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Great minds think alike: Why Japanese companies should work with European start-ups

Japan and Europe are both places not only steeped in history and culture, they also have a lot in common in the business world. At Trusted, we discovered that partnerships between Japanese companies and EU-based start-ups are often a perfect match. Here we explain the ingredients of this three-piece pie for your business success.

1. Europe & Japan: Same industries, similar markets

Japan and Europe excel at the same things. In a globalized world, this is not a reason to armor up for an arms’ race with the competition but rather an opportunity of true symbiosis.

Japan is the 4th largest exporter globally according to the Observatory of Economic Complexity. The country counts manufacturing as its second largest industry (after the service industry) and mainly relies on vehicles, machinery, electronic equipment, and optical, technical, and medical devices. In the EU, manufacturing also comes second after the service industry. In 2019, the top 5 exports in the EU were machinery and equipment, motor vehicles, pharmaceutical products, chemical products and computer, electronic and optical products, showing a near identical overlap with Japan.

“You don’t notice screws — but they hold everything together”

For example, Germany has realized the true strength of partnership in these sectors already long ago. A country not dominated by large corporations, but rather their famous “Mittelstand” (SMEs), they specialize since decades in supplying high-quality parts instead of just finished products. This has given them an edge over other economies. Their supply chains for parts used in end-products in Japan and other parts of Asia are so strong that they remained less affected even during periods of recession, allowing Germany to slowly built itself into a leading world economy, currently the 4th largest globally, with a backbone formed of the humble business of manufacturing metal, plastic, and other components.

Classic manufacturing aside, European start-ups are generally characterized by the same down-to-earth attitude as Germany and they are creating niche solutions for the markets they operate in, which overlap with Japan. Naturally, they are developing solutions that fit the Japanese market with minimal adaptation and localization required. A huge advantage for a seamless and effortless partnership.

2. The Monotsukuri Mindset is engrained in European culture

Monotsukuri mindset, or the care and pride with which one fashions high-quality products, are not only the mark of Japanese craftsmanship. Europe looks back on a century-old tradition of its guilds specializing in their respective trades to the highest level of craftsmanship. It is no coincidence that the Japanese like to use the German word “Meister” to describe someone as a master of their trade.

This mindset is more than just skill, it is a mentality deeply ingrained in European culture and can be witnessed from Italian leather goods to French couture and German engineering. Things in the EU are of the highest quality, made to last, with an attention to detail.

The idea behind this is a long-term mindset and we find the same ideas prevail in the EU tech and start-up culture. While these two terms still conjure up the idea Silicon Valley, most companies there have two goals: Grow fast and sell your business. “In Silicon Valley, the quest for growth all too often trumps sustainable unit economics and profitability,” according to the Harvard Business Review. This strategy would severely hamper any business partnerships forged between these start-ups and Japanese companies with a different mindset and could lead to frustrations or even ultimately sunken costs and projects.

However, EU start-ups are in it for the long haul and foster a culture of connection to their land and market. Instead of a grow & sell approach, they aim to adapt to the markets they operate in and grow with them, much like Japanese companies, making them better and low-risk partners.

3. Niche markets and new start-ups are an untapped opportunity

Most Silicon Valley start-ups will operate in one the following three branches: block chain, fintech, and AI. However, EU start-ups are tuning into a much broader skill set as they emerged out of Europe’s diverse market focusing on fintech, cleantech, and hardware and software for a broad range of industries, including healthcare, fashion, food/drink, and infrastructure.

There are a plethora of European start-ups that to date, remain relatively unknown with highly specialized solutions that can click into the Japanese market like a cog into a wheel.

With less competition in a niche market, this constitutes a huge, untapped opportunity for Japanese companies looking for partners to take their business to the next level.

Through Trusted’s services, you can find potential partners in the EU before they reach mainstream status, giving you a unique market advantage.

Like Japan, businesses in the EU tend to be risk-averse and only reluctantly enter partnerships with companies they are not familiar with. Through our local partners in Europe, we can build the bridge between you and EU start-ups that is necessary for successful project execution and to leverage the potential of symbiosis between Japanese and EU tech companies that makes us more than the sum of all our parts.

Writer: Mareike Dornhege


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