Japan’s Return Path to Innovation – Tim Rowe – CIC

Links from the Founder

• The Cambridge Innovation Center
• Follow Tim on twitter @rowe
• WCVB-TV’s video on Kendall Square and CIC

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Transcript from Japan

Welcome to Disrupting Japan- straight talk from the CEO’s breaking into Japan.

You know, I’ve always been a bit skeptical about co-working spaces, innovation centers, and startup community hubs. Some of them are well intended, but too often, the organizations that put these facilities together have a bit of a field of dreams mindset, where, if they just build the office space, the innovative entrepreneurs will come, and then the organizers will find themselves at the center of a thriving ecosystem.

Sometimes that actually happens, but usually not. But when it works, when all the pieces really do come together, amazing things happen. And a community develops that is far greater than the sum of its parts. So what’s the real difference between the innovation spaces that flourish compared to those that stagnate?

Well, today we get a chance to sit down and talk to Tim Rowe, CEO of Cambridge Innovation Center, or CIC, the largest innovation center in the world. And we have a conversation about what’s really involved in building an entrepreneurial community, and the CIC’s progress on building a very large-scale innovation center right here in Tokyo.

It’s a truly insightful conversation, so let’s hear from our sponsors and get right to our interview.

Romero: So I’m sitting here with Tim Rowe, CEO of the Cambridge Innovation Center. This is a pretty incredible space that you have been running for 15 years now. So rather than having me explain it, can you tell us a bit about what CIC is and how it came to be?

Rowe: Sure. CIC is the world’s largest space for startups, that is our Cambridge Space, specifically. We’re also in Boston, Miami, St. Louis, Rotterdam Netherlands, at the moment and we’ve got some more in the works. We call ourselves a community of startups. So we’re not an accelerator where we’re telling people how to build their business or investing in them. We have brought 15 venture capital funds into our location in Cambridge and some of our other locations, so there is access to money, but it’s more of an open platform.

Romero: So the VCs actually have offices there?

Rowe: Their entire firm is there.

Romero: In terms of business, though, it’s a real estate business. You’re renting office space. You don’t make money by making investments or…

Rowe: Yea. So we don’t think about it that way. You could argue that a university is mostly made up of real estate, but that’s not its purpose. It makes it’s money by charging people to live there and go to classes, but, it’s in the same way our mission is to make the world better through innovation. The space that we curate is like a little city of innovation. Yes, people have to pay to use space in that city. A lot of things we do are free and open to the public. A lot of things we do are non-profit. Our wet laboratories and our robotics laboratories are actually non-profits. So we’re a mission driven business that happens to use real estate as a means of getting innovators together.

Romero: Let’s dig down on that, because, certainly over the last ten years or so, there has been an explosion of co-working spaces and non-financial accelerators, that are frankly, often run by real estate businesses. You have got over 500 companies in this space now.

Rowe: Over 1400 companies in total now. In several different buildings.

Romero: I guess I’m saying, what are you doing different? What do companies see in the Cambridge innovation Center that they don’t see in these dozens of other accelerators?

Rowe: So there’s a lot of ways to answer that. First of all, there is a spectrum between mission-driven and money-driven spaces just as there is a spectrum between, on the one hand you have something like a university, on the other hand you have something like a hotel. They both have space, places people sleep, but they have different purposes for that. Even within the hotel business, you have everything from sort of non-profit youth hostels up to premium four seasons kind of experiences. This world is growing, obviously, quickly. There are a lot of different models that people are presenting to the world. Just as in those other industries, you have everything from community college to MIT. Even in universities there is a wide range. That range will continue. I think, where we sit, is just our own little space. We are a warm, mission-driven community of serious entrepreneurs trying to change the world. We do it at a scale that nobody else does. So we’re more city like than a space. We call ourselves an innovation campus. When you visit one, you’ll feel more like you’re at a university and the scale of that than that you’re in somebody’s shared space.

Romero: Just to contrast the mission driven approach to the real-estate or landlord driven approach. Can you think of a time where you made a decision a certain way because you were mission driven rather than…

Rowe: A good example is wet laboratories. The people in Boston were telling us, you guys really need to have the wet laboratory infrastructure that we need to build our companies. We said, sure. We did the math, and we found that it loses money. But we could not make that math work for a number of reasons.

Romero: So wet labs are for life sciences?

Rowe: Wet labs are for wet life sciences. So you have everything from petri dishes to electron microscopes and DNA sequencing devices. And those things cost tens of millions of dollars. And startups aren’t necessarily able to pay for them. Although they need them, they just don’t have the kind of capital that would support it. So we looked at that and said, this is still needed. So we went and turned it into a non-profit. We have worked on this for years. We built it. It’s very successful. Haven’t made a dime on it.

Romero: Did the non-profits have corporate sponsors? Or are they just structured as a non-profit…

Rowe: No typically governmental sponsors. We also have some corporate sponsors, but for the most part, these initiatives are underwritten by the public sector as an economic development initiative. So we try to think, what do innovators need? What should the world look like? Then we figure out the way to make that happen, regardless of whether that makes us money or doesn’t make us money.

Romero: I’ve noticed that the community doesn’t usually happen for co-working spaces. This is something that has interested me, when we were speaking earlier today, you mentioned the importance of proximity. What is it that you think is missing from most co-working spaces or what do you think that they could do better to increase collaboration or to build that community around them.

Rowe: I’m sorry about the space that you’re referring to that don’t have much community. I think good shared spaces always have community, so it may be that those places need to make their mistakes and learn how to build their community. Certainly, it’s taken us a long time for us to figure that out. It’s not easy. There are a number of factors that go into building any strong community. You need a shared purpose. You need to have ground rules for behavior and respect. You need to have leadership, so you can’t just say here you are. Somebody needs to say, this is where we’re going. You need to have access to the right kinds of ongoing nurturing resources. Whether it’s more bright people, more startups, more technologies and so forth. You need to feed them. You need to feed them economically with investment so they grow. You need to take all those things that you would think about to what makes a healthy city and apply that to one of these. You’d find the same kinds of answers.

Romero: It sounds like it’s very much not a passive endeavor. It’s not a matter of just getting the right components in the same place. It’s a lot of hands on, active management to create that.

Rowe: Yea. A friend of mine is a city counselor in the City of Cambridge. And I think a lot of the things that he focuses on and that we focus on are very similar.

Romero: Excellent. Let’s talk about your plans for Japan, and CIC in Japan. It’s actually astounding how far Japan has come in the last 15 years in terms of being startup friendly. So when I started my first company here, it was next to impossible to rent an office. Landlords would require twelve-months of security deposit, personal guarantees on leases.

Rowe: What year was that again?

Romero: That was 1998.

Rowe: Yea, hangover from the good old days when they could get that stuff.

Romero: That’s true. Real estate is not as full as it was in 1998 either.

Rowe: Some people get a little more flexible. But it is actually pretty full. Tokyo has less than a one percent vacancy rate right now. So I wouldn’t be surprised if landlords were being kind of difficult. But in general, in the United States, we have the same problems. Landlords are funded by banks. The banks want to see long leases with good credit companies, like Microsoft.

Romero: Sure, can’t blame them for that.

Rowe: And the value of their building is actually determined by the perception of the longevity or the ability to pay of these tenants. So when you’re a startup that comes along, you’re actually a negative. You’re going to reduce the value of their building by coming in. So I think there’s an inherent disconnect between the needs of startups and the needs of traditional real estate.

Romero: So you’re coming into Japan and you’re planning on coming in on a pretty big scale.

Rowe: Yea. What we’re building now are innovation campuses. Very large bases. The typical bases that we build will have thousands of entrepreneurs.

Romero: So in Japan, do you think there are enough entrepreneurs to fill that space? Or are you going to be partnering a lot with larger companies to put in innovation centers within that space? How do you think that’s going to play out here?

Rowe: Yes. To both. Tokyo is a city of 37 million people. It’s got a lot of business activity. A lot of a new business activity. Not all of it people might officially call a startup. Maybe those people might not even think what they’re doing is a startup. But they’re building a new business. And there is a steady flow of new businesses in Tokyo. I think there is sort of a misperception. If it’s not listed in Tech Crunch and backed by venture capitalists, and have somebody who used to work in California involved, then it’s not a startup. That is more of an image thing. The city is a very vibrant economic city with a very high level of competition and constant invention of new ideas and new businesses.

Romero: So you’re going to be looking at mid-sized firms as well? It’s not necessarily as startup focused…

Rowe: I mean, startups, I just mean that if you look across, you may see a company that is rolling out a new chain of restaurants. You may see a company that has a more efficient way of having dishes washed in restaurants. You may not see these coming across the radar as startups, but they are new businesses and they are applying new approaches. And they’re all over. I meet them all the time in Tokyo. I think people have an image of, oh are you building an app that sells pizza online? Like there is sort of an image of what a startup is. There’s a much broader array of business.

Romero: So I guess it really is more innovation driven businesses regardless of age or size. Well I guess size is…

Rowe: Typically they’re on the newer side. We do tend to take companies that…we have a higher maximum size. We have a number of companies that have reached 200 people. But for the most part, they have started as one or two people. We don’t generally have people come in as a large business. They may stay and grow with us until they’re much larger. Let me put it this way, if you plopped New York down into the middle of Tokyo, it would take up a small part of Tokyo. The absolute volume of activity here is enormous. If you compare just the number of shared spaces in Tokyo, one company alone, Regis, probably has six or seven times space than they have in San Francisco. And those are all small operations. Not huge companies, not mid-sized companies. Most of them are newer small businesses that people are trying to build into larger businesses. What you’re trying do is, you’re trying to create an environment where people are building those businesses have better access to technology, have better access to information about growing it, have better access to global markets for what they’re growing. Largely through the connections they can make in an actual community.

Romero: Are you going to be opening it up to foreign technology companies that are entering the Japanese market? Or are you going to try to focus on the Japanese ecosystem.

Rowe: We already know that a number of the startups that we work with overseas have said, you know when you go to a country, let us know, because it would be easier for us to come in with you. The kinds of companies that have grown up at CIC in Cambridge. It’s easier for them to come with us. So yes, I think that will be another element.

Romero: You grew Cambridge Innovation Center for 15 years in pretty much one spot. And recently, you’ve been expanding. Tokyo won’t be your first international expansion.

Rowe: No. The Netherlands was first.

Romero: And you have had a couple of other innovation centers in St. Louis and kind of a satellite in Boston.

Rowe: Although the satellite is almost getting as big as the mother ship. They’ll probably get bigger. And Miami we just opened last month.

Romero: This is a very different approach, than say, WeWork, which is opening tiny little offices around the world. Have you noticed that the community build up differently or that the dynamics have been different at different locations than they were in Cambridge?

Rowe: We have been really surprised that they have not been different. We go into the Netherlands and we find our people. They are the same people that we know, I mean, the same types of people, the same outlook, the same aspirations and global backgrounds, speak lots of languages, not necessarily Dutch, that we find in Boston or St. Louis. And you go to St. Louis, which isn’t a famous innovation city or hasn’t been, and you see really interesting companies raising tens of millions of dollars of venture capital and growing and having sales at both sides of the coast, and other countries. Again, there is kind of a narrow thinking that sort of innovation is somehow owned by a couple of spots. There is a very big focus on the big coastal innovation cities. But if you look back on history, let’s take St. Louis for example, there was a great Super Bowl ad by the Anheuser-Busch founder. That was an immigrant that got on a boat and a train and started brewing beer in St. Louis and built one of the world’s greatest companies. There is a whole lot of those in places like St. Louis.

Romero: I agree. One of my goals in starting Disrupting Japan was showing the world that there is tremendous innovation going on here in Tokyo. It isn’t just San Francisco. But what made you pick these particular cities?

Rowe: Each city has a story. In the long run, there are probably 50ish cities around the world that have the research and development chops to be a major innovation city. Cities like Paris, Beijing, really have just terrific R&D. And Tokyo, of course. So they’ll all eventually have something like us, I imaging, if not us. So in one sense, we’re kind of comfortable going to these cities in whatever order is most convenient. We don’t have to pick a particular order to get to serve all of them. But there are particular stories. With St. Louis, Washington University of St. Louis is one of the leading medical schools in the country. It is a very well–resourced compared to many. St. Louis is the second richest city in the United States in terms of unearned income.

Romero: Really? St. Louis… I would not have guessed.

Rowe: But what that means, a lot of rich people, old money, in St. Louis. And that translates well into innovation, angel investment and venture investment. You have to activate it. You have to explain what you’re doing and get those folks to find a path to be involved.

Romero: So CIC can be that catalyst that trigger, that connects the university research, the entrepreneurship that’s going on there, with the money that’s coming in from the…

Rowe: In my talk this morning, we mentioned we see sort of three key resources that entrepreneur’s needed. Money, ideas, and talent. And so if we can create an environment where there is good access to money, ideas, and talent then you’re going to create a lot of innovation.

Romero: Now it’s still early days. These newer offices were only opened recently. But do you see interaction between the offices other than a market entry approach?

Rowe: Oh yea. Quite a bit. First of all, your access card works everywhere and you have the right to work anywhere. So you’re part of a family. You can show up in any city and walk in. we actually have some relationships with other places around the world, so I think there are 50, 60 places around the world where you can go in and work if you’re part of the CIC network. We see many companies that actually have employees in multiple cities that we’re at. They have one contract and it’s all very simple, but they can say oh this person is here, this person is there. Increasingly, the structure of companies is changing in the way that companies are liking to be more flexible about where their employees are. We have venture capitalists that travel from one center to another to go look for interesting ideas to invest in. Our staff move around quite a bit. If you’re an American working in Boston, you want to have a few months in Europe, then you can just move and go to Europe. And so you’re bringing with you, your network and your connections. So the companies that you’re meeting you can go, oh geez, you should be working with these people over in the other location.

Romero: And I think that is incredibly attractive to growing startups, particularly in Japan where there has just been this overriding theme of going global. And the importance of not relying on the domestic economy here to fuel growth. Do you expect things to work out pretty much the same way in the Japan location than you do in others?

Rowe: I think we’ve both spent a lot of time in Japan. Nothing works out in Japan quite the way it works out everywhere else. That was a trick question. But at the same time, you don’t really know how they’re going to work out until you try them. So this is the entrepreneur in me that says, well you got to just go do it.

Romero: I think that’s a healthy attitude of, you know it’s going to be different, but you’re just not sure how different.

Rowe: Exactly. You adapt to… you come up with new mechanisms. I think we will be developing with others new mechanisms to help large Japanese corporations get involved in innovation. I don’t mean teaching them how to do it. I mean actually encouraging them to try specific models that may work for them to get new projects off the ground.

Romero: Now this is interesting. Let’s talk about Japan for a bit, because I think right now, Japanese enterprise is trying to find a model of innovation that works for them.

Rowe: Yes, there’s fantastic fundamental research being done in Japan. But a lot of large enterprises seem to have forgotten how to productize.

Romero: Yup. From what you’ve seen in the conversations that you have had, what do you think looks like the most promising approaches?

Rowe: My sense is that, in general, both Japanese and American large companies are not so good at productizing genuinely new ideas. It’s no accident that our leading electric car company is a startup and not one of the big three. So we shouldn’t understand this as a Japanese problem, but as an innovation problem. We can look to great authors like Clayton Christiansen to explain why this is in his book, “The Innovator’s Dilemma.” He outlines this as we all kind of understand it. Many of the more forward thinking companies in the United States have essentially said, you know what, we’re not going to try to do serious innovation in-house. We’re going to do a couple of things. We’re going to go out and invest in and partner with and buy startups when they have got something interesting that affects our business. Not necessarily pull them too closely in, but let them be a little bit independent, give them some resources, maybe give them access to our larger resources. But let them grow. And where there is an idea that the company wants to pursue, that there is no startup out there doing it, ok, so spin something out. Take some people, put them off on their own, away from the mother ship, give them a little money, tell them that they’re going to lose their jobs if they’re not successful.

Romero: Have you seen this successfully executed in Japan yet or are companies making serious efforts to try this? I know, for example, strategic M&A is still very rare here.

Rowe: No, I think that’s true. What’s more common in japan is the startups themselves simply become successful and will, like Tesla, will replace the old guard rather than become part of the old guard. That is true in the US and Japan. So the question is, can japan get a little better at this? Can a Japanese hotel chain kind of buy a startup hotel operator and have it as a second line? Absolutely, they can. Do they need to get better at that? Yes, they probably do.

Romero: The small sustaining innovations, they seem to do very well. The big breakthrough is what they seem to be struggling with these days.

Rowe: I think that’s true. Fundamentally, there is not quite enough mobility in the Japanese workflow system. Once they get their job, they’re going to hopefully keep their job for a long time. We know this. And that makes them pretty risk averse. They don’t want to lose that job. If they make no big mistakes, they get to keep it for life, so why take risks? I am, actually, starting to think that Japanese companies, that there are some new models that might work for them. In the sense that they might cull a halt to the current employment systems. Say, okay, everybody has got it, you keep it. But from now on, we’re going to try some different things.

Romero: I think that sort of happened silently over the last 15 years. And I think that is one of the reasons we’re seeing this boom in startups in Japan. Is that the lifetime employment system never officially ended? But nobody expects it anymore unless you go into government.

Rowe: That is true, but you’re still becoming an employee of Mitsubishi Shoji, you may not actually to have a lifetime employment, but many of the trappings are the same and the hopes are the same.

Romero: There is still tremendous social status in having that kind of a name card.

Rowe: So the strongest folks sort of aim for that kind of status that leads to reproductive success and other drivers that are important to people. The question is, can some Japanese companies start to forge a new kind of social contract with employees? I am hearing that some of the brightest kids coming out of schools are interested in something more creative. They’re a little worried about being stuck in the big corporation for life. Whereas, a generation ago, they weren’t too worried about that. That was kind of expected. I am hoping to work with partners here to say, hey, what if we were to create a new kind of structure, a new kind of subsidiary that uses the company’s name but it looks and works more like a startup? And the deal is really with that and not with the Honsha. I think there is a pony in here where companies can start building interesting businesses that are somewhere between a startup and part of a large company.

Romero: I see what you mean. So something where they’re not putting their brand at risk and they can keep the company at arm’s length.

Rowe: The name is a sub-brand or something. I think there will be a degree to which they will need to put their brand at risk, but that they can make clear that this is a category of new experimental business.

Romero: You have lived in Japan, you have some roots here. What were you doing in japan?

Rowe: After college, I got a job at Mitsubishi Research Institute (MRI) or Mitsubishi Sogo Kenkyusho in Japanese. I spent four years here, loved it, doing long term technology forecasting. Looking at trends in mobile phones and pollution control equipment and things like that. Single, just out of college, living in Nagaya on Tsukishima, sort of an old, long rowhouse with the traditional tatami mat floors and sliding paper walls.

Romero: So you have done the salaried man thing.

Rowe: Sort of. I had a motorcycle, traveled around Japan.

Romero: Japan is a wonderful country for motorcycles. Lots of winding roads and beautiful canyons.

Rowe: Exactly, kind of a paradise in many ways. And the work was fantastic too. Great colleagues, thoughtful. This was my first real job. I had had a software startup starting in middle school, but I was always the boss, so this was…

Romero: Boy that’s a change. So why did you leave? What made you go back to the states?

Rowe: Great question actually. I decided I was never going to be the CEO of Mitsubshi Resarch Institute. There was sort of a glass ceiling issue for me in that company. That’s actually probably wrong, in the sense that now there have been non-Japanese CEOs in a bunch of big Japanese organizations.

Romero: When was that? When were you here?

Rowe:  I was here 1990-1994.

Romero: Oh boy that was a different world, wasn’t it?

Rowe: It was. It was a terrific world, but it was also, at the time, I thought it was clear that I was going to always be kind of the outsider. I felt like I wanted to build something, also maybe something a little more global. So I went to business school at MIT, that was the specific draw to… the reason to go back. And I joined Boston Consulting Group and was there for another four years. Actually similar work, but more global at an international firm. There people of all nationalities at the firm instead of just Japanese.

Romero: It sounds like you were on a very good career track there. What made you leave Boston Consulting and start a startup incubator/innovation center?

Rowe: Two things. My wife and I were thinking it was time to have kids. She was at McKinsey and Company and doing a similar lifestyle all around the world. We knew that it wasn’t going to be possible for us to actually have anything like a family life with those jobs. So we wanted to quit our jobs. The question was, well what do we do? I had been an entrepreneur, so I said, well we’ll just start companies. It will be great.

Romero: Lots of free time when you do that.

Rowe: Exactly. What there is, is there is more control over your life. You can decide, for yourself, where you’re going to be. Are you going to be in Singapore for six months or not? You can decide.

Romero: You still end up working a lot of hours, you just have control over which ones.

Rowe: I think that’s a nice way to put it.

Romero: Getting back to Japan, one of the big drivers of innovation in Boston is clearly the universities. As we mentioned before, there is great fundamental research being done in the universities in Japan. What advice do you have for universities on how they can help foster entrepreneurship? What kinds of programs should they be running in Japan?

Rowe: This is a complicated question. The first thing is that the universities themselves need to drink more of the MIT Kool-Aid and focus more on usable invention. The MIT motto, Mens et Manus, it’s the mind thinking about thing and the hand actually figuring out how to do them, is what’s important. There’s a little too much Mens and not enough Manus at the Japanese universities. There are a lot of Japanese who have studied at MIT, famously Nobel Prize winner Tomigawa-sensei, is at MIT. So they have people they can turn to say, help us understand this. Help us spread this. Joi Ito, who is bi-cultural, runs the media lab at MIT. There are a number of folks who really get it that can help japan understand it. So internalize this more practical, let’s actually do something that’s useful to the world approach into the universities. It would be one.

Romero: On a practical level, is that culture fostered by having professors more actively involved in, not necessarily just startups, but involved in businesses? And involved in the practical aspects of running a company?

Rowe: Absolutely.

Romero: Where does that come from?

Rowe: Even in the US, there are many famous universities that don’t encourage that. I don’t think this is a cultural thing, it is about practices and about leadership. It’s about saying what’s ok and what you’re encouraged to do. Many European universities are on the Japanese model. Same culture, different system. I think that it is pretty straightforward. Yes, professors need to get involved in startups. Yes, universities need to prioritize in their advancement and their recognition of academics their role in more practical applications than just the basic research and thinking. That’s a problem that we have in the United States as well in many universities. This is not one place that needs to work on that. There are a lot of countries that need to work on that. But if you ask me what japan needs to do, this is a priority. Japan is actually pretty good at practical innovations. It’s just the universities need to maybe move a little in that direction. And actually the corporations need to move in the other direction. They’re very practical. They’re very product focused, and they need to come back to a little bit more fundamental, revolutionary technology.

Romero: Start paying attention to something that is a significant disruptive leap.

Rowe: Yea, exactly. I think, sometimes, because of this well understood innovator’s dilemma that large corporations sometimes just don’t have an incentive to develop something that will kill their own successful products. Because of that, you kind of need to red team a little bit. If you’re the blue team and you’re making gasoline cars, you may need to create a little separate business, which is the red team, which is making electric cars. And not have it sit under the gasoline car division, or else you’ll never put your heart into it.

Romero: For the listeners that don’t know the red team is the team you assemble to attack what you already have and to try to change things.

Rowe: If you don’t assemble your own red team, then somebody else is going to be the red team. Then you lose.

Alright, before we were talking about proximity. One of the things I’ve noticed at many Japanese universities is that the engineering students, the business students, the design students are often not only in separate classrooms or buildings, but separate campuses entirely. Have you noticed, for example at MIT or at the CIC in particular, are there active programs to encourage the mixing of different disciplines.

Rowe: There are. First of all, both MIT and Harvard essentially have one campus. The medical school at Harvard is physically separated due to space limitations. I think they have the advantage of that kind of proximity. But then, even twenty years ago, we had a program called TechLink at MIT where people from each of the departments would get together and present to the students, by people I mean students, from other departments on what they are working on. We had a great class at MIT’s Sloan School that I took. Steve Epiger’s class on new product development where a third of the class was MIT Sloan business school students, a third were engineering students that were building mechanical things, and a third were Rhode Island School of Design students. An entirely separate university. They built teams with at least one student from each of these schools and we built real product. There was a voting system where we chose which product’s to build, and each team went to build a real product from beginning to end, leveraging all those skills.

Romero: So do you have plans for doing this type of program and working with university professors at CIC Tokyo?

Rowe: Yes. We are working already with university professors. Professor Kagami Shigeo at University of Tokyo has signed on as the chair of our social intervention non-profit, Venture Café, it’s called. We will also build that in Tokyo. This is exactly the kind of thing that we’re hoping to do.

Romero: Fantastic. Well listen, before I let you go, is there anything that you want to talk about? Or anything that I really should have asked you and simply forgot?

Rowe: One thing I would say is, coming back to the topic of culture, I think there is a mistaken impression in Japan that oh japan is not good at startups, or Japan is not innovative enough. It’s important to recognize that Japan may be… Japan has something like over one percent of the world’s population, but has over eleven percent of the world’s biggest, most successful companies. Japan is way outperforming. It is an unbelievable performer and all of those companies were startups at one point.

Romero: People forget how incredibly innovative Sony and Seiko and Toyota were.

Rowe: So to say that Japan has a cultural problem would miss the fact that Japan had the same culture when it built those businesses. When you observe that, you realize that there is not really a cultural problem. It’s more of a structural problem. Something that you can change. Whereas culture is something usually tough to change. Structure is actually changeable.

Romero: It’s just a matter of changing the processes.

Rowe: Change the processes, change the laws, change the rules, change the incentives. Then things will change. So I would close on that, to say, you know, this is all really B.S. about Japan not being able to build new businesses that become world-leading businesses. Triple unicorns. Japan is good at that. We just need to work with Japan, I think, a little bit, to identify those aspects of its current structure that are getting in the way.

Romero: Ok. Well it’s going to be really interesting to watch CIC doing that here in Tokyo.

Rowe: That’s why we’re coming.

Romero: Well listen, Tim, thanks so much for siting down with me.

Rowe: Alright, thank you.

And we’re back.

It’s pretty clear that there is no simple formula for creating an innovation space, at least one that truly acts as a catalyst for innovation and the birthplace of new technologies and disruptive companies. Perhaps one of the reasons that the CIC did so many things right, and this is easy to forget, because they’re such a huge organization today, was that the entire project was a bottom up affair.

CIC was formed and grew initially, not with the vision to place itself in the center of innovation, but by simply trying to meet the immediate needs of their startup tenants. The CIC itself is an entrepreneurial initiative. Many of the innovation spaces in Japan, however, are top down. They are either organized by local governments or real estate companies, and often as a combination of the two.

Of course, it’s not as simple as bottom up vs top down. I found the success of CIC’s expansion facilities particularly interesting. And frankly, very encouraging. You see, their new centers in St. Louis and Rotterdam were top down affairs. They weren’t grown organically from the ground up, but modeled and informed by what they learned from Cambridge. And yet, as Tim explained, the dynamics of the ecosystem has been very much the same at the new facilities as at the original. So it seems that there is a blueprint for top down success.

It will be interesting to see if they can achieve that same level of success with their Tokyo facility. Of course, one of the things that Tim and I both agree on, is that nothing ever works out quite the way you expect it to in Japan.

And yet, the timing is right, And there is a great group of people and companies behind this project. So even though things never go as planned in Japan, I think we can expect to see great things from CIC in Japan in the next few years.

If you have ever worked at an innovation center or are thinking of doing so, Tim and I would love to hear from you. So come back DisruptingJapan.com/show076 and let us know what you think. And when you come by, you’ll see all the links and resources that Tim and I talked about, and much much more in the Resource Section of the post.

And hey, I know you have been meaning to do this for a while now, but when you get the chance, please leave us an honest review on iTunes. It’s really the best way you can help us get the word out and to support the show.

But most of all, thanks for listening and thank you for making people interested in Japanese startups know about the show. I’ m Tim Romero and thanks for listening to Disrupting Japan.