JMEC - Awakening the Genie
Sometimes the best good works happen right under your nose. Within the foreigners-in-Japan business world, one such "improver" is the Japan Market Entry Competition, otherwise known as JMEC.
- 04 Jun
JMEC - Awakening the Genie
Terrie Lloyd on JMEC in "Terrie's Take",
General Edition Tuesday, May 28, 2019, Issue No. 991
+++ JMEC - Awakening the Genie
Sometimes the best good works happen right under your nose. Within the foreigners-in-Japan business world, one such "improver" is the Japan Market Entry Competition, otherwise known as JMEC. This program and associated organization is funded and supported by 18 foreign chambers of commerce in Japan. The program's surprisingly high, and consistent, level of official support is testimony to its effectiveness. I have been involved in JMEC ever since it was first discussed as a "crazy idea" in the Australia New Zealand Chamber of Commerce (ANZCCJ) some time in the early 1990's and thereafter from when the first competition took place in 1993. From memory, those early years had intakes of about 50 people, whereas today the numbers are closer to 80, which means that up until JMEC 25 this year, at least 1,200 people and likely more have been through it.
So what does JMEC actually do?
Fundamentally it teaches volunteer participants how to take the first step in creating new businesses or fixing old ones - by doing deep-dive research and thereafter building credible business plans. The skills learned include ideating, market and technical research, product/service design, business pricing and planning, negotiation (with clients and other team members), documentation, presentation, and last but not least - perseverance - perhaps the most important habit of a successful person. JMEC participants are usually employees of companies whose senior management value creativity, independent thinking, and personal growth of their staff - even at the risk of losing them later if those same staff have an epiphany as a result of their JMEC experience. Originally most participants came from foreign multinationals, but recently it's interesting to see a lot more Japanese firms who are trying to internationalize encouraging their staff to join the program - companies like Rakuten, Fuji Xerox, and various Japanese banks.
JMEC is a tough business boot camp and it's not for the faint of heart. Teams are given a project (versus choosing one) and are expected to make the best of that client. The 4- to 6-person teams work together for a grueling 7 months, and team members are challenged to solve problems that are frequently well outside their skill set and comfort zone. Marketing people suddenly have to learn about engineering and technology, technical people need to learn market research and making customer presentations, and modest administration staff suddenly need to be seen and heard. All participants are expected to be able to speak English (although not necessarily fluently) and to have graduated from a 4-year college. In fact, about 20% of participants this current year (JMEC 25) have Masters or PhD degrees.
Why JMEC is top of mind for me at the moment is that I was contacted a few weeks ago with the invitation to become a replacement judge, after one of the regular members suddenly couldn't make the dates set. Although I have been involved with JMEC as a presenter/lecturer and so I knew that the judges play an important role, I didn't realize just what an intense and sometimes emotionally conflicting (you naturally find yourself wanting to support the underdogs) role it is... So perhaps naively, I said "yes" and duly received the orientation and a 10cm high pile of business plans to review...!
The judging took place this last weekend and although I can't say who won, that will be announced later, I can share some insights about how JMEC tests the limits of people who are suddenly thrust into the chaos and desperation of a (simulated) start-up. In fact it has been quite eye-opening to realize what a large gap there is between what is taught in schools (as mentioned, there are some MBAs) and what thought processes are actually needed to create a successful business. Just like an aircraft simulator, JMEC somehow creates the same highs and lows, tensions and desires, as would be felt in a real start-up. As a presenter/lecturer I have always shared with the participants my viewpoint of the mental and emotional stresses involved, but until now I have never "felt" the participants' own journey. As a judge, though, you really get to see the process at a much more personal level, and so my respect for each participant has gone up dramatically.
So what are the common gaps between knowledge and practice that otherwise well-educated people make when creating a new business plan under pressure? I was able to identify three points from the JMEC teams and, btw, these points apply equally well to real first-time entrepreneurs as they do to JMEC contestants.
1. Realistic Budgeting
It was fascinating to see people who are already employed show a basic trait in their budgeting process - the trait of over-optimism and trying to please. Of course when we create a business plan, we necessarily have to be optimistic that our business will succeed or otherwise why even bother to start? Furthermore, our investors need to be incentivized by optimistically strong returns or we won't be able to find the capital needed to get off the ground. I'm all for optimism, but what I found at JMEC was a pattern where some (but not all) teams did not want "ugly" red ink to show up on their projections. So even in the first or second year they had plans showing black ink (profit).
As an entrepreneur I know it's possible to run a company like this (if I have perhaps only one employee), but in doing so I also know that I'm limiting myself in two ways: i) a profit in Year One either means I'm very lucky/smart, or more likely it means I'm not working my capital hard enough and I have not made sufficient investment in growth, and ii) maintaining profit at the beginning means I'm probably the slow, cautious type who will be aiming for a 30-year exit for the business - which is certainly the bane of potential investors - versus a more normal 5- or 10-year one. Providing you have sufficient capital, I don't think it's a sin to have red ink on your P&L for the first 1-3 years. In fact it's normal.
I also found that some teams were following client expectations (in a real start-up, the "client" might be an investor) to the detriment of commonsense. If a client says that they want to be in profit in 18 months, yet with meaningful revenues, you'd better be reflecting the need for a huge amount of capital investment upfront to get there. Or, if a client doesn't want to hire staff (support for a software company, say), then perhaps you will have to tell them straight up that you don't think it's possible. Or if the client wants the Japanese partner to put up all the capital for a new joint venture, then point out in your business plan that they won't get much local ownership let alone control, because the Japan partner/distributor taking all the financial risk will want a big chunk of the local equity - in my experience as much as 50%-70%.
2. Impactful Marketing
The common pattern in teams' approach to marketing was to either ignore it, by letting a distributor take care of it, or by throwing money at the task. In real life, when you let a distributor take control of your marketing it's only natural they will want to do it under their own brand, and so you lose one of the biggest value-creation opportunities of being in the Japan market - which is strong local brand equity and thus stable revenue for years to come. OK, it is true that if your brand is already known globally, your distributor will probably push your brand, but for most companies who are just regular mid-tier players or start-ups, you will have little to no leverage with the distributor, who over time is anyway going to view you as just another supplier. Furthermore, if that distributor is major, your product and brand will gradually be lost in a huge lineup of similar products.
Throwing money at building a brand was the second common response to marketing. This actually connects to the first point I was making, which is that it is naive for a new entrant to the market to think it can simply ramp up its messaging to compete with successful local incumbents. Instead, there needs to be a clear value proposition that the incumbents don't have, or a very unique creative hook that consumers naturally respond to. When I start a company I always ask myself, "What are the natural advantages I have over my competitors?" long before I consider the marketing budget. If my product/service advantages are not outstandingly clear, I'm not ready for the market.
3. The Big Idea
Tying in to this last point about natural advantages of your product or service, is the "Big Idea". A big idea can be a product feature that no one ever thought of before, like Post-it notes; or a business model that completely disrupts a major business sector, like Airbnb; or an inspirational leader who dreams of world peace, like Gandhi. All are inspiring, all cause consumers in their excitement to overlook the normal flaws and fears, and all act as a magnet for recruits and investors. No one wants to invest their future or their money in an uninspiring company.
The prizes for the winners of the JMEC competition are HP computer gear and a bunch of Finnair return airfares to Europe, which are highly appealing, but I think the real prize for participants is their new awareness of what's possible if you think out of the box. Do I recommend JMEC? Unequivocally, "yes". But be prepared for the work involved and the outcomes.
* * * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term technology and media entrepreneur living in Japan.