Internet Japan

HBR ideas for 2007

The new HBR has a list of “breakthrough ideas for 2007.”

Two caught my eye.

First, Yoshito Horii of Japanese VC firm Globis, believes that, “A newly entrepreneurial Japan, something that once would have seemed oxymoronic, may ultimately overshadow the much touted start-up cultures in China and India.” I think that’s a wonderful goal but I’d like to see more examples (Mixi and Rakuten are trotted out too often) of new successful entrepreneurship in Japan. Hori talks about how the IPO market is favorable in Japan:

An entrepreneurial Japan has been further nurtured by, and reflected in, a favorable IPO environment. From 2001 to 2005, 747 Japanese companies—compared with 617 in the United States—went public. Of those that went public in 2005, 96%—up from 94% in 2004—opened their first day of trading above their offering price.

That may be true, but more than just getting out the door above the offer price- what percentage of Japanese IPOs from 2001 to 2005 are still above their offer price? How many of those businesses made money for retail investors? The whole picture is not nearly so rosy I will wager.

That said, the numbers he gives around Internet user fees are just staggeringly impressive- the internet costs 2 orders of magnitude less in Japan than in other high-Internet use areas. That’s WONDERFUL (and if I was an entrepreneur, I’d be banking part of my strategy on that number.)

[Japan’s] average Internet user fees are far lower than those in other developed countries—just six cents per 100 Kbps, compared with 24 cents in South Korea, $1.77 in the United States, $1.89 in China, and $2.77 in Germany. Japan also enjoys the world’s highest penetration rate for the mobile Internet, with 90 million mobile phone users [vs. 80 million PC Internet users] , many of whom have 3G handsets.

Second, Clay Shirky of NYU talks about the importance of failure and how open source software allows for many failures and thus results in better software because the cost of failure for free software is only time.

Open systems are a profound threat not only because they outsucceed commercial firms but also because they outfail them. They grow not in spite of failure but because of it. (Gen’s emphasis.)

In traditional business, trying anything is expensive, even if only in staff time spent discussing the idea; so some advance attempt to distinguish the successes from the failures is required. Even at firms committed to experimentation, considerable effort has to go into reducing the likelihood of failure. And because green-lighting ideas that turn out to be failures will be noticed more than killing radical but promising ones, many people err on the side of caution.

In open systems, by contrast, the cost of failure is reduced, partly because less coordination is required among the various players and partly because each player is willing to accept some of the risks of failure directly. This means that worrying about whether a new idea will succeed is unnecessary; you simply try it out. The institutional barrier between thought and action—the need to convince someone that your idea is worth giving a whirl—doesn’t exist. The low cost of trying means that participants can fail like crazy as they continue to build on their successes.

The HBR List: Breakthrough Ideas for 2007

One reply on “HBR ideas for 2007”

I wonder if this issue has hit the Japanese stores yet. I think I’ll enjoy picking through Hori-san’s piece.
One data point: Of those that went public in 2006, 85% —down from 96% in 2005— opened their first day of trading above their offering price.

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