For Japanese corporates, Singapore is an innovation gateway

With a healthy distance from home, they find fertile ground to reinvent themselves.

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Singapore has been attracting companies from all over the world, including Japan. But while it has long served primarily as a convenient location for regional headquarters, the tiny nation has become more than a stepping stone.

Japanese corporates, in particular, are finding value in Singapore’s vibrant innovation ecosystem, which has seen at least 25 innovation-related facilities open between 2017 to 2018.

Currently, there are about 36,000 Japanese nationals living in Singapore, and over 800 entities are listed in the Japanese Chamber of Commerce & Industry of Singapore. Japan is also the largest investor to Singapore from Asia, with more than USD 73 billion annually, according to official Singapore foreign direct investment data from 2017.

From our experience engaging with over 200 Japanese companies in Japan and in Singapore, we can say Japanese companies are redefining the role of Singapore as a place to accelerate their innovation and digitalization, rather than just a center for regional governance.

Two different models for inviting innovation

One example is Konica Minolta. The printing and imaging firm set up a Business Innovation Center (BIC) in Singapore in 2014, making it one of five BICs around the world to facilitate and accelerate the growth of Konica Minolta outside of its existing business lines.

The BICs manage the entire life cycle of service development and incubation activities, using an open service innovation concept, which means they work closely with partners in the ecosystem. Several products and services have been already commercialized as a result. Konica Minolta emphasizes “customer-driven” innovations instead of “tech-driven” approaches to identify untapped needs of potential customers that their current businesses are not serving. One of the reasons that it chose Singapore as a location for this BIC is that it can easily access consumers in adjacent growth markets to generate insights it can utilize in developing new product and services for the APAC region.

Another example is Symphony Creative Solutions (SCS), an IT solutions provider for the shipping and logistics industry. It’s located at Block 71, a startup hub run by NUS Enterprise, SingTel Innov8, and the Infocomm Media Development Authority of Singapore. This joint venture was established by multiple investors, including Nippon Yusen Kabushiki Kaisha (NYK), a Japanese shipping and logistics major.

In 2018, SCS established a new open innovation program called the “Ocean of Opportunities Challenge,” which is run in partnership with the Singapore-headquartered global container shipping company Ocean Network Express (ONE).

To establish the program, SCS and ONE reached out to the broader startup ecosystem, holding sessions to promote awareness of the ocean transportation industry and potential business opportunities. With programs like these, the firms successfully expanded their reach to a diverse group of startups beyond the incumbent logistics industry—a necessary move to stay ahead of the curve.

These are two different examples of how Japanese companies utilize Singapore’s innovation ecosystem to accelerate their own innovation outside of their home country.

A healthy distance

Singapore is a good location to accelerate innovation and digitization agendas for many reasons, but the major one would be strong support from the Singapore government.

It has established central funds to support collaborative initiatives. Government authorities such as the Economic Development Board (EDB) grant business incentives and subsidies to entities that plan to innovate in the country. The government supports the development of newer sectors by giving startups the room to experiment with new business models in a lightly regulated environment, via regulatory “sandboxes.”

Apart from the above business support from the government, we would like to highlight three factors that especially appeal to Japanese companies.

First is that geographic and cultural connectivity to the growing ASEAN markets. It gives direct access to the markets not only to gain insights and opportunities but also to test solution in a speedy manner. This allows companies to build products and services fit for emerging markets from the early stage. This particular advantage of Singapore manifests itself in the example of Konica Minolta’s approach.

Secondly, Singapore is a top gateway for Asian startups. Home to more than 4,300 technology startups, Singapore saw funding amounts multiplying by tenfold between 2012 and 2017. More than half of the funding for ASEAN startups goes to those based in Singapore. Being in this vibrant ecosystem helps companies access the high number of international startups in the region.

Thirdly, crucial for corporates from Japan, the autonomy and flexibility necessary for agile innovation can be better attained by setting up an innovation location outside of Japan.

The “healthy distance” gives companies the freedom to try new things. Also, being decoupled from existing business lines helps to minimize negative impacts in case of failure. In our interactions with the innovation leads of Japanese clients, we heard many voices emphasizing this advantage.

For example, when we interviewed a person who was running the open innovation program in Singapore for a large financial services company, the person highlighted that the company deliberately chose Singapore because the firm did not have a large business here. This enabled the program to try something new without having to worry about the negative impact on its core business.

Japanese companies become approachable

Many Japanese companies are aggressively looking outside Japan to identify new opportunities as their home market has limited growth opportunities, mainly due to an aging society and a declining labor market. They have been investing heavily to create opportunities for collaboration with external parties.

This is not just limited to industries such as internet and high-tech but can be seen widely across sectors. Logistics, construction, and industrial manufacturing are some of the notable industries that are faced with disruption, forcing the incumbents to change their attitudes.

Japanese companies are also looking outside to collaborate not only with startups but also with consulting agencies, which are tasked with helping them achieve their innovation and digitalization objectives at speed.

These two types of partnerships Japanese companies are now seeking out translate to new opportunities for startups in Singapore and adjacent growth markets.

The authors

Naoki Okutani is ​the Japan ASEAN Corridor program director at Accenture Strategy Singapore. He joined Accenture Strategy Japan and relocated to Accenture Strategy Singapore in 2013. He is involved in growth strategy, marketing, and innovation-related projects across consumer goods and the industrial and logistics industries, focusing on achieving global scale innovation via Singapore and ASEAN for Japanese clients.

Noriko Yanagisawa is a senior consultant at Accenture Strategy Japan’s Japan ASEAN Corridor Program. ​She has more than eight years of experience in consumer goods, focusing on e-commerce and the digital space. After joining Accenture Strategy Japan, she has been involved mainly in the consumer goods industry and digitalization. Currently based in Singapore, she is focusing on achieving global scale innovation via Singapore and ASEAN for Japanese clients.

This article is part of KrASIA’s contributor opinion series where experts share their views on technology and innovation in Southeast Asia. The authors represent their own views, not Accenture’s.