Ride sharing works differently in Japan. Hailo lost the global market-share war to Uber and Lyft, but Hailo won the battle in Japan. Today, Ryo Umezawa details Hailo’s Japan market entry strategy and explains how they were able to succeed  where Uber has failed.

While Uber vowed to disrupt transportation by taking on both government and industry, Hailo worked within the system. They designed and launched a platform that was completely legal and made life better for all major stakeholders, including the taxi companies.

This was a battle between Uber’s disruptive innovation and Hailo’s sustaining innovation. On the global battlefield, Uber won. Uber is the world’s most valuable startup and is still growing fast, while Hailo had a cash crunch in 2016 and was acquired by Daimler.

In Japan, however, Hailo won. Hailo’s sustaining innovation soundly trounced Uber’s disruptive innovation, and Hailo remains significantly larger than Uber in Japan.

Of course, as you probably suspect, both companies had very different strategies in Japan than they did in the rest of the world, any Ryo explains it all in the interview.


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Transcript

Disrupting Japan, episode 68. Welcome to Disrupting Japan, straight talk from the CEOs breaking into Japan.

I’m Tim Romero and thanks for listening.

Today we once again turn our attention to ride sharing, but surprisingly, we won’t be talking about Uber—at least not very much. No, today we get a chance to sit down and talk with my old friend Ryo Umezawa, who is responsible for Hailo’s market entry. Now, listeners not familiar with Hailo, let me explain. Hailo is, in a way, Uber’s quiet and somewhat neglected little brother. Hailo did not make the same impact as Uber worldwide, because they followed a very different strategy. While Uber vowed to disrupt transportation by taking on all-comers, both government and industry, Hailo had a different approach. Hailo wanted to work within the system. They wanted to design a platform that was completely legal and that would make life better for all stakeholders, including the governments and taxi cab companies.

In fact, their model involved working with taxi companies directly. This was very much a batter between Uber’s disruptive innovation versus Hailo’s sustaining incremental innovation. And on the global battlefield, Uber won. Uber is the world’s most valuable startup and is still growing fast, while Hailo ran into a cash crunch in 2016 and was acquired—for quite a healthy sum, mind you—and it’s still an ongoing concern.

In Japan, however, Hailo won. Hailo’s sustaining innovation soundly trounced Uber’s disruptive innovation and Hailo remains significantly larger than Uber in Japan. Of course, as you probably suspect, both companies had very different strategies in Japan than they did the rest of the world. But Ryo Umezawa tells that story much better than I can. So let’s hear from our sponsor and get right to the interview.

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[Interview]

Tim: I’m sitting here with Ryo, the former country manager of Hailo. You’ve since moved on from Hailo, but we’re going to back up a couple of years because I think your experience with Hailo is something that a lot of people who are coming into Japan now can learn a lot from. Thanks for sitting down with us.

Ryo: Thanks for inviting me to speak.

Tim: Hailo is very popular in Europe and it made a good run in Japan, but I think a lot of people in the U.S. aren’t familiar with it. So can you just give a brief overview of what it does?

Ryo: Okay, sure. Hailo is a British company started up in 2012. It’s a smartphone hailing app. So we basically connect drivers and users who want to ride a taxi through the app and we also help drivers basically raise revenue by utilizing our unique algorithm to efficiently connect users to the driver. And then for the consumer side of the experience, we help them hail the taxis very easily.

Tim: Okay, so it sounds very much like Uber but with one important difference. You guys were dealing with actual cab companies?

Ryo: Yes. So we only work with licensed taxis. So for example, in London, it’s a black cab. There are 6 founders in the company. 3 of them are black cab London taxi drivers, so they wanted to create more revenue while driving around and create efficiency doing their job because their time is limited.

Tim: So, back in 2013, I believe is when it came into Japan, right? What was Hailo’s main motivation for coming into Japan? What did they see in the market?

Ryo: Actually, I’m the second person for Japan, so there was a predecessor before me. In Japan, yearly, there is about 1.8 trillion yen market size. This includes taxis and private vehicles. But in Japan, taxi companies own most of the private hired vehicles. That’s why the market basically size is 1.8 trillion yen, as big as the entire Europe market put together. So it’s a very big market and it’s actually twice or three times bigger than the New York Taxi market.

Tim: Okay. So it was simply the size of the market; they knew they had to be there. It wasn’t a particular trigger event.

Ryo: Yes, and also in addition, Hailo tends to focus on market that has high number of concentrated taxi in that area, and then in addition, the average fare is higher than other cities where we look at.

Tim: That makes sense. How did you structure the market entry? Was it holding a subsidiary? Did you set up a joint venture?

Ryo: In the beginning, when they came in with the predecessor, he came in with 100% subsidiary, so it was a wholly owned subsidiary of the UK headquarters, but when I was taking over as the new country manager/president, we had a lot of difficulties acquiring new drivers because penetration from the smartphone, where our business was, it launched also from the beginning. The penetration for the smartphone drivers was about 10% because our driver’s age was about 50 years old. So by looking at all this data and then looking at the speed of acquisition of drivers, I was thinking that we need a Japanese local name that can kind of vouch for us in order to create our brand, as well as get trust, because trust is very important. And when foreign companies come in, in some cases, in some industries, people see us as a black ship coming in, just like wartime. So my strategy was to basically change the black shit to either grey or white, by raising money from a conglomerate, the company called Hikari Tsushin. We kind formed a type of joint venture.

Tim: So Hikari Tsushin invested in the subsidiary or you created a new entity for them?

Ryo: We created a new entity for them, that we can jointly put money in.

Tim: And what was the split, was it—how much did Hikari Tsushin own and how much did the parent company control?

Ryo: I can’t disclose, but we had the majority of the shares.

Tim: Meaning Hailo?

Ryo: Yes, Hailo has the majority of shares.

Tim: Actually, before we get into some of the marketing techniques you used and how you built up some of that trust that you said is so important, I’m going to take a quick step back. You made some big changes to Hailo when you came on since Japan’s CEO. What was the reason for the change?

Ryo: Most of it was that we weren’t seeing the growth that HQ projected or predicted in the beginning, and also our business is all about platform, so matching drivers and users. And it’s always chicken or egg in these kind of platform businesses. You might have a certain point of time, more taxi than users, more users than taxis, but in this business, I thought having more taxis was more important because the user acquisition could be done online but all the taxi acquisitions are done offline.

Tim: Well, yeah, also, since you’re working with the taxi companies, you can do one deal with a company and get a few hundred taxis on the service. Okay, so to set the scene, how big was your team at that time when you were just taking over?

Ryo: When I was just taking over, I think the team was about 10, 12 people.

Tim: So not small for a new company coming in. Did you make changes to the team as well or did you make just strategic changes when you came in?

Ryo: Yeah, I made changes to the team and strategy. We weren’t doing that many rides a day but we had actually full customer support.

Tim: Well, customer support is important in Japan.

Ryo: Sure, but back then, we would have one customer support for few rides. Of course, I think they were looking at the scalability, but the service works. The service started in 2012; we were in Dublin, Spain, Singapore, and we even had a US operation, like we were operating in New York and it was proven that this really works. Of course, customers are thought of as kings in Japan, but in the beginning—I’m more of a startup guy, so I am happy to pick up calls from customers and I was actually picking up calls from drivers as well because I really want to know what is going on and what their concerns are, rather than hearing it from customer support. Of course, they will probably have a better voice and better service than I do, but market entry in Japan, I just thought it’s better as a lead startup to have more flexibility.

Tim: And I’m sure the fact that they are talking to the Japan CEO carries a lot more weight, even if you are not doing support perfectly correctly, right? Knowing they have that attention is far more valuable to them. What sort of changes did you make? How did you go about acquiring both the supply side, acquiring those taxis, and on the demand side, acquiring users?

Ryo: So originally, our operation was based in Osaka. I was going in there pretty often times and actually doing the sales work myself to really learn about what their requirements are. And in the taxi industry, you have a lot of conglomerates as well as second generation or third generation son or daughter taking over as a CEO and they do have libraries from centuries before. So trying to get into the middle and really hearing them out, and trying to fix this problem is something I’ve been doing hands-on, which is very important because this business is very local. It’s all about relationships and trust building, so myself, actually travelling down from Tokyo, and meeting them, and spending a lot of time and really trying to figure out what our best routes were, really was enjoyable.

Tim: Let’s talk about that trust though because you’ve mentioned that a couple of times already. I know it’s an important step of building up any kind of customer base in Japan. So trust is important in America too. It’s important in any business you do, but were there things that you had to do in Japan, to build this trust, that were different from what was going on in the states or England, for example?

Ryo: So Japan has the word called [UNCLEAR 12:50], which is drinking and communication. Practically, you think that you can always get business done in the meeting room, and giving away the terms, and the contract is there. And when I compare, generally, the US contract seems to be a lot longer than the Japanese contract. And it’s specified. So whatever is written on the US contract is what it is. In Japan, some is set as very vague, because you do have this trust and relationship. You don’t need to write down small details because it could be discussed or it already has been discussed. So I think when foreign companies come in, or even myself, like going to a new district like Osaka, where I’m not raised from, I would need to tell them who I am, what my thinking is, hang out with them, eat lunch, dinner, hang out with their family, and really understand in terms of when a problem or crisis happens, you can be called at any time and be reached, and really understand how to really solve the problem. Because Japan tends to be, in terms of making a deal or partnership, once you’re in, you’re in it for life. There’s a big cost I believe, in terms of doing business in Japan.

Tim: I think that’s the flipside of the long sales cycle. So it takes a long time to make that first sale in Japan, but customers are much more loyal. It’s just as hard for them to decide to move away from you and get a new vendor, as it was for them to decide to move away from their last vendor and use you.

Ryo: Because I think once there’s a problem, the first thing that will come to mind is not about switching—it’s about how to fix a problem. For example, Toyota, they have their Kaizen Style, like always it improves, and that’s the mindset that has been around. And the taxi industry is pretty old, so this kind of relationship building was a very important part of the business.

Tim: So you’ve worked in quite a few different businesses as well. Do you find this importance of personal trust and vagueness is stronger when you’re working with traditional industries than, say, when you’re working with more high tech industries?

Ryo: I think the basis is about the same, but it’s a lot stronger working with the traditional industry. It was actually my first time experience so I didn’t know what was left and right, but I was just trying to learn, and asking a lot of questions, and hearing them out. And in a way, I was a bit unique in the industry because I was raised abroad and at times, pretended to be like a foreigner and be ignorant of their request, and just pretending that I don’t understand it when I actually knew about it.

Tim: I could tell you from my own experience, that’s an incredibly useful technique, just saying, “I don’t understand this. Can you please explain it to me?” And people are very helpful and they will.

Ryo: At times, people expect you to show but don’t tell kind of thing, like they expect you to understand it, so once you ask them to explain details, they will be like, “Oh, it’s okay. Never mind,” because they don’t really want to explain that portion, details. They don’t want to be held accountable for it.

Tim: Did you have to change the product coming into Japan? So, for example, the taxi industry in London is very different from the taxi industry in Osaka. Were there changes you had to make to the product?

Ryo: Yeah, of course. Prices are different, there’s highway calls, and then, actually, one of the unique cities where we were accepting cash—for example, in other cities, we usually ask people to use their credit cards, but in Japan, and especially in Osaka, it’s a very cash oriented city. There are still many restaurants, and wherever you go, they don’t accept credit card, but this was one of the things that needed to be implemented on receiving cash.

Tim: And did you make that decision based on feedback from the taxi companies, or from the users, or from the market research?

Ryo: I think all of it.

Tim: All of the above? So it was a pretty clear decision you had to do this.

Ryo: We are a global company. We have to think global, but act local, and always customize to its needs. Otherwise there won’t be penetration in the market, as well as we will be seen as a black ship. Because they would be like, “They just want to push their own style because maybe it works overseas,” whereas, if we’re really adapting and we’re talking to players, they want us to customize to their needs, and they will feel special because we could say, “We’re a global company, but just for the Osaka version, we have these changes just for you guys.”

Tim: From my own experience, a lot of times Japanese clients and partners are asking for customizations. They’re really asking for a kind of confirmation that you take them seriously.

Ryo: Yeah. I agree. There are some things that they line up saying, “I need A, B, C, D, E, F, G in order to sign the contract,” and once they sign the contract, they don’t follow up on maybe D-G, because they were just testing how committed we are and how many steps we were willing to take just to partner up with them.

Tim: And also, they know if it becomes important in the future, they can push you then.

Ryo: Sure.

Tim: Let me ask you, why Osaka?

Ryo: Actually this was a decision made by the predecessor. Actually, there has been many cases recently that foreign companies start in Osaka because it’s more concentrated and it’s more controllable. And some does it in another way as well. For example, in order to do it in Tokyo, we have to have a big coverage. So if you’re riding in point A, you could end up taking the customer to maybe 15km away, whereas if it’s Osaka, you have the north side and the south side, it’s really like these main roads that surrounds it within the city and it’s more controllable, and it was good for our initial case study.

Tim: I see. So by focusing on Osaka, it was a risk control measure. It enables you to come into a still big and viable market with much less capital, fewer taxi companies on board to cover that market.

And it could work as kind of R&D in the beginning.

Tim: Sure, because that’s going to, when you make the next move to Tokyo, you would have a whole list of Japanese clients and proof that it works in Japan. That’s really interesting. Almost everybody enters in Tokyo. So you were mentioning other companies were coming in Nagoya for example. What type of companies is this strategy really good for, do you think?

Ryo: I think it could work for us, for example, transport businesses, or even for corporate enterprise systems, or SMEs as well. Because if it’s Tokyo, you have to go one by one, or use an agency, etc. But when you’re in maybe the second or third largest cities, the community is a lot smaller. So if you have this one company track record, they would be willing to introduce you to their friends and companies, whereas in Japan, it’s more business-like for some industry, where they’re like, “You can go to this one, you can go to this one.”

Tim: Right. You can go to the trade association with the 20 different members. Interesting. I could also see it would be very advantageous for any company that has a physical plant, their employees scale linearly with the market, or, in your case, you needed cars signed up. What are some of the things you tried to generate the demand? So on the supply side, the taxis, was it really just a matter of going out drinking, building some trust, and rationally explaining the value proposition?

Ryo: Well, it was also explaining about—having our investor, the conglomerate, we were getting secunded. The employees were being secunded to really go after a lot of taxi companies. So we were approaching the executives of taxi companies, as well as the driver itself. So the drivers would have like weekend events, corporate events that we would show up and sometimes sponsor some of it in order to really mingle, as well as the penetration that I mentioned previously, that the smartphone penetration is about 10%. So 90% of the consumers were having mobile phones, the feature phones, flip phones. So we were creating incentives in order to swap from feature phone to smartphone by doing a cash back campaign, lessons—some of the drivers were grandparents. We were pitching that if you got a smartphone, you could watch YouTube anime together with your grandson. So these were kind of initiatives, in not only the relationship side, but making use of agencies, partners, as well as our investors, to really go out there and pitch to each driver as well.

Tim: And for our listeners overseas, Hikari Tsushin is one of the largest, if not the largest, independent retailer of mobile phones and mobile phone subscriptions.

Ryo: They’re the number one reseller for iPhones in Japan.

Tim: So it makes sense that they would go out, they really dedicated their sales force to going out, and talking to the taxi companies, and convincing the drivers to sign up for these discounted smartphone plans.

Ryo: I think Japan was one of the unique cities where the smartphone penetration was very low. The penetration of smartphone in Japan is pretty high, but just for drivers, because coming from age—

Tim: Yeah, that makes sense, because there is still a whole lot of flip phones sold in Japan, and it is mostly to older people. Okay, so on the demand side, what were some of the things you did to get users aware of Hailo?

Ryo: We’ve had a lot of partnerships and campaigns that we’ve had. So we were having a partnership with rental parking spaces. If you were to park in a hotel for maybe the whole day, it’s going to be a tremendously expensive bill, but if you own a house, and a parking spot, and you don’t use it for the daytime, you could be actually renting that space for a lot cheaper. So for consumers that rent the parking space, they would need a taxi to go somewhere. So that was one of the partnerships. Because even though they took a taxi to the destination closest to the parking space, they will still save money, rather than parking in a very expensive place. We’ve had partnership with hotels where they would—because we’re a global, we would allow people to use in English, or Spanish, or other languages, and it’s the same app. You open it anywhere, you are able to call the local taxis out there, so we had a partnership with hotels to accommodate people to actually use the app in their own language. Actually, one of the most successful promotions was handing out tissue papers. In Japan—

Tim: That’s old school. That’s—all right.

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Ryo: It’s old school but it’s really targeted. So, for example, when people miss last trains, people have to take a cab home, and the last train in Japan is about like 1am or midnight in some certain places. There’s a long queue of taxis, so what we would do is give out tissues to the people waiting in line and we would tell them, “You don’t have to wait in line anymore. You could also advance taxis,” and we were asking the drivers to give away tissue papers as well. Because they’ve already ridden taxis, perhaps not through us because we are using taxis as also running around.

Tim: But I love that idea of going up to people who are waiting in line, because once someone uses it once, that’s the hurdle, right? They’re much more likely to continue to use it once they’ve put in their information, and hit that button, and had a good experience.

Ryo: You know they could be a potential user. I mean, obviously because they’re waiting for the cab. Maybe it’s not so often times that they miss a last train, but I’m sure at a certain point in time, they’ll feel, “Oh, I should use that app because I don’t have to wait in line anymore.”

Tim: One thing I find really interesting about your approach is that I think most people looking at this application would assume that the best strategy is to pursue online methods—really scalable. But your strategy seems to have been built primarily around partners and partnerships.

Ryo: I have an online marketing background and I’ve done all my marketing as well, just by looking at the numbers, what was most effective, and cost efficient way for taxi business. It happened to be offline. So people were really surprised, like, “What’s your CPA for Facebook ads? What’s your CPA for Google ads?” I think what you want to do is give away tissue paper because that’s really effective. When I was explaining this to the guys in London, they were like, “Are you sure?” And I was like, “Please look at the numbers, look at this, look at that,” and if you look at the demands that came in, it was really the tissues. Because we were using the coupon code tracking for the tissues or we were giving away fans and a lot of local events.

Tim: So you were rigorously tracking everything you did and just doubling down on worked. And that just happened to be the more physical stuff.

Ryo: I think it really depends on the stages as well. I think by doing offline, you won’t probably scale at a certain point in time. In the beginning, we have to be looking at chicken and egg strategy, so keeping the good balance, and the number of drivers that were coming into our network, really matched the strategy of doing a lot of things offline.

Tim: Okay. So Uber was coming into the market, pretty much the same time you guys were, with a very different strategy.

Ryo: We’re just a bit bigger than them, right? Globally.

Tim: Well, that’s the funny thing, in Japan, you were much bigger than they were. In Osaka, what percentage of the market did you capture there? How many taxi companies did you bring on board? How many rides were you doing?

Ryo: I think we were able to capture about 50 taxi companies, total of about 500 cabs. More than enough to create a case and do a lot of research and development and provide customization to be able to bring into other cities in Japan.

Tim: So about what percentage of the taxi cabs in Osaka would that be?

Ryo: There is about 17,000 cabs. So it is not the majority yet, but based on the predecessor’s strategy, in the beginning, Osaka market entry was more R&D, research and development, and really getting the product right.

Tim: Proving the concept.

Ryo: And making sure how much we can do the product customization, what kind of speed, to really expand it and scale it up.

Tim: Okay. Actually, let’s get back to Uber for a moment. Globally, Uber is so much bigger than Hailo, but in Japan, it didn’t work out that way. Hailo was much bigger than Uber. When I look at it, I think it comes down to a basic approach to strategy, but you were right in the middle of it and you guys took very different paths. I want to hear your thoughts on their strategy versus the strategy you guys executed.

Ryo: We get compared often but I believe we play a role in a totally different space. As Hailo is focused on raising revenue for the drivers, and creating efficiency, and then allowing for our drivers to pick up customers, and our customers getting safety, riding a licensed cab, and being able to use the app globally. Whereas Uber is creating more of a network by enabling private hired vehicles, or they’ve also done carpool in Japan, in Skoka, where they were ordered by the Minister of London Transport Infrastructure to be shut down because it wasn’t legalized. So I think it’s very hard to compare. The area of their focus is very different from our area of focus.

Tim: That’s true. From what I’m seeing, though, it seems like the most important difference was that Hailo seemed to be making a very strong effort to play by the rules, to make friends with all the local players, to go out of their way to obey all of the laws and understand them, and Uber was trying to be disruptive. Is that a fair way of looking at it?

Ryo: Sure. Some media has picked up us before when comparing the two companies. Hailo is a constructive innovator, whereas Uber was a disruptive innovator. The reason why I like Hailo, because the founders’ DNA plays a big role in the company. 3 of them, out of the 6, are taxi drivers—London, black cab drivers, with a long history. And their sole purpose of starting this company was really create efficiency and of course create more money for themselves, because by creating efficiency, they will be driving more customers. So whichever cities we go into, we want to obey the law and make sure we obey the taxi association. Our business was favored by the Minister of London Transport Infrastructure in Japan and I was always talking to the politicians and government officials in order to really help grow this market. Because taxi wages has been going down in Japan in revenue for taxi companies. Some of the taxi fleets, the average was 33% in profit. It’s a very small margin and in terms of the overall economy, the prices are going up while the taxi prices are not going up that much. It might be expensive to start off with.

Tim: So I can see why that would be attractive, because Hailo is very much about improving the status quo, making things work a little bit smoother, or making a little bit more money, and that message is attractive in Japan in general.

Ryo: We were able to raise about 30% after revenue for taxi drivers, for people who started using smartphone and then Hailo services. I think that really helped, and they even get to spend more time with their grandchild because they have a smartphone now.

Tim: Excellent. So after about a year, year-and-a-half, you had a functioning proof of concept, you had a good number of taxi cabs, you had a good number of users. What happened? Because I know the plans to expand to Tokyo didn’t quite materialize, so what happened?

Ryo: We’re actually still in the process. The next deal took over, who is actually from the conglomerate’s side, who is our investor. While we are expanding to many of the larger fleets, we’ve had fleet A disliking fleet B. When we talk to fleet C, they would only come into the Hailo network when were able to convince fleet D. So, as mentioned, it went in generations and generations of good friendship and bad friendship.

Tim: So you’re dealing with a lot of very old rivalries and alliances?

Ryo: Yes, exactly. And our platform is very neutral. We want to work with everyone in the market because we’re a platform. The business will grow and we can only create efficiency once the majority of the taxi fleets—I mean, most of the taxis in Japan, the drivers exist to a fleet, or a private taxi association. So we would require the association or the fleets in order to sign up with us. And the individual driver can all sign up directly. So after thinking and going through the strategy and re-thinking, I was not able to convince fleet A to work with fleet B, or C and D, etc. We would have to kick out one by one for some of them and we won’t be a neutral platform. So we changed strategy. This is actually the first country to change strategy in our business model so we decided to switch to OEM business model. So the app will probably be a fleet A branded app, powered by Hailo because each fleet wants loyality, loyal customers that they already have a network of. Our pitch was we will provide our OEM to A, B, C, D, or E-Z. That’s for Japanese. For foreigners that’s travelling in Japan, we’re currently about 20 million travellers for inbound right now. And by the Olympics in 2020, we should be having about 40 million. So we’re proposing about having a Hailo app for foreigners and a global app because they can use it in other countries, like UK, etc. And when they come to Japan, we will be able to utilize all the powered by Hailo taxi companies, but for the Japanese consumers—

Tim: They can maintain that brand loyalty.

Ryo: Brand loyalty. And it could be 10 apps that people might have to download but—

Tim: But that certainly makes sense from the taxi company’s point of view. So I’m sure they saw the disintermediation that Uber did and they said, “We don’t want that happening to us.” So that’s pretty interesting. Has that strategy been successful?

Ryo: It’s a work in progress right now and the new CEO is actually working on it and I’m helping him as an advisor of the company. So he just keeps the relationship with the taxi fleet but he’s the one running the show now.

Tim: All right. And that’s very much an only in Japan play?

Ryo: Yes. You look at the numbers, for example, in Tokyo, there’s about 45,000 taxis and the largest fleet only has about 4,000. That’s about 10% of the market share. And this 4,000 cab fleet and association, there’s like 4, 5 of them.

Tim: Incredibly fragmented market.

Ryo: Yes. And the rest of them are all small, medium enterprises that only has maybe 10 cars, 50, 30, 100. I really think that they need to work together in order to create more efficiency and raise revenue. Because I’m sure there are a lot of usage of drivers’ time trying to pick up customers 15 minutes away.

Tim: Sure. And are you still targeting these very small companies as the Hailo branded app?

Ryo: We’re happy to talk to anyone who’s interested. We require a certain amount of taxis, otherwise, as mentioned, taxi drivers might be forced to pick up a customer that’s 15-20 minutes away and that won’t be a good story for both sides, for the consumer side as well as the driver’s side. We don’t force drivers to pick them up but in Japan, drivers, when they take the job, they tend to go really far as part of the service where customers are king.

Tim: Right. Okay. Let me ask you something kind of personal because you found yourself the man in the middle between the global team at headquarters and the team on the ground in Japan, particularly during a transition, how did you keep communication open? How did you make sure Japan did not become a black box?

Ryo: Well, I was constantly sharing Japan’s data and stories of what’s going on with HQ, the UK team, and my direct boss was actually the founding chairman, and I would have weekly calls, or I would call him whenever I meet him. My voice is, to a certain level, I’m shouting from Japan. It’s very different when you’re hanging within UK and the executive chairman of the company, and also, I was asking the chairman to actually come to Japan. He would come here several times, meet the whole team, have time, he really conversed and had direct channels as well with employees in London. And also, when I do my periodical trips down to UK, I was taking some of the employees, creating more of this network within the company.

Tim: Okay. So there weren’t any real problems getting special resources for Japan or making these changes that were unique to Japan?

Ryo: At times, of course, there is because we’re out there, like when compared from working in the UK, it’s kind of hard to have a facetime and really remind them. I wouldn’t know if they are having a bad day or not through maybe a video conference, because I wouldn’t hear them chatting about something before my call. Of course, there was difficulties at times, but then Hailo was a really great start up where people were friendly and they really tried to help, and they understand the needs and differences.

Tim: Oh, cool. So you just had a really good corporate culture coming in.

Ryo: Yeah. The founders were really great. They were really helpful. Sometimes I don’t know who to go to, so I ask the 3 founding drivers. They know every employee and they know who to ask and they will be willing to help out.

Tim: All right. That’s good to hear. Looking back on it now, now that it’s done, what would you say is either the biggest mistake you made, that you wish you could go back and take back or perhaps the biggest challenge you faced bringing this company in?

Ryo: I think globally as well, I think we should have raised more money. Like the example you mentioned, Uber, there is billions of dollars and we were in millions.

Tim: I know globally Hailo has had some money troubles recently, but do you mean even the Japan JV should have been better capitalized?

Ryo: Yeah. I think so. I mean, I don’t think there will be an issue of having too much money. And actually, we’re doing okay now. We’re owned by [UNCLEAR 41:18] and we’re actually moving on to the bigger next stage. It’s looking very prospective.

Tim: Okay, let’s see, before we wrap it up, what’s the best advice you can give to a new country manager?

Ryo: It’s a very human-oriented business. All companies, it’s all about the people that creates the culture of the company, or the profits, so knowing the people in headquarters, knowing your original colleagues, and really spending time communicating. And also, just because you’re in a different country, you shouldn’t expect people to really understand the differences or what’s going on with you, so you have to be over-communicating your current data. Even if it’s very small details, if it’s in the same country, it’s something maybe you don’t have to share, but if it’s a global company, I recommend that you over-communicate and tell all the small details, even though they don’t respond to you.

Tim: So is that over-communicate to your boss and headquarters or over-communicate to your staff or just everyone?

Ryo: Just everyone. Your colleagues in HQ, your colleagues in other countries, and your colleagues in Japan.

Tim: Excellent. Well, listen, is there anything that you want to talk about that I haven’t asked you yet? Is there anything I should have asked you that I didn’t?

Ryo: I think my answer seemed to make it kind of, in some way, negative, in terms of the traditional industry taking a long time, but there’s always a good portion of it, once you get the trust, the long-term relationship can be there. And also, this is a very big market to penetrate. I think it has a lot of chances for even other players to come in and as long as you’re committed to Japan, I think there is great opportunities to gain and really spend time talking to the right people.

Tim: I think Japan is really opening up now. It is so much easier to either build a startup or to bring a company into Japan than it has ever been.

Ryo: I think so too.

Tim: Listen, thank you so much for sitting down with me. I really appreciate it.

Ryo: Thank you too.

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[Outro]

And we’re back.

I absolutely loved Ryo’s low-tech approach to marketing Hailo, handing out packs of tissue in front of train stations. I mean, after all, that’s where the customers were and it’s the perfect illustration of how sometimes your best early moves involve things that don’t scale. The critical thing, however, is that the team meticulously tracked the results of these marketing experiments just as they would for an online campaign. He also underscored a point that I think is not well understood about the well-known tendency of Japanese companies to demand extensive customization. Sometimes that customization is really required of course, but sometimes the customer is just making sure that you’re really committed to the relationship.

I also think that Ryo’s description of the difficulties in getting the taxi companies to cooperate—or not even really cooperate, just to exist on the same platform—really illustrates the need for disruptive innovation. Hailo managed to succeed, to an extent, by carefully balancing the needs of all stakeholders. Now, many of these so called needs were clearly non-economic, some simply driven by pride or resentment. And they result in inefficiencies and higher costs for everyone. When these economic inefficiencies get high enough, a disruptive company can break through and re-write the rules of the game. It seems that the taxi industry in Japan is not yet right for this kind of disruptive innovation, but there’s a lot to learn from Hailo’s approach in Japan.

If you’ve got a question of disruptive innovation or with Uber and Hailo, Ryo and I would love to hear from you. So come by DisruptingJapan.com/Show068 and let’s talk about it. When you drop by, you’ll see all the links and sites that Ryo and I talked about and much, much more in the resources section of the post.

And you know, I’m going to be trying something new at Disrupting Japan: listener mail. I get a steady stream of inbound mail and some of the questions, well, I think a lot of people would benefit from. So if you’ve got a question, e-mail me at [email protected]  or better yet, send them via Twitter or on our Facebook page and I’ll read them on the show. It should be fun. And most of all, thanks for listening, and thank you for letting people interested in Japanese start-ups know about the show. I’m Tim Romero and thanks for listening to Disrupting Japan.