Japan can leave innovation to the rest of the world: Scott McNealy

Last week at Ad:tech Tokyo, Sun Microsystems co-founder Scott McNealy was asked why Japan doesn't have a more robust startup and tech entrepreneur culture.

You might think that McNealy would answer this question with a diplomatic acknowledgement of Japan’s unique culture and industrial heritage and then follow up with some encouragement and suggestions about moving forward. McNealy though is famously blunt. Most famously, in 1999, he lit the tech world on fire by stating that consumer privacy issues were “a red herring. You have zero privacy anyway. Get over it". People didn't like his message, but his words were well ahead of their time.

For McNealy, a Silicon Valley giant, Japan is a beautiful, safe, and clean country. Its people have a “great work ethic” and are industrious. It’s an enjoyable place to visit. But Japan isn’t a place that encourages risk taking, a key component of startup culture. 

“Japan should just relax,” according to McNealy. It should leave innovations and breakthroughs to others and be content to “make improvements” and play a supporting role.

Does the global tech industry really have such low expectations of Japan when it comes to the next great technologies and companies? Even worse, could it be that Japan has collectively given up on serious efforts to promote entrepreneurialism?

Another former Sun Microsystems executive noted: “The ‘Japanese can’t do tech startups’ argument is very, very old—almost as old as ‘Japanese can’t do software.’  I think it’s taken as a given and thus not particularly controversial, though I’m sure Japanese people don’t like being reminded of it. I can count the number of software startups from Japan that I’m aware of on the fingers of very few hands.”

In a recent talk at the American Chamber of Commerce Japan, Minoru Etoh, the ex-CEO of NTT DoCoMo Ventures, noted that VC-backed startup funding in Japan was a paltry US$1 billion in 2015. In the US it was around $72 billion. This investment disparity is breathtaking. Japan not only risks being left behind in the startup economy; it risks being left out altogether or being reduced to a bit player.

It’s unlikely that McNealy set out to insult his hosts. Someone in his position probably doesn't care enough one way or another about the future of Japanese startups or entrepreneurs to have an agenda here. Most probably, McNealy was just exasperated that there has been so little progress in supporting entrepreneurs since he first came to Japan in the 1980s.

Japanese advertising and communications agencies are in an unusually good position to support tech innovation. While they may not be the creators of important new technologies, they have the client connections and communications expertise to offer useful support and promote startups and emerging technologies.

We can build, and some of us already are building, accelerators that not only provide funding for new tech ventures, but also help startups access potential clients as well as build their brands. Some, notably Dentsu via Dentsu Ventures, are dedicating significant resources to tech investing as a means of developing alternative revenue streams—as opposed to developing niche technologies to support existing client briefs or attract PR.

As an industry, we lament our diminishing budgets, margins and stature with our clients. If we work cooperatively with credible investment experts and are willing to risk our own resources, we may begin to develop new and long-term sources of revenue. With even moderate success, we’d likely win the respect of our current clients. There is no doubt that inadequate investment in new ideas and entrepreneurs is the riskiest course we can take.

Barry Lustig is managing partner of Cormorant Group, a Tokyo-based business and creative strategy consultancy.