achieved the credibility from big NGOs like the World Bank in many projects for improving farming conditions and securing water for the environment. MimosaTEK collaborates with reputational partners in irrigation infrastructure supplies and greenhouse construction to provide complete solutions to its customers. Last but not least, structural capitals refer to a company’s processes, information systems, databases, policies, intellectual property, culture, etc. Understanding of knowledge being embedded in organizational structures and processes, Tri Nguyen and his colleagues have built a warm-hearted start-up environment, where they share the same enthusiasm to transform agriculture from manual to technology. According to Tri Nguyen, the biggest difficulty in managing the team is how to keep people stay together whole-heartedly with the organization over a long term. Besides devotion, there must be commitment guaranteed by policies and regulations. Thus, all of the founders have decided to not only invest money but also agreed that they would have to stay with MimosaTEK for a certain period of time before being able to sell the

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stocks. As the leader, along with a clear vision, Tri Nguyen must guarantee a fair environment that creates dynamic working atmosphere for employees.

11.6 Analysis of MimosaTEK’s Entrepreneurship (1) The Dream of Tri Nguyen With his experiences in IT industry, what Tri Nguyen would like to do the most is applying IoT in agriculture. He believes that must be the future for Vietnam agriculture. Having witnessed the hardship of the farmers in his hometown, Tri Nguyen has always concerned with finding a solution. He now is close to the achieving his objective, providing accurate irrigation for healthy crops and successful harvests. Nonetheless, it is just the first stage of his goal. Tri Nguyen wants to make MimosaTEK the leader in AgriTech, to bring the useful resolutions to all the farmers in Vietnam. Not only the big organizations can have access to AgriTech, he hopes that small-scale farmers can also access the well-equipped systems and devices to improve their farming results. Finally, his big dream is that Vietnam agriculture can be promoted and eventually have a break-through in development for sustainability and success. (2) The Ability of Forecasting the Future Business Environment When Tri Nguyen was still an expert in IT industry, he had the opportunities to access up-to-date technologies and scientific know-hows from foreign companies. He realized the value of having a favorable operation system. Yet, the cost is always the biggest concern, especially in agriculture. The evolution of Internet of Things has transformed the way people around the world live and work. IoT has changed completely the business landscape of information technologies. Instead of producing host systems like before, manufacturers have shifted to produce micro-processors, which allow customers coding and embedding added devices to work. That creates space for the SMEs to thrive with their innovative ideas. “This is my chance”—Tri Nguyen remembers. However, fierce competitiveness is inevitable in all markets. Even though MimosaTEK is a pioneer in AgriTech in Vietnam, there also are many advanced and well developed AgriTech organizations coming from the U.S, European, and so on. They all are well established and reputable. In addition, agricultural harvest is typically seasonal, so the risk is very high. Farm owners tend to be more cautious with new names in the market. To win them over, MimosaTEK has provided them with monthly rental so they can easily access the solutions. That helps MimosaTEK stand out in the market. Forecasting the needs of the farmers accurately and giving them special care to solve their problems heads on, MimosaTEK may have initially reached

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its customers using non-conventional strategy, but eventually, it is high quality and satisfaction that have convinced its customers completely. (3) Core Capabilities of MimosaTEK At MimosaTEK, the strongest competence lies in its people. Its team members themselves are talented and enthusiastic. With skills and knowledge, they have built their own applied algorithm and customized hardware devices to ensure reliability of the solutions for every farm. The people are young and together they head towards the mission of the organization “Being a Vietnamese company pioneering in application of Internet of Things for precision irrigation, MimosaTEK aspires to implement technology in every farm, helping farmers to operate sustainably and have better lives”. Climate changes have led to droughts on the fields for a long time recently. It drives farm owners of affected fields to invest in technologies to control irrigation. While foreign-based solutions have been favored in the past thanks to their quality, today many farm owners choose Vietnamese services because of reasonable costs and good benefits. MimosaTEK with outstanding quality, service and understandings of local culture and environments, has become a big player in the market competition. (4) The Entrepreneur’s Vision and Management “Startup is a commitment to go along with customers and with yourself till the end. MimosaTEK is not the startup that build up for selling, we develop by bringing an appropriate solutions for customers. Balancing the research and business is the essential factor”, Tri Nguyen affirms. On one hand, selling products and market expansion are survival elements for all organizations. However, if a company only focuses on business trade, it may offers no actual value. On the other hand, R&D is a significant element that can really make an organization stand out from its competitors for being unique and competent. Undoubtedly, Tri Nguyen and his associates have worked hard to manage both sales and R&D to maintain and improve MimosaTEK. For Tri Nguyen, agriculture is a long term commitment. Thus, people should not shorten the time investment. Patience and consistence are important in building a start-up business. Keep learning and working hard till the end are the way to be successful. Having a chance to support Vietnam agriculture is the inspiration for Tri Nguyen and MimosaTEK to go ahead. (5) His Way of Life and His Value Sense Through five years innovatively applying IoT in farming, MimosaTEK has been the leading start-up in this business, but not yet changed the entire landscape of Vietnam agriculture as they had wished. From the first day of doing AgriTech, Tri Nguyen has known that this is not an easy task. MimosaTEK has to challenge the conventional habits of Vietnamese in cultivating. Farmers are not familiar with high technologies such as cloud computing or data mining. They are afraid of using new system with which they previously have not had any experiences. They are skeptical about the success of the system and unwillingly to bear the costs that they have to pay. Tri Nguyen and his team have not only overcome the barrier of technology but also the

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closed mindsets of the farmers. This is an industry that has existed for thousands of years, so farming practices are not easy to change overnight. When being asked about giving up, Tri Nguyen just smiled “There are times when I’m tired. The path is long, the results are still not achieved much. Sometimes I think I stop, then go another way because the energy was out. However, the initial commitments I made to the company, my passion is still there, so it can’t be stopped”. Pausing for a while, he continued “And unconsciously, suddenly at that time, there was a light appearing, something suddenly become better, enough to pull me forward. It’s already the fifth year, the market is much brighter, we want to go to the end to know how much we can contribute to agriculture”. And Tri Nguyen, as a man with a strong determination for what he started, continues to fight for the dream he has nurtured for so long.

11.7 Future Plans After winning the Securing Water For Food Challenge organized by the United States Agency for International Development (USAID), the Swedish International Development Cooperation Agency (Sida), the Government of South Africa (DST), and the Ministry of Foreign Affairs of the Kingdom of the Netherlands (MFA-NL), MimosaTEK is implementing the project to apply water-efficiency technology to support smallholder farmers in Vietnam. In 2019, the company is going to deploy the Piloting Water Saving for Coffee Using Sensors & Smart Watering Technology in Lam Dong and Dak Lak. This project is supported by The World Bank. By using sensors on the farm to measure environmental factors such as soil moisture, precipitation, air temperature, and wind speed—each farmer will be provided tailored information about when is best to water their crops. MimosaTEK aims to reduce water loss up to 50% and to help smallholder farmers save water, electricity and also labor. So far, MimosaTEK has deployed the solution for more than 300 farms and helped save more than 80 million liters of water. Figures 11.8 and 11.9 show the execution of the project by setting up MimosaTEK system’s sensors on the farm and Tri guided the farmers to use the MimosaTEK’s app. The next plan for MimosaTEK is targeting sales for smallholder farmers in Vietnam as they accounted for 70% the agricultural products. In the past, farmers with small-scale yield rarely use technological system, but this is changing. To catch up with the market trends, farmers must be more open and accept the state-of-the-art technology. MimosaTEK would like to expand its business and collaborate with small farmers for a win-win outcome.

11.8 Conclusions Over 5 years of operations, Tri Nguyen and MimosaTEK have steadily developed, following Tri Nguyen’s vision. They have realized the goal of contributing to Vietnam

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Fig. 11.8 MimosaTEK system’s sensors on the farm (MimosaTEK, 2019)

Fig. 11.9 CEO Tri Nguyen shows a farmer how the MimosaTEK app can be used to collect information about the soil and schedule irrigation (MimosaTEK, 2019)

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agriculture. In the era of beneficial start-up like social network platforms, ecommerce apps or FinTech as leading trends, AgriTech has progressed steadily because of its true nature: innovation for environmental sustainability. Having no dream of becoming a “unicorn” (a startup which is worth one billion of dollars), MimosaTEK is truly a “zebra” with the purpose of sustainable prosperity. Instead of squeezing every last cent out of their target markets, it has helped invest its profits back into the communities and businesses. It has opened a new chapter of high technological applications in farming and the farmers now can utilize the available infrastructure, and optimize irrigation and fertilization to ensure fruitful harvests.

References Brown, E. (2016). “Who Needs the Internet of Things?”. Linux.com, Retrieved May 9, 2019. Dieisson, P., et.al. (2018). Scientific development of smart farming technologies and their application in Brazil. Information Processing in Agriculture, 5, 21–32. Edvinsson, L., & Malone, M. (1997). Intellectual Capital, Harper Business, New York. Gupta, J., & Sharma, S. (2004). Creating Knowledge Based Organizations. Boston: Idea Group Publishing. ISBN 978-1-59140-163-6. Michael, J.O’G., & Gregory, M.P.O’H. (2017). Modelling the smart farm. Information Processing in Agriculture, 4(3), September 2017, 179–187. Stewart, T. (1997). Intellectual Capital: The New Wealth of Organizations, Nicholas Brealey Publishing, Business Digest, New York. Sveiby, K.E. (1997). The New Organizational Wealth, Berett-Koehler Publishers, USA. https://data.worldbank.org/indicator/NV.AGR.TOTL.CD?locations=VN&view=chart (retrieved March 2019). https://e27.co/7AgriTech-startups-asia/ (retrieved March 2019). https://MimosaTEK.com/en/ (retrieved March 2019). https://www.cbinsights.com/research/agriculture-tech-market-map-company-list/ (retrieved March 2019). https://www.worldatlas.com/articles/the-american-food-giant-the-largest-exporter-of-food-in-theworld.html (retrieved March 2019). https://www.worldatlas.com/articles/the-world-s-largest-exporters-of-coffee.html (retrieved March 2019). https://www.worldatlas.com/articles/the-world-s-top-black-pepper-producing-countries.html (retrieved March 2019). https://www.worldatlas.com/articles/top-rice-exporting-and-importing-countries.html (retrieved March 2019).

Chapter 12

Daisuke Teshima and TRIFE Inc.—Creating a New Business to Support the Elderly and Handicapped Michitaka Kosaka and Yong Nie

12.1 Introduction Many cases of successful entrepreneurship tell stories in which new businesses were successfully launched and high sales and profits were created. Their business purposes usually created value for their general customers. However, this report describes an example of a very unique new business targeting the elderly or handicapped people, who are generally referred to as “the weak.” TRIFE Inc. is the creator of this kind of unique business. The company is located in Yokohama, Japan, and its president is Mr. Daisuke Teshima. Through joint research on an oral care formulation “NEONISIN” with Kyushu University, Kagoshima University, and the National Center for Geriatrics and Gerontology, and through collaboration with an advanced research institute (Eco Friendly Institute Limited.), came the release of the oral care product “ORALPEACE” (toothpaste and oral care gel, mouth spray and wash). The product is made from 100% natural raw ingredients and is even safe to eat. The product is being sold nationwide at elderly nursing homes, care facilities for the handicapped, and other environments in which elderly or handicapped people are present. One of the main characteristics of this business is that it provides safe and secure products to the elderly. In recent years, with the rising trend of an aging society in Japan, the number of elderly people who need long-term care, have severe disabilities, and/or those who have to take daily medical treatment is increasing. For those in need of oral care, such as those with tooth decay, periodontal disease, halitosis, or aspiration pneumonitis, it is difficult to take care of themselves. Even if ORALPEACE is accidentally ingested, it is safe because it will be digested as an amino acid promptly by the body’s digestive enzymes. This revolutionary feature has

M. Kosaka (B) · Y. Nie Japan Advanced Institute of Science and Technology, Nomi, Japan e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_12

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attracted worldwide attention to this oral care product. In the field of biotechnology, ORALPEACE is regarded as a bio-business venture to care for the elderly. Another feature of this business is that it aims to create jobs for handicapped people and improve their income. Through ORALPEACE, we are trying to create a business model for handicapped people who cannot get a job despite their desire to, and we are trying to establish a business model that leads to their receiving income. From this perspective, ORALPEACE can also be regarded as a social business venture that aims to solve problems faced by the handicapped. This is a report that focuses on two aspects: ORALPEACE as a bio-business venture and as a social business venture. It is attracting attention as a new type of entrepreneurship born in Japan from the will to solve problems spawned from aging societies and help those with disabilities through worldwide competitive research and development. All information in this chapter is obtained through interview with Mr. Daisuke Teshima. In the following chapter, we discuss Mr. Teshima’s way of thinking, which was the reason for the launch of ORALPEACE, and the features of this business.

12.2 ORALPEACE as a Social Business Venture We introduce the superiority of ORALPEACE as a social business venture by discussing the following aspects: (1) Mission, (2) Features of ORALPEACE, (3) ORALPEACE products, (4) Recent business situation, and (5) Recent awards. (1) The Mission of ORALPEACE Mr. Teshima and his colleagues at TRIFE Inc., which sponsors ORALPEACE, recognize their mission as follows: We, as a bio venture, are opening up a path to medical and healthcare applications of a natural antibacterial agent, Bacteriocin, which is made from lactic acid bacteria. The technology behind this is Japan’s original research on lactic acid bacteria and biotechnology, through an industry-university collaboration with Kyushu University. As a social venture, we are challenging the creation of social participation and jobs for the handicapped through our business; we provide innovative oral care products that are friendly to humans and the environment, care for people of all ages (from infants to the elderly), work in emergencies without any water, and contribute to people’s health worldwide every day. We take advantage of being a combination of a bio and social venture and of these innovative bacteriocins to develop various businesses worldwide. (2) Seven Features of ORALPEACE Because of the bacteria in oral cavities, the number of people who suffer from cavities, periodontitis, bad breath, and, in serious cases, aspiration pneumonia is increasing. ORALPEACE is based on the latest bio-technology and lactic acid research,

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enabling consumers to conduct oral care effectively and safely. ORALPEACE has the following seven features: (a) It was created through an industry-university collaboration with the Graduate School of Agricultural Research Institute at Kyushu University, the Graduate School of Medical and Dental Sciences at Kagoshima University, and the oral disease research unit at the National Center for Geriatrics and Gerontology. (b) It is based on Japanese bio-technology. (c) It contains NEONISIN® , which includes a natural pharmaceutical formulation for oral care. (d) It is hypoallergenic, alcohol free, only uses natural ingredients, and does not contain synthetic preservatives, synthetic fungicides, or other synthetic ingredients. (e) ORALPEACE pursues safety for everyone: from babies to the elderly. (f) All ingredients, except for water, are derived from plants, so it has high sustainability and little environmental impact, even when released into water sources, such as rivers and lakes. (g) ORALPEACE supports the handicapped by creating new jobs for them. (3) ORALPEACE Products The ORALPEACE products shown in Fig. 12.1 are made with the above-mentioned biotechnology and include toothpaste, oral care (75 g: 1080 yen), mouth spray (30 ml: 1080 yen), clean moisture (80 g: 1296 yen), and so on. In addition, sunshine orange, sky mint, and other colors of ORALPEACE toothpaste are available. Product examples are shown below. (4) Recent Business Situation This ORALPEACE started in 2014, and its annual sales then amounted to 20 million yen. As of 2017, the sales for the fiscal year are expected to be 78 million yen. Mr. Teshima said, “Three years have passed since the start of the business. The annual revenue has risen about four times, but from a business perspective, I do not think that it is enough considering how much attention it is attracting.” This is a business model with the premise of giving work to the handicapped, but it is expected to develop rapidly with global expansion of the business. (5) Recent Award Examples Owing to such efforts and characteristics, ORALPEACE won many awards at various business contests. First, at the Yokohama Business Grand Prix 2014, the largest domestic business contest held in 2014, he received the two prizes of “Best Award” and “Audience Award.” In 2015, he received the “Minister of Economy, Trade and Industry Prize,” shown in Fig. 12.2, which is the most acclaimed prize in the Japan Venture Awards. The Japan Venture Awards recognize entrepreneurs who have surpassed challenges without fear of risks and conducted a business that is voted as “excellent” in

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ORALPEACE Brushing & Moisturising Gel

ORALPEACE Mouth Spray & Wash

3 types of ORALPEACE products

Fig. 12.1 Products of ORALPEACE

Fig. 12.2 Mr. Teshima won Japan Venture Awards 2015

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the categories of sociality, advancement, innovation, regionalism, internationalization, and technology. In 2015, from among the 152 applicants (the largest number of applications ever received for this award ceremony), he received the honor of winning the “Minister of Economy, Trade and Industry Prize,” which is awarded to the best entrepreneur. This was the result of the comprehensive evaluation of the business content of ORALPEACE, the achievement of the activity, and the qualification of the management. ORALPEACE has also won many other awards, which shows that it is well appraised by Japanese society.

12.3 The Prehistory of the Establishment of ORALPEACE 12.3.1 Teshima’s Career and Experiences Before the Start-up After graduating from the School of Law at Meiji University, Teshima (Fig. 12.3) worked at Uchida Yoko and Tohmatsu Consulting Co., Ltd., as well as at other companies. There, he did corporate consulting and offered various solutions to customers. In 2005, he launched the organic cosmetic brand “Agronatura” at Idea International Fig. 12.3 Mr. Teshima’s photo

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(Idea) Co., Ltd. The business started from scratch, but its revenue reached 1 billion yen within nine months in the market. The company become Japan’s leading organic brand, and Idea Co., Ltd. has since developed into a company that donates more than 10 million yen annually to NGOs and has become a listed stock. From this experience, Teshima gained business knowledge regarding organic relations, and he started to meet influential people, thus forming crucial networks. Based on these experiences of success, in 2006, he established TRIFE Inc., which launched various businesses and brands, and delivered corporate consulting work, lecture activities, etc. The turning point was when Teshima’s eldest son was born handicapped. As a result of this, in 2009, he established a volunteer organization called “Sell the Challenge” that sells products that were made by people with disabilities. He also assisted in the planning of voluntary products and the development of sales channels at facilities throughout the country. However, he realized that doing business with disabled people is very difficult if the products themselves are not strongly competitive and profitable. So, in 2012, he began working on a project to challenge the creation of jobs nationwide for handicapped people with a will to work. The result is ORALPEACE, and Teshima’s entrepreneurial company TRIFE is sponsoring it.

12.3.2 Starting up a New Business for Handicapped People’s Independence Mr. Teshima talks about the business in which handicapped people can gain independence as follows: The purpose of ORALPEACE is to “use technology to create work for the handicapped.” If you think about the question: “Who is important to you?” The answer is your family; therefore, for me the future of children with disabilities is important. “Commitment to my family” means consideration of the future of children and people with disabilities. This is why I started the business. Teshima worked an ordinary life as a company employee after graduating from university. However, when his firstborn son was born handicapped, he knew that the wages of people with disabilities were low. Considering the future of his child, he was eager to raise their wages. At the company he was working for, he created organic cosmetic brands and made these brands grow successfully. With the profits of a successful business, he developed a donation model supporting people with disabilities. However, he was not satisfied with this model and further thought about how to make it more meaningful. In order to contribute to the handicapped, he established a volunteer group called “Sell the Challenge” to create jobs for them. There are 7.8 million people with disabilities in Japan, and accordingly there are 16 million parents. Those parents are co-workers of the volunteer association. He talks about the trigger to start up ORALPEACE as follows:

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Various people gathered and did a variety of things to help. There were many facilities for people with disabilities, and a variety of products were made, but those products could not all be sold. Also, there were donation and support activities, but I realized that conducting a business with disabled people is difficult. On my 42nd birthday, I saw an article in a newspaper that said, “An elderly woman passed away and her handicapped son (42 years old) starved to death.” At that moment, I realized that volunteering was not a solution. It dawned on me that it is indispensable to create jobs where the handicapped can earn money by and for themselves. Why do we work? My mission is to develop a cause that eliminates the future concerns of myself, my family, people with disabilities, and their parents. In not only Japan, but also countries worldwide, the number of people with disabilities is huge. This start-up business for the handicapped is for my precious family, for the handicapped with the same troubles, and for their parents.

12.3.3 Discovery of a New Biotechnology and Starting ORALPEACE When Teshima was exploring various businesses for handicapped people, he had the chance to discover a new biotechnology from Kyushu University. The opportunity came about because of an inquiry aimed at him about whether the organic technology at Kyushu University could be used for organic cosmetics, which he used to have expertise in. Unfortunately, although it was a biotechnology safe for human ingestion, it could not be used for cosmetics. However, at that time, his father had been diagnosed with cancer. Because of the anticancer drugs, mold had grown in his mouth and sterilization became necessary. As is well known, disinfectant would destroy the stomach if it were to be swallowed by mistake, and in fact, such mistakes sometimes happen to elderly people, so disinfectants could not be used. An idea came to his mind about whether it would be feasible to make a mouth disinfectant with Kyushu University’s biotechnology and to create a new business for people with disabilities. By using the biotechnology of Kyushu University, the disinfectant can sterilize mouths and is safe even if it is ingested. This was the trigger to starting ORALPEACE. ORALPEACE is a bio-business venture from the viewpoint of technology. Meanwhile, it is also a social business venture from the perspective of solving a societal problem for the handicapped. When the elderly use ORALPEACE products, their nursing care expenses can be reduced because their mouths are being well cared for. Moreover, until now there was no safe drug that could kill mouth fungus and at the same time have no risk of lesion when ingested. From a business viewpoint, it is important for nursing care facilities to maintain a high level of care and it is not good for the facility’s reputation when care targets are not met due to accidents. Drugs with strong bactericidal effects are dangerous and not suitable for the sterilization of elderly people’s mouths, and these have been causes

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for such accidents. Moreover, in terms of jobs for people with disabilities, there are not many jobs for them in rural areas. A lot of questions about the daily lifestyles of the handicapped should be thought about. For example, how do handicapped people survive in their hometowns? What will happen to them in ten years? People with disabilities who cannot leave their hometown have to live there forever, and, similarly, elderly people must also remain and live in their rural areas. ORALPEACE is expected to meet the needs of the elderly owing to its feature of safe oral care, and it delivers competitive oral care products to elderly and disabled people living in the area. It leads to a solution for the social problems that the elderly or handicapped have. Mr. Teshima adds, “This business is receiving everyone’s concerns and sympathies; its goal is to create business for people with disabilities, so business targets may change to fit in with the objective.”

12.4 Pursuit of ORALPEACE Business 12.4.1 Technological Innovation as a Bio-Business Venture ORALPEACE uses NEONISIN, which is considered to be extremely innovative biotechnology. In this chapter, we will explain the background of such innovative biotechnology and the business strategy of TRIFE Inc., which focuses on joint research with universities. (1) Nisin Introduced from Kyushu University The core technology for the products of ORALPEACE was born from joint research with Kyushu and Kagoshima Universities. The Bio-architecture Center of Kyushu University (Fig. 12.4) focuses on antibacterial peptides (proteins) made from highly safe lactic acid bacteria, which have been eaten since ancient times. It has done various joint research with local companies. One achievement includes the commercialization (formulation) of the most famous antibacterial peptide—Nisin A. Nisin is a micromolecule protein made by lactic acid bacteria (Lactococcus lactis). The lactic acid bacteria and its closely related bacteria (Gram positive bacteria) show antibacterial action. The lactic acid bacteria used in Kyushu University is a bacteria (Lactococcus lactis) that was found in the Okara bean curd in the Fukuoka prefecture, and it has the highest ability for making Nisin A. It is used to develop oral care products that are safe even if ingested accidentally, and it has safe and secure antibacterial agents that can be used for specific purposes. Nisin A was found in cheese by a British dairy farmer in 1928. It is a bacterium that humankind has eaten since ancient times, naturally existing in traditional fermented foods, such as yoghurt, cheese, and salty rice-bran. Facing the bacterial population, certain lactic acid bacteria make protein to get rid of their enemies in order to survive. The protein is called a bacteriocin, and bacteriocins have been used throughout the

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Fig. 12.4 Researchers in Kyushu University

world to preserve foods. Since Nisin A was approved by the World Health Organization (WHO) and the UN Food and Agriculture Organization (FAO) in 1969, it was added to the generally recognized as safe (GRAS) list in 1988 in the United States. Moreover, it has been recognized as a safe natural bacterial agent for oral and mucous membrane ingestion in over 50 countries. In the United Kingdom, France, and other European countries. the amount of permission for its use in cheese and other dairy products is unlimited. In 2009, it cleared all genetic toxicity and carcinogenicity tests, as well as other tests that were conducted at the Ministry of Health, Labor, and Welfare, and it was recognized as a safe food in Japan as well. (2) NEONISIN as a Technological Innovation Nisin A is low in stability, salty, turbidly white, and smelly, so it could not be used in a formula for oral care. Furthermore, it is used exclusively in some foods, so if the same quantity were used for oral care products, it would affect the taste and have stability issues in the case of extremely small amounts if only Nisin were used. Therefore, original separation and purification technology was performed to create a type of Nisin A that can be ingested without problems that result in a lack of quality (taste, smell, stability). After ten years of research and development, a highly refined salt-free Nisin A with high purity and excellent stability in liquid was invented. This was achieved through the industry-university collaboration between Kyushu University (who researched bacteria and provided bacterial strains) and Kyushu dairy business, Eco Friendly Institute Limited. Eco Friendly Institute Limited was developing the dairy business and leading it into a new field that did not focus on food. Therefore, a technique was developed for mass culture and production of the provided bacterial strains. Eco

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Friendly Institute Limited’s Nagatoshi and Teshima are now working together to promote ORALPEACE. Teshima and his colleagues refined e technology through various processes, with a strong motivation to care for Teshima’s father while he underwent anticancer therapy and a desire to create work for the handicapped. The result was NEONISIN. This technology solves the aforementioned problems through a unique combination of Nisin A and plum extract. It led to the invention of an ideal formula for oral care— NEONISIN® *—which has since been patented, and, in 2013, it pioneered globally for its use of bacteriocins in medical and cosmetic applications. Based on the above, NEONISIN® * can be said to be a new oral care formula that meets the safety needs of various people. From this perspective, ORALPEACE can be thought of as a biotechnological innovation. (3) Superior Technology Development Policy Through Joint Research with Universities In addition to the technologies already commercialized, TRIFE Inc. uses new superior technologies that are being studied at universities, research institutes, corporations, and by individual researchers TRIFE identifies the core competences of research and technology by working with project members that have various business-producing experiences in the field of healthcare. By working with them, TRIFE aims to commercialize influential products, brands, and services that are friendly to people and the environment, which are innovative and highly competitive in terms of social usefulness and innovation through strategic approaches. Furthermore, TRIFE aims to develop its business in a way that solves social problems, such as through the creation of jobs and the encouragement of social participation of the handicapped nationwide. TRIFE’s corporate policy is to develop a new social business model that can combine business and welfare to solve social problems with new technologies; it is developing international competitive products, brands, and services in the field of healthcare and is expanding its environmentally and people-friendly business worldwide. Yet it all started from the world’s most quickly aging society in Japan. Regarding the current R&D situation in Japan, there are several technologies which are difficult to turn into products and commercialize, even if research, development, and prototyping are conducted repeatedly for commercialization purposes. Furthermore, there are inventions and intellectual properties at universities and firms, which have high social usefulness. Facing such a situation, TRIFE works with professionals in business and marketing, research and technology, and manufacturing, as well as with administrators and other supporters to identify the social usefulness and competitiveness of such research and new technologies. Through the collaboration of industries, universities, and the government, the company is trying to implement Japanese superior technology in businesses to create international competitiveness and high social contribution. The target research and new technologies of the company are: • Those regarded as being very useful in the healthcare and medical fields

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Those that are useful for health promotion (intraoral, skin, oral intake etc.) Those in biotechnology, materials, ICT, robots, etc. Those that are expected to be internationally competitive Those that contribute to aging societies Those that are friendly to both humans and the environment.

12.4.2 Business Model Innovation as a Social Business Venture ORALPEACE is also an innovative channel through which handicapped people conduct distribution business in Japan’s aging society. Generally, production has to be concentrated considering the economies of scale, but consumption can be done anywhere, and elderly people still remain in rural areas. For these reasons, it is possible to run a retail business that serves the elderly in each small commercial area. The handicapped cannot earn high wages by doing production work, but they will receive reasonable earnings through doing distribution work. ORALPEACE is a solution to the problem of no jobs for the weaker and less-abled members of society. It does not deprive healthy people of jobs and it is a Blue Ocean business. ORALPEACE has built a high added-value business, in which the handicapped work to sell goods and can gain 350 yen per product sold. Moreover, ORALPEACE has a business model in which profits are shared from the beginning. Two features of ORALPEACE as a social business venture include its business model incorporating the handicapped and the formation of supporters with the same values. These will be explained in detail below. (1) The Business Model that Provides Opportunities for the Handicapped The biggest feature of ORALPEACE is its business model that provides working opportunities for the handicapped. The population of the handicapped in Japan is about 7.44 million, and many of them have desires to work and live independent lives with the wages that they have earned. However, the current situation is that there are few job options to satisfy those who wish to work and live independently. Even for those who were working, their wages were very low. According to the Continuous Employment Support-Type B Services, the average monthly wage in FY 2011 was 13,742 yen, and, in many cases, some people earned less than 10,000 yen per month. The mission of ORALPEACE is to continuously challenge itself to create a workplace where the handicapped can get a rewarding income, a secure place where they can live, and future options for the handicapped and their family in which they can live a safe and active life. The supply chain of ORALPEACE is shown in Fig. 12.5. Through business, such as sales of products, production of raw materials, shipping work, and manufacturing of promotional products (Fig. 12.6), the handicapped can make full use of their individuality. Sales are conducted at about 100 facilities for

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Working facilities for the handicapped

Product manufacturing Factories

Shipment to nationwide offices Warehouses

Regional sale & wholesale Working facilities for the handicapped (nationwide )

Retail Care facilities for the elderly and handicapped/medic al institutes/retailers

The elderly living in rural regions

Fig. 12.5 Working opportunities for the handicapped at ORALPEACE

Fig. 12.6 Production of ORALPEACE

the handicapped, 500 retail stores and 2000 dental hospitals nationwide. In this way, jobs are created for the handicapped in various places. In addition, Tokyo Colony Higashimurayama Works, which is a social welfare corporation, ships the products from place to place. ORALPEACE plans to create jobs in which the handicapped also cultivate organic raw materials, such as soybeans and mint, in the future. The above explanation is summarized in Fig. 12.7. In this way, scholars, researchers, engineers, bio-ventures, and social ventures work together to create a future where the handicapped and their families can live in peace of mind because of ORALPEACE’s environmentally and people-friendly products. If they feel motivated to improve their social participation opportunities and income, the handicapped can start working at partner offices at any time. With the effort of protecting both their employment opportunities and their income, this business model sets the following five constraints: (a) The handicapped must be engaged in the work derived from our supply chain of jobs. (b) Products that are sold outside the possible areas must not be sold online (see ‘commercial area’ below).

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245 Purchasing assistants Doctors Nurses Dentists Dental hygienists Families

Promotion to medical personnel

Kyushu University Kagoshima University NCGG* Partner Business offices

Joint research

Manufacturer & Distributor Gentle Laboratory

Sales agency Wholesale Trife Inc. Market supports

Consumers

For reference:

handicapped

Cultivating plant sources Welfare offices/working facilities for the handicapped

*NCGG:

Retailers Nursing facilities

Product filling Medical institutions End users Dental hospitals Revenue Wholesale Retail Retail stores collection Working facilities Distribution for the processing

Shipping agency Working facilities for the handicapped

Retail Selling products online to regions without such facilities

• 5 million elderly people needing longterm care • 50 thousand people with severe mental and physical disabilities

The National Center for Geriatrics and Gerontology

Fig. 12.7 The business model for the engagement of the handicapped

(c) Promotional discounts are not allowed in order to maintain fair sales opportunities at each business office. (d) Vessel accounting shall be used for sales, and the portion obtained by subtracting expenses shall be distributed as compensation for users. (e) Sharing of distribution fee results regarding sales of ORALPEACE products. In addition, partner offices can start ordering products by e-mail instead of by procedures such as signing contracts or system registration. There is no penalty or default if they stop business activities and do not place any orders. It is simply a mechanism for conducting business promptly. Care facilities for the elderly and medical treatment facilities for the handicapped are expected to be utilized in terms of sales efforts. For example: • Phase 1: Conduct retail sales at business offices, and welfare shops (stands). • Phase 2: Take advantage of local ties and personal connections, thus achieving wholesale at local medical institutions and facilities for the elderly and handicapped. In order to successfully circulate business in rural areas, it is very reasonable to make use of the ties with dental hospitals and medical institutions that the people at ORALPEACE offices and their families use. Since this project aims to create jobs for the handicapped in each region of Japan through local sales activities, it is desirable to build a business area that is within scope of delivery and supplies by a partner office that is designated as an agent. If there are multiple partner offices in the same business area, priority will be given to the first one that starts to cooperate with the business, in a typical first-come-first-serve fashion.

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(2) Creation of a Community with the Same Values ORALPEACE aims to form a community to contribute to society through organizing supporters or partner facilities alongside people with the same values (Fig. 12.8). Specifically, in order to promote and expand social contribution, the ORALPEACE project requires support from warm-hearted people. It aims to conduct long-term cooperation with business partners and professionals that sympathize with this project; for example, those within fields such as domestic and overseas business management, business operations, sales/retail, wholesale, manufacturing, planning, new drug development, accounting, finances, PR, advertisement, media, editing, legal affairs, IT, consulting, marketing, photography, and film. The desired professionals are those who come from the medical, research, education, and sports industries, among others. Furthermore, ORALPEACE is also currently organizing retired people who have experience in social contribution, and those who are willing to provide help are welcome to. The current supporting members, totaling about 100 professionals, including dental doctors, university officials, and businesspeople, are shown online; http://ORALPEACE.com/member. In particular, the company is trying to receive support from the following people: • Those who have experience in sales, wholesale, purchasing, retail, marketing and consulting, and especially those in the fields of domestic oral cavity products, cosmetics, pharmaceuticals, baby goods, miscellaneous goods, and other similar products (because of their weak function in marketing) • Doctors and dentists • Pharmacists, nurses, dental hygienists, and speech-language-hearing therapists

Fig. 12.8 International workshop of ORALPEACE community

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• Corporate managers with whom ORALPEACE can work together on social contribution activities • Corporate managers and persons in charge in the retail or wholesale business • Entrepreneurs who run pharmacies and hospitals • Managers and persons in charge of nursing care facilities for the elderly and handicapped • Teachers at universities and research institutions, managers and persons in charge of companies who can provide research support, technical assistance, and technical alliances • Chairpersons and persons in charge of foundation funds who can support and promote the project • Individuals who can support the project • Managers, chairpersons, and persons in charge who run working facilities for the handicapped • Business persons who can support by providing pro bono publico (strategies, marketing, finances, operations, marketing, planning, PR, design, copy and editing, photography, film, composition, ICT, welfare, athletics, and others) • Professional and amateur athletes and climbers who participate in competitions while wearing the ORALPEACE logo • Models, stylists, apparel brands, studios, photographers that are willing to cooperate in photography for ORALPEACE • People in the entertainment and fashion industries who can widely propagandize the ORALPEACE project • The media: publishers, editors, and writers who can write about the project • Organizers of lecture meetings and seminars who are willing to spread knowledge about the project • University professors, researchers, and students who are engaged in research and case studies on corporate social responsibility (CSR) or creating shared values (CSV) models regarding the integration of business and welfare • Volunteers at the headquarters of the project (supporting businesses, accounting, affairs, PR, sales promotions, telephone and e-mail communications) • People who are willing to help introduce the ORALPEACE project to friends and acquaintances (anybody is welcome!) • People who are willing to help create a better future for the handicapped, their precious families, and for people in trouble.

12.5 The Global Development of ORALPEACE 12.5.1 Teshima’s Thinking on ORALPEACE’s Global Expansion Teshima has a strong desire for overseas expansion, which he describes as follows:

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When developing business in Japan, having overseas success will have a big impact and a positive push towards conducting further business in Japan. However, even though Japanese products would win in markets by virtue of technology, there are no products for overseas expansion because of the business relations with Japanese pharmaceutical companies. Currently, there are few Japanese pharmaceutical companies that are doing business with global brands; it is purely a domestic demand sector. We would like to make the best use of biotechnology for a global benefit and expand ORALPEACE with all of its advantages from our aging Japanese society to the rest of the world. ORALPEACE is a small Japanese company but it is still attracting worldwide attention owing to its social significance. If this were not the case, other countries would not have taken notice. However, as a business, if it does not make a profit, it cannot expand overseas. Whether or not the model will eventually become a global business is a problem. Regarding the process of expanding the healthcare business for the Japanese elderly from the Asia-centered market to overseas, I think we can do good business if we can position ourselves properly.

12.5.2 Examples of Overseas Development ORALPEACE is firstly developing the markets of Asia and Central America when expanding overseas. As a strategy, ORALPEACE first plans to focus on popularizing its products and establishing itself as a brand. Then it plans to launch the numerous workplaces for the handicapped. 【Business Development in Asia】 In the Asian market, ORALPEACE is planning to expand through cooperating with local companies. In China, it has already established connections with local entrepreneurs who acknowledge the significance in promoting work opportunities for the handicapped, and ORALPEACE products are thus being exported there (Fig. 12.9). When this business venture eventually smooths out, ORALPEACE plans to implement its business model for the handicapped. A future challenge will be to demonstrate the feasibility of operating a handicapped-based supply chain. In Taiwan, ORALPEACE is working together with a Taiwanese company that has its business based in Asia (Fig. 12.10). Although the premise is that ORALPEACE is a business supporting the handicapped, the first step of developing strategies overseas is to popularize the products, establish the brand of ORALPEACE, and then consider making a business with jobs available for the handicapped. The ORALPEACE project is developing business in Central America and Europe as well. In some Mexican and Guatemalan hotels, doctors, dentists, and healthcare professionals gathered together to hold onsite product presentations. The presentations allowed lots of people to learn about the philosophy behind the ORALPEACE project and the advantages of their products in the global market, the impact on society, and so on. Also, Fig. 12.11 shows an exhibition held in Germany. Although it

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Fig. 12.9 Exhibition in Tenjin

Fig. 12.10 Collaboration with a Taiwan company 【Business Development in Central America and Europe】

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Fig. 12.11 Exhibition in Germany

is on the other side of the world, ORALPEACE’s vision is being transmitted, and participants are becoming supporters of the ORALPEACE project, leading it to have a successful start. The thought that people are important is connecting the world together.

12.6 Teshima’s Thoughts and Future Development of ORALPEACE Finally, Teshima expressed his thoughts on the future development of ORALPEACE during the interview. We summarized them as follows: (1) Positive Things and Reflection on Short-Term Business Development So Far 【Good things】 We have won a variety of awards, and we have been accepted and reported about on the television and in the newspaper, as well as by other forms of media and have been attracting public attention. Moreover, big companies overseas are now noticing and making contracts with us. We are being expected to do something. Our goal is to solve social problems, and we can confirm that many people sympathize with us. For example, they took no fee for supporting ORALPEACE; they attended press conferences and moreover supported various other activities; they are supporting us mutually. 【Reflection】 The main purpose so far is to support the handicapped, and thus ORALPEACE’s economic success has been postponed. For this reason, the current business scale is still small. With this purpose in mind, we think that if we introduced capitalists who focused on earnings and return, our goal of creating a business for the handicapped would be shaken. Hence, we are so far running the business with just our own funds. However, whether the current situation can be said to be successful in the world of business? At this scale, ORALPEACE could not produce a big impact, but I wonder if we could make the business better. It’s hard to keep small businesses going, and it

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may be better to eventually aim to make money like Bill Gates. Currently, my thoughts are swaying a lot, but I know I would like to advance the business in the way of not disappointing people’s expectations. (2) Future Dream: Pursuit of Both Economic Rationality and Support for the Handicapped I am thinking of gathering people who sympathize with the vision of supporting the handicapped and acknowledge their value, to promote ORALPEACE on a global scale. The value is not monetary. We have to think about: What is important? What are we working for? We are working for our family and our colleagues. In order to expand the business, we should make full use of biotechnology and NEONISIN, create bacteria, and expand on its use. For example, I am thinking of expanding the business by creating eye drops, medicinal materials, and health medicine to support our various projects. However, considering the efficiency of the business, making profits contradicts our aims of supporting weaker and less-abled citizens. However, regarding capital economy, how should we deal with a situation in which we do not make money because of caring about the elderly and disabled? It is necessary to seek to achieve both economic rationality and support for weaker and less-abled citizens simultaneously. There is no successful business model for the handicapped. I feel anxious and also expect to do what we never did at all. This is a very difficult thing to do. With regard to capital economy and social entrepreneurs, there is no such case in which a statesman made his country rich through the strength of weaker, less-abled people. I would like to ask more native English speakers about their opinions on how to balance the working success of handicapped people and the achievement of good results in the company. ORALPEACE aims to establish a brand by which the handicapped can create a sense of value, participate in society, enjoy their lives, and the dream of a community living and working together with its weaker and less-abled citizens can come true. Besides economic rationality, what else is there? What is human society? Why do we work? What is a value that cannot be expressed by money alone? I am trying to seek the answers to these questions. Wouldn’t it be great to create such a brand? I want to make ORALPEACE grow into a global brand. If such a global brand existed, it would be wonderful to have it come from Japan. We at ORALPEACE all share the dream of winning the Nobel Peace Prize in the future.

12.7 Analysis of Teshima’s Entrepreneurship We analyze Mr. Teshima’s entrepreneurship according to the following attributes. (1) His Dream and Objectives Mr. Teshima said “The purpose of ORALPEACE is to use technology to create work for the handicapped. If you think about the question: “Who is important to you?”

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The answer is your family; therefore, for me the future of children with disabilities is important. “Commitment to my family” means consideration of the future of children and people with disabilities. This is why I started the business.” Thus, his dream is to create work for the handicapped and make his children’s social participation. (2) His Ability of Forecasting the Future Business Environment ORALPEACE is expected to meet the needs of the elderly owing to its feature of safe oral care, and it delivers competitive oral care products to elderly and disabled people living in the area. It leads to a solution for the social problems that the elderly or handicapped have. In Japan and Asian countries, aging people have been increasing rapidly. Also, there are many handicapped people, for example, there are 7.8 million people with disabilities in Japan, and accordingly there are 16 million parents. This new business is looking at the future business environment associated with the aging society and the handicapped. (3) His Core Resources or Technologies ORALPEACE uses innovative biotechnology and is regarded as a bio-business venture. This core technology for the products of ORALPEACE was born from joint research with Kyushu and Kagoshima Universities. He has a superior technology development policy through joint research with universities. (4) How to Manage His Company He said “This business is receiving everyone’s concerns and sympathies; its goal is to create business for people with disabilities.” So, in order to promote ORALPEACE and expand social contribution, he has been forming a community to contribute to society through organizing supporters or partner facilities with the same values. The ORALPEACE project requires support from warm-hearted people, especially, business partners and professionals. (5) His Way and His Value Sense He said “I am thinking of gathering people who sympathize with the vision of supporting the handicapped and acknowledge their value, to promote ORALPEACE on a global scale. The value is not monetary. We have to think about: What is important? What are we working for? We are working for our family and our colleagues.” Thus, he pursuits for human’s happiness and well-being society.

12.8 Conclusion In this chapter, we analyzed TRIFE Inc. and Mr. Daisuke Teshima’s entrepreneurship as a bio-business venture and as a social business venture. This case is a new type of entrepreneurship born in Japan from the will to solve problems spawned from aging societies and help those with disabilities through worldwide competitive research and development. We hope that ORALPEACE will grow into a global brand from Japan.

Chapter 13

Masanori Kamiguchi and Kayotei—Harmonizing a Japanese-Style Inn with the Local Culture and Environment for Social Innovation in a Hot Spring Area’s Revitalization Shunichiro Morishita

13.1 Introduction Many local areas in Japan are actively investing effort in regional revitalization, perhaps reflecting a trend. Regional revitalization requires a uniqueness limited to the specific region as well as the ability to be competitive with other regions. It is also necessary to demonstrate a region’s attractiveness, clarify the image of each town, and make that image widely known as a brand. For regional revitalization, in addition to awareness within local government and among residents, people with an entrepreneurial spirit are essential to plan and steadily implement projects based on new ideas (Amano 2018). Entrepreneurs engaged in regional revitalization are able to find underutilized management resources and apply these resources to potential customers’ needs. They are actively working in a wide range of fields, including government, public institutions, private companies, and volunteer organizations (Machida 2000). Establishing a business depends strongly on a person or a group of people with entrepreneurial spirit (Arai 2012). Regional attractiveness is also created by regional entrepreneurs during the regional revitalization. As an example of regional entrepreneurs, this chapter describes Masanori Kamiguchi, who is the innkeeper of Kayotei ryokan (“Ryokan” is a traditional Japanese-style inn, and this used throughout the chapter.) located in a hot spring village in Yamanaka—Ishikawa prefecture. Kayotei ryokan (Fig. 13.1) has only 10 guest rooms, but it is featured in an American guidebook Japan’s 4 Best Ryokan as offering the best breakfast in Japan. It also received a SPA & WELLNESS JAPAN Crystal Award, which is given to excellent hot spring facilities, and has become a popular inn, with customers visitS. Morishita (B) Kyushu Sangyo University, Fukuoka, Japan e-mail: [email protected] © Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_13

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Fig. 13.1 Kayotei ryokan

ing from not only Japan but also overseas. Its innkeeper, Masanori Kamiguchi, runs Kayotei, but he also holds important positions in the local community, contributes to regional development and actively works for human resource development for the next generation. How he played his role as an entrepreneur for regional revitalization in his area, as well as his history and motivations, are discussed through a case study by investigating public documents and conducting an interview.

13.2 Background and a Successful Example of Social Innovation in Yamanaka Onsen 13.2.1 Yamanaka Onsen Yamanaka Onsen is a 1300-year-old hot spring town in Ishikawa prefecture, where famous cultural figures such as Basho Matsuo, Eiji Yoshikawa and Shugoro Yamamoto liked to visit. Yamanaka Onsen is set in the hilly area of Kaga Onsen in Ishikawa Prefecture, Japan, situated along Kakusenkei Gorge (Fig. 13.2). Visitors can experience the area’s famous hot springs, lacquerware, and woodturning. Taking the air on the forest trail by Kakusenkei Gorge, visitors find riverside cafes serving traditional Japanese desserts and can enjoy the forest environment. Traditional and modern bridges cross the gorge along the track, and there are several galleries displaying the crafts of the region Yamanaka lacquerware, which has a 400-year history. The area has abundant chestnut and keyaki (zelkova) trees, whose wood are utilized to make gorgeous plates and bowls. The primary feature of Yamanaka lacquerware is the technique of cutting the wood on a lathe to feature the innate beauty of the wood’s texture. Yamanaka has a quite old history. In the 8th century, a monk, Gyoki, was traveling through the area when he encountered the Medicine Buddha, who told him, “Here

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Fig. 13.2 Kakusenkei Gorge

there is a hot spring of just the proper temperature that will cure people’s illnesses. You should dig it up.” Gyoki dug and found a hot spring, which became Yamanaka Onsen. Due to multiple wars and conflicts, people forgot about Yamanaka Onsen until several hundred years later, when Nobutsuru Hasebe visited the site and helped revitalize the ancient township. Since that time, many visitors have come to Yamanaka Onsen, seeking to cure their ailments in its healing waters.

13.2.2 Current Trends in Ryokan Management in Japan Ryokan is defined as a type of accommodation facility that has more than 5 guest rooms and is characterized by a historical development and management type unique to Japan. While the number of ryokans has decreased from 64,831 in 2000 to 46,906 in 2010, the number of hotels has increased from 8220 in 2000 to 9629 in 2010 (Table 13.1). In line with this, the number of guest rooms in ryokans has decreased, while the number of guest rooms in hotels has increased. In 2010, the total number of guest rooms in hotels exceeded those in ryokans. Since 2000, approximately one hundred ryokans have gone out of business every year. The lack of successors to run them is one of the reasons, but in many cases, it is due to financial difficulties. Ryokans’ guest room occupancy rate is 37.9%, which is lower than the rate at business hotels (74.4%) and city hotels (78.7%). In particular, there has been a remarkable decrease in the number of large-scale ryokans with more than one hundred guest rooms. Against the background of this serious situation in ryokan management, there is also the fact that the number of domestic travelers staying at ryokans has decreased. As we can see from Table 13.2 (change in the number of domestic travelers who have stayed at ryokans since the 1980s), the number of travelers increased from 1980 to 1990, but then it remained almost unchanged until 2003 before entering a declining trend after 2004.

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Table 13.1 Change in the number of ryokans and hotels 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Ryokan

Hotel

Ministry of Health, Labor and Welfare (2012)

Table 13.2 Change in the number of domestic travelers who stay at ryokans 3.40

3.20

3.00

2.80

2.60

2.40

2.20

2.00

JAPAN ASSOCIATION OF TRAVEL AGENTS (2012)

The number of guests increased with economic growth from 1980 to 1990. In this period, there were many customers coming as groups, such as company/local community trips and school trips, and the total number of travelers increased by approximately 25%. After 1991, the number stagnated and remained almost unchanged until 2001. Then tour groups such as company trips decreased by more than 40% from 1990 to 2002, and the type of travel shifted from package tours organized by travel agents to individually organized travel, which accounted for approximately 70% of the total. The number of domestic overnight travelers exceeded three hundred million people each year from 1990 to 2005 but fell below three hundred million after 2006 and continues to decline. In addition to the declining trend in the number of guests, the deterioration of the buildings and facilities, which were expanded through capital investment during the economic bubble, has become another issue

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in ryokan management. The ratio of 20- to 29-year-old buildings is 25.8%, and the ratio of 30- to 39-year-old buildings is 20.8%. While the number of Japanese guests has decreased, the number foreign guests have increased. Many guests are tourists from China, Taiwan, Korea and America, and when including other Asian countries to these top three, guests from Asia account for more than 70% of the total. The number of Japanese guests has started to decline, but attracting foreign tourists has become a focus in ryokan management.

13.2.3 Katotei and Yamanaka Onsen as a Successful Example of Social Innovation Of course, the above trend in ryokan management in Japan influenced Yamanaka Onsen. However, due to Kamiguchi’s efforts toward regional revitalization, Yamanaka Onsen and his ryokan “Kayotei” have a successful business. The downtown in the Yamanaka area has several traditional ryokans or Japanese inns known for their excellent service and beautiful meals, and a stay at a ryokan is a quintessentially Japanese experience. Masanori Kamiguchi manages Kayotei, which is one of the best ryokan in Yamanaka. Kayotei ryokan at Yamanaka Onsen has only 10 guest rooms but is featured in an American guidebook Japan’s 4 Best Ryokan as offering the best breakfast in Japan. It also received a SPA & WELLNESS JAPAN 2014 Crystal Award, and customers visit from not only Japan but also overseas. The average guest room occupancy rate of Kayotei is currently approximately 70%, and wealthy foreign tourists from Western and other Asian countries account for 15–20% of their total guests. Kayotei’s special feature is its simplicity. It places great importance on harmony with the natural environment and omits unnecessary items. It does not focus on expansion and the pursuit of profits but instead focuses on regional environmental protection and attempts to fulfill its role as an ancient Japanese hot spring inn. For the outward appearance to blend into the surrounding environment, it has been built with much attention to detail, including the height of the building and the color scheme. Thus, there are no signs or signboards that would detract from the surrounding atmosphere near the entrance (Fig. 13.3). There is an agarikamachi, a small wooden step at the front edge of the entranceway floor and at the entrance porch and other Japanese elements, such as geta sandals for going out into the garden and a hibachi stove. For the interior, local wood has mainly been used, as well as Echizen’s Japanese paper, Yamanaka lacquerware, and ceramics boards prepared by local craftsmen. In addition, there are tatami mats and furniture made of natural wood, in which the local craftsmen have utilized their techniques to their fullest extent. Tatami mats are laid on the floor of the corridor, so guests can walk without slippers. Because staff at Kayotei trust guests fully, they provide room keys only if requested. For the meals, they eliminated non-authentic Japanese Kaiseki cuisine, which is typical in many

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Fig. 13.3 Entrance of Kayotei

Japanese ryokans, and serve home-cooked dishes instead, using locally produced food as much as possible. Their lavish and pleasurable meals are served on plates that are specially chosen for each dish.

13.3 History of Masanori Kamiguchi (1) He Was Born in a Large Hotel at a Hot Spring Spa Masanori Kamiguchi was born Mar 6th, 1932, in Yamanaka, Ishikawa Prefecture, Japan. At the time, his father managed a hot spring Japanese hotel, Higashiyamaso (Fig. 13.4), along a mountain stream, with a wooden two-storied building and a maximum capacity of 40 guests. His father was originally a lumber dealer but took over this ryokan soon after the Second World War ended, and it became a family business of the Kamiguchi family. Masanori Kamiguchi joined this business after he graduated from a graduate school in Tokyo in 1958 and graduated from a vocational school for hotel management in 1960. Because this was a period of high economic growth, business expansion was common in the ryokan industry, and many ryokans in Japan focused on extensions and structural alterations of their buildings to expand their business scale. Additionally, at that time, Western concepts such as breaking away from irrationality and the pursuit of high profitability were spreading, and this trend was also taken up by the ryokan industry. Higashiyama-so was a large-scale ryokan that accommodated many guests and was enjoying a great deal of prosperity. Because Kamiguchi’s father was a lumber dealer, extensions and structural alterations using extensive building materials were possible. As a result, it became a large-scale ryokan with 54 rooms and a maximum capacity of 200 guests. (2) A Difficult Period and a New Concept for Ryokan Management In 1973, when Japan faced an oil crisis, Kamiguchi (Fig. 13.5) realized the finiteness of natural resources. He therefore thought: “Hot spring villages and ryokans

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Fig. 13.4 A pamphlet of Higashiyama-so

Fig. 13.5 Masanori Kamiguchi

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have been entertaining many people for a long time. However, as the whole of Japan has become greatly affected by the idea of capitalism, we have forgotten the important things we originally had.” This intuition, which he developed himself, had a great influence on his attitude toward ryokan management (Masanori Kamiguchi, [Ryokan’s style], Yomiuri News Paper, evening edition, November 20, 2012). He did not have any particular plan, but he closed down the Higashiyama-so ryokan while his father was away for a month in Hawaii. At that time, many ryokan managers were expanding their facilities through capital investment to accommodate more guests. The bank turned its back on him because he decided to close the business, and this also caused an intense feud with his father who became extremely angry. It took him 3 years to work out his plan of a high-quality inn with the idea: “A ryokan is not a hotel. Best to have 10 guest rooms and approximately 20 guests at most. Guests should be able to have their breakfast anytime they like. I should take the opposite path to what the big ryokans are doing!” He thought that it was important to regain what Japan had lost after the Meiji era, especially in the period of postwar high economic growth—that is to say, to revive the original Japanese culture. In the tourist spots of local areas of Japan, especially places where there are onsen (hot springs) that can revive our body and mind and where there is a lively onsen culture, some important quality remains and attracts tourists from all over the world, including people who live in busy big cities in Japan. Kamiguchi wanted to utilize this for ryokan. His father was extremely angry, but his mother said “I believe that our son must have something particular in mind, so please listen to him,” and soon after she passed away. His father gave up on Kamiguchi, and so Kamiguchi took over the actual management rights. (3) He Opened Kayotei Masanori Kamiguchi finally opened the small ryokan in 1977 after 4 years of twists and turns; it had 10 rooms and a maximum capacity of 20 guests based on the concept of “an inn where the innkeeper can meet and communicate with every single guest” (Manabe 2009). Kamiguchi named this ryokan Kayotei after his mother, who was named “Kayo”. Kamiguchi has kept his policies; “Guests can wake up anytime they like,” “Do not advertise,” “Do not have any relationship with any travel agent” and “Do not seek profit, and it is ok as long as the family can make a living.” Such an attitude toward ryokan management attracted many supporters, and Kayotei became a small-scale but first-class ryokan that has not been affected by recession due to the support of repeat guests.

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13.4 Masanori Kamiguchi’s Social Innovation Activities 13.4.1 Kamiguchi’s Social Innovation Process Figure 13.6 shows how Kamiguchi invested his effort in the development of the whole Yamanaka Onsen, which is his social innovation process. (1) Suspicious About the Current Situation Kamiguchi finished his study in Tokyo and started helping with his family’s ryokan business in Yamanaka Onsen. When he saw the situation following the oil crisis in 1973, he began to have strong doubts about the trend of high economic growth and thought, “There is no way that such high growth will continue forever. Quantitative expansion will definitely break down at some stage. This is not going to last long.” He therefore closed down the Higashiyama-so, which was a large-scale ryokan with 40 rooms and a maximum capacity of 200 guests, while his father was on a one-month trip in Hawaii. (2) Individual Ideal Embodied into His Organization After 3 years of planning, he decided to return to the basic concept of “nature lets people live” and emphasize living in harmony with the natural environment. He thus opened the Kayotei ryokan in 1977, which was characterized by simplicity and the lack of unnecessary things, based on his concept of “an inn where the innkeeper can meet and communicate with every single guest.” Kamiguchi thought: “I’m fine as long as I can have a decent living, I won’t seek profits. The highest priority is to establish a good inn. If I can do this, the guests will come back to stay again.” Although he was not engaged in advertising, people who agreed with his philosophy became repeat guests, and the Kayotei became prosperous.

Fig. 13.6 Transition of Kamiguchi’s philosophy

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(3) Contribution to the Regional Area Kamiguchi runs his ryokan following his personal policy: “Not a luxurious building or environment, but warm hospitality, and omotenashi spirit. This is all we need. Only if the whole Yamanaka Onsen becomes prosperous can Kayotei exist. If the town is not lively, inns there cannot survive. We are on the same boat. We must get together to develop the region. I want to make a contribution to the development, and so does Kayotei” (Manabe 2009). While he was successively holding important positions in the local community, he started a craftsmen study group named “Kayotei Shokunin (Mirai) Juku” in 2002. He has been a pillar of the community and has done his best to retain and develop the local food and crafts. (4) Success Factors Because the managers of Japanese inns during the 1970s were pursuing profits, efficiency and expansion, the number of mediocre inns with no individuality increased, and competition intensified. In contrast, because Kamiguchi pursued his own management philosophy, such as harmony with the natural environment, he successfully created a unique ryokan that attracted guests and was differentiated from others. People who agreed with his philosophy became repeat guests. Moreover, residents in the region agreed with his ideas, which resulted in the expansion of his management philosophy across Yamanaka Onsen from a single inn—Kayotei.

13.4.2 Kamiguchi Cocreates Customer Value with Yamanaka Onsen Kamiguchi says “A Japanese ryokan should be a place that demonstrates local culture. I hope that people can feel relaxed as well as revitalized for their lives tomorrow. Additionally, a ryokan should be a place where they can communicate with their heart. In such a place, travelers’ and welcoming staff’s warm and sincere hearts communicate with each other and deepen wisdom. I also hope this ryokan can be a place of people’s conscience, hoping for the coexistence with nature, which they are losing.” He thus continues “My mission is to protect Yamanaka’s wonderful nature, the revitalizing energy of the hot springs and environmental assets cultivated through a long history. The whole of Yamanaka Onsen will be able to thrive by protecting the unique assets of Yamanaka, such as the hot springs, Kutani ware (Fig. 13.7), and Wagata-bon wooden trays (Fig. 13.8). Whether the Kayotei will survive or not will depend on this.” Kamiguchi believes Katyotei presents two management visions: “a ryokan should be a showcase of local culture” and should represent “true anti-aging”. First, a showcase of local culture must be well thought out and demonstrate the attractiveness of local products to the guests. This means that the ryokan has a mission to convey the unique culture, history, natural resources, hot springs, etc., of the region.

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Fig. 13.7 Kutani ware

Fig. 13.8 Wagata-bon wooden tray

One of Kamiguchi’s ryokan management philosophies is “Ryokan should be engaged in its business activity closely related to society.” A ryokan is a place where the local cultures are collected, and these are introduced to other people. The owners of ryokan are missionaries who are respected by the residents. Kamiguchi successfully turned his ryokan, Kayotei, into a place for introducing Yamanaka’s local products. There are works of local craftsmen displayed and in use at Kayotei. For example, there are wineglasses displayed in the Japanese-style lounge (Fig. 13.9) that cast a dull golden light. These were created by an eminent local woodworker using Japanese zelkova and a potter’s wheel. Only Yamanaka lacquerware and Kutani ware are used as tableware in Kayotei. There are many guests who see those products and decide to buy quite expensive similar items priced between three and ten thousand yen. Kamiguchi believes that what is important is not the quantity but the quality of products and the fact that they are. He has been providing access to the true beautify unique to Yamanaka Onsen to his guests and continues to impress them through Kayotei.

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Fig. 13.9 Kayotei’s lounge

Second, true anti-aging is the vision that embodies Kamiguchi’s idea that “ryokans are a healing place where visitors come to the hot springs and stay.” This is the direction in which Kayotei is aiming in: the best quality inn where guests can be revitalized both physically and mentally by their stay. Kayotei offers local ingredients as much as possible, for example, rice grown organically using the aigamo (duck) method, free-range local chicken, tofu made with water from Hakusan’s stream, Japanese sweets using alkaline ionized water, local flour, soy sauce brewed by a 4th generation brewer, and sake from a local 14th generation brewer with a 240 year history. Food is served on locally made tableware that has been carefully selected. Additionally, guests can wake up anytime they like and have a breakfast, which is known as the best breakfast in Japan. The breakfast (Fig. 13.10) includes dashimaki tamago (Japanese rolled omelet), local iwaori (seaweed), mountain vegetables and seafood. Local products are used for all dishes prepared for the guests. In addition to organic vegetables, other ingredients, such as rice, eggs, tofu, sake, and alcohol lees are carefully selected to be as healthy as possible. Fig. 13.10 Breakfast at Kayotei

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Kamiguchi has managed Kayotei based on both concepts: “a ryokan should be a showcase of local culture” and “true anti-aging.” Kamiguchi hopes to spread the true culture of onsen and ryokan as well as the craftsmanship unique to this region in Japan to the world and to welcome more guests from overseas. His son-in-law has experience working at a first-class hotel, and both husband and wife are fluent in English. They are also engaged in activities to attract foreign tourists to the region in Japan.

13.4.3 Kamiguchi’s Contribution to the Regional Area Kamiguchi believes that “accommodation is a part of the entire travel and the purpose of travel is to be impressed by the natural features of the town and culture and to gain satisfaction by understanding the subtleties of human nature. Therefore, the whole hot spring village needs to be harmonized and have unique and rich characteristics (culture of the village), and all the villagers then have to give a warm welcome to travelers.” While keeping this in his mind, he has held various important positions in the local community (Table 13.3), cooperated with the residents and been involved in specific projects. For example, he has been involved in the maintenance of bridges such as Ayatorihashi Bridge (Fig. 13.11), Koorogi-hashi Bridge and Kurotani-hashi Bridge as well as Yamanaka-za and Yuge Way (Fig. 13.12), which are currently the main tourist attractions in Yamanaka. Additionally, for guests to enjoy the beauty of Japan’s natural features, he restored walking paths through the valley and townscape back to how they used to look back when he was a child in the good old days. In this way, his activities as a social entrepreneur cover a wide range of responsibilities, including community development and human resource development for the next generation and introducing regional culture to the world. (1) Town Development of Yamanaka While Kamiguchi is running Kayotei, he is also engaged in various activities for developing the town of Yamanaka. In a project named “Finding pretty flowers”, he Table 13.3 Important positions that Masanori Kamiguchi has held in the local community President and representative director of the Limited Company Kayotei 1964: Member of the town council of Yamana-cho (Total 1 term) 1967: Member of the Ishikawa prefectural assembly (Total 6 terms) 1969: Vice President of the Hokuriku Otani High School 1973: President of the Yamanaka Onsen Tourist Association 1989: President of the Hokuriku Tourism Association 1996: President of the Chamber of Commerce and Industry 2000: President of Kaga Ezuma Food Hygiene Association

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Fig. 13.11 Ayatori-hashi Bridge

Fig. 13.12 Yuge Way

took some vacant stores and used the space to introduce the culture and local industries of Yamanaka. Yamanaka is the birthplace of Kutani ware (porcelain decorated with a colored picture), which is highly acclaimed worldwide. He also uses vacant stores or ryokan buildings as art galleries and to conduct cultural activities, hosting an exhibition for modern Kutani ware featured with young and spirited Kutani pottery artists or displaying masterpieces of Kutani ware. He is engaged not only in exhibiting traditional crafts but also in carrying out spot sales and demonstrations of craftsmen’s skills. Through these projects, people from the ryokan industry, lacquerware industry, shop owners and residents cooperated for the first time and achieved successful outcomes. In addition, the wives of the ryokan owners started an activity named “Group of 300 years green” to embody their hope of “leaving at least beautiful flowers and green for the children and grandchildren.” Residents also became involved in this activity, and they planted cherry blossom trees on the street and at the foot of a mountain. The owners of the shops on the main shopping street organized a conference to discuss

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and study Yamanaka’s unique landscape, which could be treated as a resource to impress tourists. Meanwhile, a member of the Chamber of Commerce and Industry started officially selecting shops for their new project: “Your shops become iconic scenery of the village.” There is also a bus service, the “strolling through the village shuttle”, that stops at the tourist spots and the birthplace of Kutani ware, etc., and the wives of ryokan owners work in turns as tour guides on the bus. (2) Human Resource Development for the Next Generation in the Region Kamiguchi started the craftsmen study group named “Kayotei Shokunin Juku” in 2002 and is actively working on nurturing the growth of local craftsmen (Fig. 13.13). His original goal was to improve business by working in close cooperation with the producers and craftsmen who were supplying products such as eggs, aigamo (ducks), rice and tableware to Kayotei (Masanori Kamiguchi, [Ryokan’s style], Yomiuri News Paper, evening edition, December 4, 2012). The members are Yamanaka lacquer painters, Maki-e painters, woodworking craftsmen, washi (Japanese paper) craftsmen, Kutani ware craftsmen, tatami craftsmen, Japanese sweets craftsmen, Tofu makers, an Italian chef in Yamanaka Onsen, a healthy egg farm owner, the chief sake brewer, organic vegetable farmers, and organic rice farmers using the aigamo (duck) method. In this way, the local industries can grow together with producers who have business with Kayotei and are organized as the Kayotei Shokunin Juku. The study group developed into one called Kayotei Shokunin Mirai (future) Juku and now has approximately 20 members. Seminars are held by lecturers who are invited as special advisors from outside the region. General residents can also join in these activities. Interaction with lecturers from outside of the region can be a good opportunity for the members to broaden their horizons. The Kayotei Shokunin Mirai Juku is also drawing interest from Western countries, and Yamanaka’s craftsmanship and culture are spreading overseas. The group is now expanding beyond an effort made by a single ryokan and showing unique development.

Fig. 13.13 Craftsmen of Kayotei Shokunin Mirai (future) Juku

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Fig. 13.14 Yamanaka lacquerware

(3) Introducing Yamanaka’s Industry to the World Kamiguchi has also committed to introducing Yamanaka lacquerware (Fig. 13.14) to the world. He visited Saltspring Island in Canada, where approximately 200 craftsmen live, together with Yamanaka’s craftsmen aged from their teens to their 60 s. They created a collaborative work, showcased each other’s skills, and interacted with each other for a year. In Canada, Yamanaka’s craftsmen sold their own works themselves and successfully sold approximately ten thousand dollars’ worth of work in three days. These experiences made Yamanaka’s craftsmen rethink Japanese traditional handicrafts taking a global view. Those craftsmen barely knew each other before they went to Canada, but they started exchanging opinions routinely after returning home. They also became motivated to showcase their work to as many people overseas as possible.

13.5 Analysis of Masanori Kamiguchi’s Entrepreneurship Table 13.4 analyzes Kamiguchi’s nature as an entrepreneur from five viewpoints. (1) His Dream and Objectives Kamiguchi’s dream and objectives are to protect and develop Yamanaka’s culture, history, nature and industries and to introduce these to the world through his ryokan. He says “My mission is to protect Yamanaka’s wonderful nature, the revitalizing energy of hot springs and environmental assets cultivated through a long history. The whole Yamanaka Onsen will be able to thrive by protecting the unique assets of Yamanaka, such as the hot springs, Kutani ware, and Wagata-bon wooden trays. Whether the Kayotei will survive or not will depend on this.” He then continues “A Japanese ryokan should be a place which demonstrates local culture. Additionally, a ryokan should be a place where they can communicate with their heart. In such a place, travelers’ and welcoming staff’s warm and sincere hearts communicate with each other and deepen wisdom. I also hope this ryokan can be a place of

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Table 13.4 Five viewpoints for value creation of the entrepreneur, Masanori Kamiguchi Five view points for entrepreneur’s value creation

“Kayotei” ryokan’s innkeeper, Masanori Kamiguchi

(1) His dream and objectives

Introducing culture, history, nature and industries in the mountainous region through the ryokan’s activities

(2) His ability of forecasting the future business environment

Casting doubt on the economic growth and modernization in the 1970s and proposing to focus on access to nature and culture of the region

(3) His core resources or technologies

Culture, nature, industries, residents and craftsmen in the mountainous region

(4) How to manage his company

Managing a simple and small inn according to the following policies: “Guests can wake up anytime they like,” “Do not advertise,” “Do not have any relationship with any travel agent” and “Do not seek profit and it is ok as long as the family can make a living”

(5) His way and his value sense

“Ryokan is engaged in a business activity closely related to society” and “an inn where the innkeeper can meet and communicate with every single guest”

people’s conscience, hoping for the coexistence with nature, which they are losing.” Such thoughts are totally different from those of the managers of hotels that pursue efficiency and economic performance. He has been providing a place where guests can come into contact with culture, industries and history that have been passed down for generations and can rethink their city life. (2) His Ability to Forecast the Future Business Environment Kamiguchi has been arguing for the importance of regional culture and nature even since the high postwar economic growth period in the 1970s, in which priority was given to economic growth rather than to the protection of culture and nature. He believed that it was important to revive original Japanese culture, which at that time had been forgotten by the Japanese people. In the tourist attractions of local areas in Japan, especially places where there are onsen (hot springs) that can revive bodies and mind and where there is lively onsen culture, something important remains and attracts tourists from around the world, including people who live in major busy cities in Japan. He wanted to utilize this “something important” for his ryokan. He believes that the accommodation is a part of the entire travel experience and that the purpose of travel is to be impressed by natural features of the town and culture and to gain satisfaction by understanding the subtleties of human nature. He therefore believes that the whole hot spring village, which is unique and rich in its culture, needs to be harmonized and that all of the villagers must give a warm welcome to travelers.

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(3) His Core Resources or Technologies All the things in Yamanaka, such as its culture, history, nature, industries, local residents and craftsmen, are Kamiguchi’s resources. Kayotei is at the center of these, and he follows his philosophy in that Kayotei does not focus on the pursuit of profits or quantitative expansion but on regional environmental protection and on fulfilling its role as an ancient Japanese hot spring inn. For the outward appearance of Kayotei to blend into the surrounding environment, it has been built with attention to every detail, including the height of the building and the color scheme. Thus, there are no signs or signboards to detract from the surrounding atmosphere near the entrance. There are agarikamachi, a small wooden step at the front edge of the entranceway floor and at the entrance porch, and other Japanese elements, such as geta sandals for going out into the garden and a hibachi stove. For the interior, mainly local wood has been used, as well as Echizen’s Japanese paper, Yamanaka lacquerware, and ceramics boards prepared by local craftsmen. In addition, there are tatami mats and furniture made of natural wood, in which the techniques of local craftsmen are utilized to their fullest extent. In this way, the small ryokan, Kayotei, places great importance on harmony with Yamanaka’s natural environment and omits unnecessary items. (4) How to Manage His Company Kamiguchi’s management policies are simple: “Guests can wake up anytime they like”, “Do not advertise”, “Do not have any relationship with any travel agent” and “Do not seek profit, and it is ok as long as the family can make a living”. He believes that guests should be able to wake up and have their breakfast at any time they like, which is something that large-scale ryokans and hotels that pursue efficiency and economic performance cannot do. A special feature of Kayotei’s building is its simplicity, with no waste, and it places great importance on harmony with the natural environment. Additionally, to communicate with guests one-to-one, it is kept small, having only 10 guest rooms that accommodate 20 guests at most. In this way, he actualized his idea, “the best quality inn where guests can be revitalized both physically and mentally by their stay” through his management of Kayotei. (5) His Way and His Value Sense Kamiguchi’s ryokan management philosophies are that “A ryokan should be engaged in a business activity closely related to society” and “A ryokan where the innkeeper can meet and communicate with every single guest.” Yamanaka’s history, culture and industries are conveyed while he is enjoying conversation with the guests one-to-one. When Japanese citizens became overwhelmed by the idea of capitalism and nature destroyed in return for achieving high economic growth in the 1970s, Kamiguchi observed the scarcity value of history, culture and industries unique to the region. With the concept of “a ryokan should be a showcase of local culture,” he aimed to make Kayotei a ryokan that conveys the attraction of Yamanaka’s history, nature and hot springs to the guests. He has also been making efforts to protect nature and industries and develop the region together with Yamanaka’s craftsmen and residents.

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13.6 Conclusion This chapter has discussed a social entrepreneur and regional development innovation through a case study of Masanori Kamiguchi, who is the innkeeper of Kayotei ryokan located in a hot spring village in Yamanaka—Ishikawa prefecture. He embodied his management philosophy of creating an inn coexisting with the regional environment through his small inn, Kayotei. While holding important positions in the community and contributing to regional development, he started Kayotei Shokunin Miari Juku (Craftsmen Study Group) and led the training of human resources to protect the traditions of the Yamanaka Onsen. His philosophy of Kayotei, which is to be in harmony with the natural environment, has spread out to the whole area of Yamanaka Onsen. In this way, the existence of social entrepreneurs who play a central role in regional revitalization is demonstrated to be important.

References Amano, R. (2018). Social Innovation and Vitalization of local Areas Conducted by Entrepreneur Vol. 2. Shitennoji University bulletin, 65, 261–270. Arai, K. (2012). Influence of regional social capital at the time of start-up business. Ikoma journal of economics, 9(3), 239–251. Machida, Y. (2000). Social entrepreneurs, who create good society, PHP Institute. Manabe, S. (2009). This person and book – Stories that I want to talk about, Ribun Shuppan.

Chapter 14

Summary and Discussion Michitaka Kosaka, Ke Xing and Hua Bai

14.1 Verification of Hypotheses for the Successful Entrepreneurship in the Asia Pacific In Chap. 1, three hypotheses for successful entrepreneurship in the Asia Pacific are introduced based on knowledge management and service science. They underpin a framework of knowledge creation that supports innovation and value creation for customers in new businesses. For case studies, 12 successful examples of entrepreneurship in the Asia-Pacific are selected from China including the region of Taiwan, Japan, Australia, Malaysia and Vietnam. In each case study, the 5 attributes considered as key factors for the entrepreneurship in the Asia-Pacific region, i.e. personal aspiration and goals/objectives of entrepreneurial business (Desires), the way of life and value sense (Desires), ability of forecasting the future business environment or future society (Opportunities), core resources or core technologies (Capabilities), and how to manage the company or proceed his business (Capabilities), are analyzed by using collected information on entrepreneurs and their businesses. In this section, the three hypotheses on entrepreneurship in the Asia-Pacific region are verified to be valid through investigating summarized results of 12 case studies.

M. Kosaka (B) Japan Advanced Institute of Science and Technology, Nomi, Japan e-mail: [email protected] K. Xing School of Engineering, University of South Australia, Adelaide, SA, Australia e-mail: [email protected] H. Bai School of Economics and Management, Beihang University, Beijing, China e-mail: [email protected]

© Springer Nature Singapore Pte Ltd. 2020 J. Wang et al. (eds.), Entrepreneurship in the Asia-Pacific: Case Studies, https://doi.org/10.1007/978-981-32-9362-5_14

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(1) Hypothesis 1: Successful Entrepreneurs Realize their Dreams and Ways of Life in their Companies This hypothesis represents the notions that “Entrepreneurs realize their dreams through pursuing their ways of life in their business” and “an innovator’s way of life is a key factor for innovation management” (Nonaka and Katsumi 2004). The results of analysis on the attribute (a) and the attribute (e) are used for verifying this hypothesis. Attribute (a): Personal Aspiration and Goals/Objectives of Entrepreneurial Business (Desires) At the starting of entrepreneurship analysis, it is assumed that new services or products in entrepreneurial companies are developed for achieving the dreams and goals of entrepreneurs. Table 14.1 shows the results of such analyses from the case studies. All the cases demonstrated that the entrepreneurs’ dreams are realized through products and services in their established companies. Their dreams are formed depending on their experiences or background respectively. Realizing dream is the most important factor for success of entrepreneurial company in all cases. In each of the cases, the dream is continuing and expanding the business and company. Thus, the assumption on the relationship between entrepreneurship and dream is valid, such that dream appears the most important factor for entrepreneurship in the Asia-Pacific. Attribute (e): The Way of Life and Value Sense (Desires) Usually, an entrepreneur makes effort to realize his/her dream or goals in line with the way of life and value sense. These two aspects are considered as factors essential for the spiral growth of business. Through the case studies, it is found that the attribute (e) is an important factor for verifying Hypothesis 1. Table 14.2 shows the results of analyses. As indicated by the case analysis, many entrepreneurs believe that dream is an integral part of their way of life and essential for their businesses. For example, in Nidec, “All for dreams” is the corporate slogan. In PKT, “Dream of it, Talk about it, Plan for it, Work for it, and Get it” is a message from the entrepreneur. Other related key notions include “keep learning”, “working hard”, “responsible”, and “future vision”. Such results once again remind us the importance of dream in entrepreneurship. Based on analyzing the attribute (a) and the attribute (e), it is evident that “Entrepreneurs realize their dreams through pursuing their ways of life in their business” and “an innovator’s way of life is a key factor for innovation management” are both valid and supported by the cases. (2) Hypothesis 2: A Successful Entrepreneur Creates Value for Customers in the Future Business Environment This hypothesis is that “Entrepreneurship can be considered as value creation for customers or societies in the future business environment for realizing the entrepreneur’s dream”. In Chap. 1, the following 4 attributes are discussed as important for the

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Table 14.1 Entrepreneur’s dreams and goals Entrepreneur

Company (business)

Dream

1

Shigenobu Nagamori

Nidec corporation (motor manufacturing)

His desire to become a president and his interest in motors became key to the development of Nidec

2

Jun Lei

Xiaomi (smart phone, electronics)

His dream is to build a great company with huge impact in China and globally like the Apple Company

3

Guotian Liu

Jinsida (textile and environment protection)

To bring value to the current generation and the future (economically, environment protection, planting and seedling)

4

Kenny Lin

Thermaltake Technology (electronics)

He didn’t like to do OEM for other company His dream is to have his own products and brand

5

Qian Wang

Taibei (environmental protection equipment)

His dream is to start a century-old enterprise and become an internationally influential company

6

Dato Michael Tio

PKT Logistics (logistic services)

His desire is to make Malaysia the logistics hub of the region, to develop global and socially responsible logistics company

7

David Schell & Co-founders

Airlock Digital (information security)

Team’s goal is to lift the security posture of organisations and countries by providing a solution to a challenging problem

8

Toshikazu Saito

RENAISSANCE (sports and health services)

His dream is to pursue human well-being based on RENAISSANCE concept—revitalization of humanity

9

Shigemi Kawahara

IPPUDO (ramen noodle services)

His dream is to spread the taste of Japanese ramen to the world through IPPUDO’s business activities (continued)

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Table 14.1 (continued) Entrepreneur

Company (business)

Dream

10

Tri Nguyen

MimosaTek (IoT for agriculture)

His dream is that agriculture of Vietnam can be promoted and have a breakout development for sustainability and success

11

Daisuke Teshima

TRIFE Inc. (ORALPEACE for elderly/handicapped)

His dream is to create work for the handicapped and make his children’s social participation

12

Masanori Kamiguchi

Kayoutei (Japanese style inn)

His dreams are protection and development of culture, history, nature and to introduce these to the world through his ryokan

entrepreneurial company in the spiral growth model to create values for customers under the future business environment. (1) Objective: Entrepreneur’s dream and goal (Desires): the attribute (a) (2) Context: Future business environment (Opportunities): the attribute (b) (3) Idea of Service & Products: Core resources and technologies (Capabilities): the attribute (c) (4) Realization: Management of his business organization (Capabilities): the attribute (d). While the attribute (a) in relation to dream and objective are already analyzed in verifying Hypothesis 1. The other three attributes are analyzed through summarizing the results of 12 case studies as follows. Attribute (b): Ability of Forecasting the Future Business Environment or Future Society (Opportunities) At the beginning of entrepreneurship analysis, it is argued that an entrepreneur can succeed in his/her business if developed services or products have value in the future business environment or future society. Therefore, the ability of forecasting the future business environment is a crucial factor for entrepreneurs. Table 14.3 presents the results of analyses. Table 14.3 shows that each entrepreneur has been developing own novel products or services based on their insight and vision for technological and business trends of the future. Nagamori (Nidec corporation), Lei (Xiaomi), Lin (Thermaltake), Tio (PKT), and Nguyen (MimosaTek) have been driving the innovation of their companies by closely monitoring and foreseeing the development of new information technologies and new business trends in their sectors. Liu (Jinsida) and Wang (Taibei) found the importance of environmental protection and human well-being in China as a new trend for business growth. Saito (RENAISSANCE) views sports business

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Table 14.2 Entrepreneur’s way of life and value sense Entrepreneur

Company (business scale)

His way of life and value sense

1

Shigenobu Nagamori

Nidec Corporation (large scale)

His way is “All for dreams,” the corporate slogan of Nidec We can buy the future by having a dream or a spirit of romance

2

Jun Lei

Xiaomi (Large scale)

His motivation to found Xiaomi is not for money, but for dream Make amazing product at honest price, enjoy fun of technology

3

Guotian Liu

Jinsida (medium scale)

He is a seeker who’s not afraid of problems and always sticks to it until he finds the solution

4

Kenny Lin

Thermaltake Technology (medium scale)

His intention is to make the product which meets the customer’s He didn’t like OEM which is far away from end user

5

Qian Wang

Taibei (medium scale)

He is responsible, never forgets original intention, loves learning His duty to country, employees, family is the source of success

6

Dato Michael Tio

PKT Logistics (medium scale)

“Dream of it, Talk about it, Plan for it, Work on it, and Get it” Make different from its competitors with a service-oriented view

7

David Schell & Co-founders

Airlock Digital (medium scale)

Co-founders share the same values of team cohesion, trusting relationships, intrinsic motivation and finding meaning

8

Toshikazu Saito

RENAISSANCE (medium scale)

He always pioneered his future He always found his dream (continued)

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Table 14.2 (continued) Entrepreneur

Company (business scale)

His way of life and value sense

9

Shigemi Kawahara

IPPUDO (medium scale)

His philosophy is “to continuously innovate to remain true” He thinks employees follow a leader who has a future vision

10

Tri Nguyen

MimosaTek (small scale)

Keep learning and working hard until the end is the way to be success

11

Daisuke Teshima

TRIFE Inc. (small scale)

“We are working for our family and our colleagues” He pursuits for human’s happiness and well-being society

12

Masanori Kamiguchi

Kayoutei (small scale)

“A ryokan should be a showcase of local culture” Innkeeper can meet and communicate with every single guest

as creating value in fostering people’s healthy lifestyle. Teshima (TRIFE) started a new business to cater for growing needs for disability and aged care products and services in the society. Kawahawa (IPPUDO) and Kamiguchi (Kayotei) establish their businesses by leveraging new trends of food culture and tourism services. It is clear that all the entrepreneurs in the case studies have abilities of forecasting and tapping into the needs of future business and social environments for realizing their dreams. Attribute (c): Core Resources or Core Technologies (Capabilities) For the entrepreneurship analysis, core resources or core technologies are considered as key for developing services or products. It is essential to strengthen core resources or core technologies through technology innovation, M&A (Mergers & Acquisitions), or efforts by motivated people. Table 14.4 shows the results of analyses. Whilst some entrepreneurs, e.g. Liu (Jinsida) and Wang (Taibei), consider the importance of technologies as core resources, most of entrepreneurs in various region of Asia, such as Nagamori (Nidec corporation) in Japan, Lei (Xiaomi) in China, Tio (PKT) in Malaysia, Nguyen (MimosaTek) in Vietnam, believe that core resources for their success are human factors, especially motivated people in their companies. This is an interesting finding from the case studies and underscore the notion that human resources are very important factors in entrepreneurship in the Asia-Pacific.

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Table 14.3 Entrepreneur’s ability of forecasting the future business environment Entrepreneur

Products or services

His ability of forecasting the future business environment

1

Shigenobu Nagamori

Motor equipment (HDD, car, industrial, etc.)

Nagamori has excellent insight into growing business areas (small precision motor for HDD, automotive, IoT)

2

Jun Lei

Electronics products (smart phone, etc.)

He has strong ability to forecast trend of future business (mobile Internet, Intelligent hardware and IoT, etc.)

3

Guotian Liu

Textile environment protection equipment

His change of business direction showed his pursuit of business value and a match of his forecast to the future

4

Kenny Lin

Electronics products (computer peripherals)

He does continuously new market forecasting and new products developing for company’s long term development

5

Qian Wang

Environment protection equipment (ultra low emission)

He is always looking at the government policy and future needs on environmental protection in China

6

Dato Michael Tio

Logistics services (logistics, car, education)

DMT’s personal skills and ability to understand market situations, which is helped to development of PKT

7

David Schell & Co-founders

IT services (information security)

Their expertise is what lends them to being able to forecast business environment although landscape is ever-changing

8

Toshikazu Saito

Sports and health services (sports club, aging society)

He is always sensitive to the social demands of the times for healthcare, well-being in an aging society, CSR

9

Shigemi Kawahara

Ramen noodle services (ramen restaurants)

He believed that Japan’s unique ramen culture would be accepted by people around the world (continued)

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Table 14.3 (continued) Entrepreneur

Products or services

His ability of forecasting the future business environment

10

Tri Nguyen

IoT for agriculture (AgriTech)

IoT transforms the way people live and work This trend has changed IT business

11

Daisuke Teshima

Natural raw toothpaste (ORALPEACE)

It leads to a solution for the social problems that the elderly or handicapped have

12

Masanori Kamiguchi

Japanese style inn (Omotenashi services)

He think hot spring village needs to be harmonized and all the villagers have to give a warm welcome to travelers

Attribute (d): How to Manage the Company or Proceed his Business (Capabilities) It is suggested that the ability of managing organizations is vital for establishing and developing entrepreneurial businesses. Such an ability is related to knowledge management, community creation, and team management. The results of analyses are shown in Table 14.5. In Table 14.5, key terms and concepts such as knowledge creating, flat organization, trust, reliable, motivation, thoughtfulness, keeping things tidy, emerge from the analysis, indicating that having the vision and the ability for community creation as integral part of organizational culture is an important feature for entrepreneurship in the Asia-Pacific. From analyzing the attribute (a) to the attribute (e), we found that entrepreneurs develop the following value creation process for the future business environment, which is shown in Fig. 14.1 proposed as the hypothesis 2 in Chap. 1. The first step is to determine the objective of the entrepreneurial company based on the entrepreneur’s dream or goal, which is demonstrated based on the analysis of attribute (a) and attribute (e). Then, the business context is considered and opportunities are found based on the objective in the second step. Here, the entrepreneur has enough ability to forecast the future business environment of his company and considers suitable business market for realizing his dream. At this step, there are important attributes to consider, such as insight of new era, global thinking, ICT’s impacts, changes of social environment and so on. These facts are demonstrated base on the analysis of attribute (b). Thereafter, the entrepreneur and his/her company consider suitable services or products by utilizing core resources and core technologies in the third step. As an entrepreneurial company, the originality of services or product is highly required. Meanwhile, most of entrepreneurs consider that human factors such as motivated people are the most important factors. These are demonstrated based on the analysis of attribute (c). In the fourth step, the business idea is realized

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Table 14.4 Entrepreneur’s core resources and core technologies Entrepreneur

Products or services

His core resources or core technologies

1

Shigenobu Nagamori

Motor equipment (HDD, car, industrial, etc.)

Core resources are motivated people in the Nidec Group He focuses on motor technologies

2

Jun Lei

Electronics products (smart phone, etc.)

He has a lot of human resources and financial resources to find the suitable team members on business model and technology

3

Guotian Liu

Textile environment protection equipment

He has been keen on advanced technologies and invested He lead and participated in R&D job of technological innovations

4

Kenny Lin

Electronics products (computer peripherals)

He keeps open innovation through cooperating with external design resources from time to time, shows a positive image on innovation

5

Qian Wang

Environment protection equipment (ultra low emission)

He understands that technologies related to environmental protection are core resources for Taibei’s successful business

6

Dato Michael Tio

Logistics services (logistics, car, education)

Employees are main resources for PKT Ethical behavior of PKT is also core resources for PKT business

7

David Schell & Co-founders

IT services (information security)

The combination of expertise, experience, and a knowledge of the problem from a customer perspective

8

Toshikazu Saito

Sports and health services (sports club, aging society)

The important element of promoting business is the human factor His human network is the source of idea and knowledge (continued)

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Table 14.4 (continued) Entrepreneur

Products or services

His core resources or core technologies

9

Shigemi Kawahara

Ramen noodle services (ramen restruants)

His core resource is the personnel who work under him His core technology is to develop new Ramen taste

10

Tri Nguyen

IoT for agriculture (AgriTech)

The strongest competence is people They head toward the mission of the organization together

11

Daisuke Teshima

Natural raw toothpaste (ORALPEACE)

ORALPEACE uses innovative biotechnology, which is developed through joint research with universities

12

Masanori Kamiguchi

Japanese style inn (Omotenashi services)

All the things in Yamanaka, such as culture, history, nature, industries, local residents and craftsmen, are his resources

through managing the organization considering knowledge management or community creation, which is demonstrated based on the analysis of attribute (d). These present the knowledge creation process and value creation process for the success of an entrepreneurial business. In sum, the notion of “Entrepreneurship can be considered as value creation for customers or societies in the future business environment for realizing the entrepreneur’s dream” represented by Hypothesis 2 is considered as valid and supported by the analysis above. All the entrepreneurs found their opportunities in the current and future business environment and created value-adding products or services with their core technologies and resources. Here, their core resources are motivated people who work with them in realizing their dreams within an inspiring, effective and community-creating organizational culture. (3) A Successful Entrepreneur Grows Spirally through Learning by Reflection This hypothesis posits that a successful entrepreneur and an entrepreneurial company grow spirally through learning by reflecting on the journey of development. According to the case analysis, it is noticed that all those entrepreneurs have been expanding their businesses and knowledge spirally through learning from their experiences, both successes and failures, in order to realize and advance their dreams. With regard to entrepreneurship in manufacturing industry, Mr. Nagamori (Nidec) has been expanding his business from small precision motors to various motors business in various industries such as cars, IoT, industrial robots, etc. through learning

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Table 14.5 Entrepreneur’s management of his organization Entrepreneur

Company (business scale)

Management of his organization

1

Shigenobu Nagamori

Nidec Corporation (large scale)

To make the Nidec Group a knowledge creating group “Do it now, do it without hesitation, do it until completed”

2

Jun Lei

Xiaomi (large scale)

Flat organizational structure with only three layers Entrepreneur team always keeps on hard working

3

Guotian Liu

Jinsida (medium scale)

Trust the person who makes decisions. Keep family members out of the company. Keep employee motivation

4

Kenny Lin

Thermaltake Technology (medium scale)

He manages company culture, working environment, committed to innovation, product innovation for his aim on the branding

5

Qian Wang

Taibei (medium scale)

His thoughtfulness for others helped him form Taibei cohesion, won reliable business partners, and attracted loyal customers

6

Dato Michael Tio

PKT Logistics (medium scale)

Operate company by ‘we’ as a partner not by ‘I’ The Facebook community supports his management

7

David Schell & Co-founders

Airlock Digital (medium scale)

They share responsibilities and mostly used an intuitive and iterative response to their business management

8

Toshikazu Saito

RENAISSANCE (medium scale)

He started utilizing in-house venture business scheme He reduced investment by using existing facilities efficiently

9

Shigemi Kawahara

IPPUDO (medium scale)

His basics of shop management are being thorough with cleaning and keeping things tidy (continued)

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Table 14.5 (continued) Entrepreneur

Company (business scale)

Management of his organization

10

Tri Nguyen

MimosaTek (small scale)

Balancing the research and business is the essential factor They have worked hard to manage both sales and R&D

11

Daisuke Teshima

TRIFE Inc. (small scale)

He formed a community to contribute to society through organizing supporters or partners with the same values

12

Masanori Kamiguchi

Kayoutei (small scale)

“Do not advertise,” “Do not have any relationship with any travel agent” and “Do not seek profit”

Fig. 14.1 A process of value creation in the future business environment

Step1: Objective Entrepreneur’s dream or goals

Step2: Context: Future business environment

Step4: Realization: Management of his business organization

Step3:Idea of Service & Product: Resource and technologies

by reflection. For example, the “Lehman shock” was a 2008 global economic crisis that significantly influenced Nidec. He considered the “Lehman shock” to be a good chance to change Nidec and improved its revenue structure. Mr. Lei (Xiaomi) is expanding his business into smartphones, mobile apps, laptops, and related consumer electronics. Xiaomi had multiple failures and failed to reach its sales goal in 2015, but it recovered in 2017 through improving problems. Mr. Liu (Jinsida) has been expanding his business from ‘textile printing and dyeing’ to ‘seeding and tree planting’ ‘environment protection expert’ considering values according to environmental changes. Mr. Lin (Thermaltake) developed the PC cooling system business, and changed to an IT company integrating PC peripheral products R&D, production and sales by considering PC business environment. Mr. Wang (Taibei) developed a successful environmental protection enterprise, which is expanding its business

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through reviewing and capitalizing the relationship between China’s policies and Taibei’s technological advancement in relation to environmental protection. These examples in manufacturing industry demonstrate the importance of spiral growth through improvement by reflection. For entrepreneurship in services industry, Mr. Tio (PKT Logistics) developed a knowledge creating company using FACEBOOK community, which aimed at spirally growing into a global logistics company. Airlock Digital has grown incrementally with the product having found its product-market-fit across the globe for 5 years. Mr. Saito (RENAISSANCE) has been expanding his business from sports club to health business to help people fulfill an active, healthy lifestyle by mulling over and aligning with the trend of demand transition over time. Mr. Kawahara (IPPUDO) opened their first shop in Fukuoka city Japan in 1985 and expanded globally, for example to New York City in the United States in 2008, through reflecting on and overcoming the previous gaps of understanding with local community. As the examples of entrepreneurship in new business and social innovation, Mr. Nguyen (MimosaTek) was promoting Vietnamese agriculture by IoT application. However, he had no idea and experience in farming forecast and knowledge. MimosaTek solved the problems by trying to simulate and conduct physical experiments on the field step-by-step. He and his colleagues were trying their best to develop the system to be suitable for more and more plants. This is the knowledge creating process with spirally growth. Mr. Teshima (TRIFE) developed a new business model to support elderly and the disabled people, by overcoming the usual difficulties faced by those businesses operated by handicapped people. Mr. Kamiguchi (Kayoutei) aimed at a social innovation for regional activation based on his concept “A ryokan is a place where local cultures gather together”. He has also been making efforts to protect such nature and industries and develop the region together with Yamanaka’s craftsmen and residents through creating knowledge and value spirally. From the above analyses, Hypothesis 3 is supported to be valid. Based on the analysis of attribute (e), it is also found that their way of life and value sense have strong influence on what and how activities are engaged with to continue with this process for realizing their dreams and ensuring the sustainable development of their businesses.

14.2 The Proposed Entrepreneurship Model in the Asia-Pacific By combining these three verified hypotheses, it can be concluded that the model of entrepreneurship in the Asia-Pacific proposed in Chap. 1 is considered as valid after the analyses of the twelve case studies. A successful entrepreneur and an entrepreneurial company grow spirally through learning by reflection, which can be described by the spiral growth model of value creation process for successful entrepreneurial companies. This is similar as the KIKI model (Kosaka et al. 2012)

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of value creation for customers or the SECI model (Nonaka and Takeuchi 1995) of knowledge creation. Through reflecting the result of one cycle, the entrepreneur should learn something to enhance his business. The entrepreneur’s strong willingness or the way of life is important for this spiral growth and is a key factor for successful entrepreneurship. The model construct shown in Fig. 14.2 consists of the following three factors: (1) Entrepreneur’s dream and goals (2) Knowledge creation process and value creation process for realizing his dream, which consists of the following four sub-processes (a) (b) (c) (d)

Objective: Entrepreneur’s dream and goal (Desires) Context: Future business environment (Opportunities) Idea of Service & Products: Core resources and technologies (Capabilities) Realization: Management of his business organization (Capabilities)

(3) Spiral growth by refection and improvement. “Dream and goals” is the most important to motivate entrepreneurs and therefore serves as the starting point for the entrepreneurship process. The next step is “Knowledge creation/value creation process”. Then, it leads to continuous and spiral growth of knowledge and value creation process. Through reflecting the result of a cycle of business development, the entrepreneur can gain some learning from the process to inform the business strategies and to enhance the operations. The entrepreneur can expand the business through spiral growth by reflection and improvement. The entrepreneur’s strong will and way of life are essential for achieving this spiral (1) Entrepreneur’s dream or goals

(2) Knowledge creation/ Value creation process Objective: Entrepreneur’s dream or goals

Context: Future business environment (3)Spiral growth: Reflection and improvement

Realization: Management of his business organization

Idea of Service & Product: Resource and technologies

Fig. 14.2 A model of entrepreneurship in the Asia-Pacific

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growth and key enablers for successful entrepreneurship and sustainable business development. The rationale of this model is consistent with the SECI model (Nonaka and Takeuchi 1995) of knowledge creation and the KIKI model (Kosaka et al. 2012) of value creation for customers. Such a model as well as the case studies that it is derived from can help to inform entrepreneurs in starting new business and inspire further research focusing on linkage among entrepreneurship, knowledge management, innovation management and service science.

References Kosaka, M., Zhang, Q., Dong, W., Wang, J. (2012). Service value co-creation model considering experience based on service field concept. IEEE International Conference on Service System and Service management (ICSSSM 2012), Shanghai, July. Nonaka, I., & Katsumi, A. (2004). The essence of innovation (in Japanese), Japan: Nikkei BP. Nonaka, I., & Takeuchi, H. (1995). The Knowledge-Creating Company, New York: Oxford University Press, Inc.