Japan’s Secret Strategy for Global Drone Domination

Blue Innovation attracted a lot of international attention last year when they announced the  T-Frend drone system.

This dystopian drone flies around offices after hours reminding staff not to work overtime, and taking pictures of those who violate overtime policy so that management can be alerted.

We’ll talk about this particular drone, of course, but Blue Innovation’s technology is much broader and is making an impact an many more important, if perhaps less visible, areas. Founder and CEO Takayuki Kumada explains the early days of the company and why they decided to pivot into drones in the first place.

We also talk about the future of drones in Japan and globally, about what’s really holding the industry back, and why the Japanese government crackdown on drones might have actually forced the industry to focus on a very specialized and very lucrative niche.

It’s a great conversation, and I think you’ll enjoy it.

Podcast: Play in new window | Download | Embed

Subscribe: Google Podcasts | Stitcher | RSS | More

Show Notes

• What is a drone integrator, and why are they important?
• How Blue Innovation pivoted from environmental consulting to drones
• How drones navigate with no WiFi no GPS and no light
• What kinds of jobs drones should not do
• Why flying drones make more sense than swimming or crawling drones
• Which industries will be most affected by drones
• What’s really holding drones back
• How Japan can overcome China’s lead in drones

 Leave a comment

Transcript

Welcome to Disrupting Japan, straight talk from Japan’s most successful entrepreneurs.

I’m Tim Romero and thanks for joining me.

One of the ideas I’ve talked about a lot over the past few years and one that’s finally gaining some acceptance is that the bulk of meaningful innovation in Japan is going to come not from startups but from midsized companies. Of course, Japanese venture capital and the ecosystem will adapt to include these players but things are going to develop differently in Japan than in the United States. With this in mind, perhaps you won’t be too surprised to learn that Japan’s leading drone company is not a traditional startup but a midsized company that pivoted into drones from a completely different industry.

Today, we’ll sit down with Takayuki Kumada, founder and CEO of Blue Innovation, Japan’s leading drone integrator. Now, Blue Innovation attracted international attention last year with the announcement of their T-Frend drone. Now, this drone is designed to reduce overtime by flying around the office taking pictures of staff and telling them to go home, and yeah, we talk about how effective this is likely to be but we also talk about the integrator strategy, the one that’s being pursued by a lot of the most successful high-tech startups in Japan. It’s a strategy that allows them to quickly collaborate across industries and brings an immediate cash flow, but it does come at a cost and it might not be stable long-term, but we’ll get into that. We also talk about the future of drones, both in Japan and globally and what’s really holding the industry back, and why the Japanese government’s crackdown on drones might have actually forced the industry to focus on a very specialized and very lucrative niche,

But you know, Takayuki tells the story much better than I can, so let’s get right to the interview.

Tim: So I’m sitting here with Takayuki Kumada, the CEO of Blue Innovation, and Blue Innovation is developing civil engineering services using drones. So thanks for sitting down with me.

Takayuki: Thank you very much.

Tim: Okay. On your website and in interviews, I’ve heard you describe Blue Innovation as drone integrators. I was wondering if you could explain, what exactly does that mean? What is a drone integrator?

Takayuki: Ah, I see. So drone integrator means hardware and a software, and a solution. We manage each component.

Tim: So you work with various different companies in different industries to sell drone technologies, right?

Takayuki: Yes, that’s right.

Tim: Before we get into all of the different systems you’re developing, let’s step back a bit because Blue Innovation, it didn’t start out making drones. Blue Innovation started in 1999.

Takayuki: Yes, that’s right.

Tim: And you were focusing on environmental issues or coastal erosion?

Takayuki: Yes, yes, that’s right. First, our business side is power protection to disaster, so we developed the countermeasure against beach erosion and tsunami. So we need some aerial photograph because we try to understand the cause of disaster, so aerial photograph is very, very important. So we bought the aerial photograph for some company in the past but we could not gather it after the disaster. After the disaster areacs photograph, we could not get that, so we thought, so how to get and how to take a photograph after that disaster at a point.

Tim: So it turned out that at the time when it was most important to get that information, to get the photographs, you couldn’t get it?

Takayuki: Yes, yes, that’s right. Right after the disaster, yes.

Tim: So at that time, did you contract out to drone companies? Did you buy drones yourself? How did you start using your own?

Takayuki: 10 years ago, we searched the technology for how to take a photo, aerial photograph. We found the technology in University of Tokyo. So the University of Tokyo developed the drone system. So we met the professor, so Professor Suzuki developed the UAV, or unmanned aerial vehicles.

Tim: So he was developing the hardware or the software that controlled it?

Takayuki: Both.

Tim: Both?

Takayuki: Yes, hardware and software. The main part, the main research part is software.

Tim: And this was in 2000 – what year was this?

Takayuki: 2006.

Tim: That was pretty early in the drone –

Takayuki: Yes, so we try to – “Please print the area robot,” so Professor Suzuki said, “Okay, let’s together try the research.” So first time that we used the coastal monitoring by this UAV, we developed the coastal monitoring system using the UAV.

Tim: At that time, you were still a coastal erosion environmental company just using drones, so when did you make the pivot to become a drone company yourselves?

Takayuki: So ICAO decided their own concept to aircraft, so many company developed the Revised Aviation Law all over the world. At the time in Japan, the government didn’t move the Revised Aviation Law, but some maybe IT venture, the Yahoo, Google moved very faster, then maybe some IT venture company contact us, they said, “So we want to develop the UAV system, drone system. Do you have the drone system, UAV system?” So maybe about four or five years ago, maybe companies contact us about drone system because there are some drones on our website.

Tim: So these startups and venture companies were contacting you, hoping you would be a customer for their photography services or were they contacting you to be a partner for developing drone systems?

Takayuki: No, case-by-case, so development and they were service, and the aerial photograph, security. So many, many company contacted our company. So the contact number of drone is very larger than the coastal problems so we decide that we focus on the drone business maybe five years ago, yeah.

Tim: Okay, your background when you were in university, your whole career was on studying that coastal erosion, so that must’ve been a hard decision to make.

Takayuki: Yeah. About 10 Years ago in Japan, the big tsunami attacked Japan.

Tim: Right, the big earthquake and tsunami.

Takayuki: Yeah, yeah, yeah, so at the time, so we had so many, many jobs as a countermeasure against tsunami. So many, many jobs, and after three years, the coastal problems gradually smaller. Yeah, yeah.

Tim: So the environmental and coastal monitoring business was going down at the same time drone business was going up?

Takayuki: Yes. This is a very crosspoint. So our company, this is a big chance to re-contract our company.

Tim: Okay. Well, you’ve certainly done a lot since then. So let’s talk about some of the use cases because you’re working with companies and organizations in so many different industries right now. So one of the ones that you’ve announced recently is that tunnel inspection projects with Mitsubishi. Can you talk a little about that?

Takayuki: Yeah, Mitsubishi project, this system is a very narrow space in atomic, and no GPS and no radio waves, okay? So how to fly area? So our team drone can fly without GPS and without radio waves. So this drone, so some sensor on the drone, so  … .

Tim: A lot of your use cases are indoor drones and as you mentioned, it’s very challenging to navigate without GPS, without Wi-Fi or radio waves and sometimes, even in the dark. So what technology do you use to do that?

Takayuki: This is a very, very secret system. So for example, in office and the factory, and the tunnel, we select a different sensor unit. This is a very, very secret system there. In the factory and in the office, we use a different sensor. This is very, very difficult to select the sensor and the sensor fusion is very difficult. This is our technology.

Tim: Can you talk about the general base of the technologies, is it like infrared, is it sound? Is it too secret even to give that level of description?

Takayuki: So it’s a secret system because before the announcement, okay?

Tim: When are you planning on announcing?

Takayuki: Maybe April.

Tim: Okay, alright, we’ll have to follow up for later. Well, actually, one of the applications that received a lot of attention recently in the English language press is your project with Taisei and NTT East, the T-Frend project.

Takayuki: T-Frend system aims to the office security without people and reduce the overtime.

Tim: Okay, so the drone will patrol an office, take video footage of what’s there and encourage people to go home by playing music?

Takayuki: Yes, yes, that’s right, yes. This is a more Japanese idea.

Tim: Well, that part of the idea, the drones for security make sense and there’s lots of companies around the world trying to do that, but the drones who encourage people to go home and not work overtime, this is very Japanese.

Takayuki: Yeah, yeah, yeah, so national problem. Japanese people, hard-working.

Tim: Why, I mean, obviously, when you were developing and working on this project, this is something you must’ve thought about a lot but why is it so difficult for Japanese companies to reduce the amount of overtime employees work? Why is it such a hard problem?

Takayuki: Yeah, in Japan, working is very appreciate in Japan.

Tim: But you know, to be fair, I mean, work is appreciated everywhere. It seems that many times in Japan, even when the management says, “We don’t want the staff working overtime, we want you to go home on time,” and the staff says, “We don’t want to work overtime, we want to go home on time,” but everyone ends up working overtime anyway.

Takayuki: Yeah, that’s right.

Tim: Do you think the drone will help that or is there a deeper problem?

Takayuki: So I think that drone system supports this problem. The real problem is another point, maybe. They are another point, so the Japanese company change the workstyle and this is a big problem. At least, our system supports government problem.

Tim: The initial launch is in April and I think you announced full production in October this year, right?

Takayuki: Yes, that’s right.

Tim: What has been the feedback from HR managers?

Takayuki: So this T-Frend service is provided by the Taisei company. We have no information for this problem, okay?

Tim: So Blue Innovation is strictly handling the technical side.

Takayuki: That’s right, that’s right.

Tim: Okay, well, it’s going to be very interesting to see the feedback in the market, and how this product does in the marketplace.

Takayuki: Yes, yes, that’s right. Yes, that’s right. So on the website, T-Frend press release last year, so some people shout, “I don’t need this kind of drone!” So on the website, so on SNS there, we don’t know because robotics always tries to monitor.

Tim: I can understand that opinion if the worker just feels like robot harassment.

Takayuki: Yes, that’s right. So last year, we announced the T-Ftiends and the top searching ranking is a drone on the Twitter. So many, many Twitter, “I hate this kind of drone because -” yeah, that’s right, “Robotics harassment, and we don’t want to control the drones and the robotics. I feel free.”

Tim: Okay, so even in Japan, the initial reaction was negative.

Takayuki: Case-by-case.

Tim: We’ll have to see what happens when it’s actually in the market and people start using it, and there is real use cases. So so far, I mean, we’ve talked about that T-Frend drone and sewer pipe inspections, and tunnel inspections. Everything we’ve talked about so far has been flying drones. Does Blue Innovation also create crawling drones or swimming drones? Are you strictly aerial drones?

Takayuki: Maybe. So our client needs water drone, tunnel ground, so maybe we search the technology all over the world. Maybe, so we develop. There are some needs, so maybe. So always, we aim to drop robotics or our drone if some customer needs. So we try to develop.

Tim: But so far until now it’s all been the aerial drones, the flying drones?

Takayuki: Yes, yes.

Tim: Looking around the world at all of the uses of drones and the attempted use of drones, most of the innovation seems to be in the flying drones. Why is that? Is it just simpler to write software that flies rather than swims or crawls?

Takayuki: In general, there are many, many needs to carry the luggage. For example, the very, very narrow metropolitan, so they are very crowded, the world, so many, many car on the tracks, so if there are New Space, middle height, so this is very easy to transport and the logistics is very, very easy. In contrast, in Africa, so there are no streets. There are only the river and the desert. So in Africa, it’s very hard to transport. So if there is a drone, drone can deliver to anywhere, very easy to transport. So they developed only the drone ports, not without road. Only the drone port, so this is very cost down. So in general, so many, many people, feel the variable for maybe logistics. Logistics are very, very variable.

Tim: So in a sense then, it’s not so much the technology, it’s just there’s more use cases for aerial drones than other types of drones. Okay, I want to ask one question and maybe this is a silly question. When we were talking about all of the applications for indoor drones, whether it’s offices or warehouses, how do you handle doors? Because there’s lots of doors in offices and warehouses and drones can’t open doors.

Takayuki: So maybe we want to sell many, many drones. So yeah, in office, a big problem. We assume one floor, one drone and one room, one drone, so we assume. The big, big factory, maybe one or two is no problem.

Tim: Okay, yeah. So just in practice, it’s not a big deal, it’s just with a strange image in my mind. Let’s talk a bit about your business model. Is Blue Innovation a consulting company? Do you make money on the project fees? Do you license your software? What’s your core business model?

Takayuki: I see. So our business is mainly system integrator for drones, so we provide services, first as consulting. Sometimes, we use our system so we provide our system the Blue Earth platform, for example, so we provide our system and sometimes, we provide for drone operation. So we provide the total service.

Tim: The services or the integration company, as you’re saying, like drone integration or any kind of system integration tends to depend on partnerships. So do you plan on staying in Japan and working with various partners or do you have plans to expand globally as well?

Takayuki: So our company is a very small company, about 30 or 35 people. So we force the market the first time, Japan, Japan area. Maybe next year, we plan to increase my company staff, so next year, we plan to develop business partner offshore.

Tim: Okay, excellent. With so many different kinds of projects, do you have a rule of thumb? Have you ever had projects proposed to you that were just too crazy or too impossible? Something where you said, “Wow, that’s a really interesting idea for drones but the technology is just not there yet”?

Takayuki: So this stage in the market, we force deeper relationship with the big company. It’s very, very important, I think. So if some company has a very good idea but technique is very, very hard, but this company has a deep passion and so much money for the research, maybe we will keep in touch with the company, and maybe the first time, we provide the consulting service so consulting service contains develop milestone and the business milestone, so first-year, three-year, five-year, so we have so many, many discussion. Maybe half a year, about one year. So next year, we develop drone system.

Tim: So sometimes, the consultation is simply, okay, you have to wait for the technology to catch up.

Takayuki: Yes, yes, that’s right, yes, yes. Gradually, gradually. So I think it is very important, the relationship with one company and the one company because our business is a B2B business, not B2C business.

Tim: So does that mean you haven’t heard any ideas you thought were just impossible or you don’t want to say what ideas are in public?

Takayuki: Yes, so maybe two or three years ago, all most company has many, many big ideas, very funny idea, but it’s very, very difficult to develop the drone system. So two or three years, many, many company, very difficult, the relationship is a big company because they don’t know what is drone, but now, so many, many company know the drone system. So they understand drone system, so very easy to get the new customer or a new relationship.

Tim: So it’s a combination of the technology is getting better and the customers are becoming more educated?

Takayuki: Yeah, yeah, that’s right.

Tim: Makes sense. I don’t want you to name specific products because I know you love all your products equally, but with drones being used in everything from logistics to agriculture, to environmental monitoring, what area are you most excited about? What area do you think drones will disrupt the most and change the most?

Takayuki: I think logistics. In the past, airplane is same case. Airplane was used the first time for the wars. Over the wars, the airplanes were used for logistics. This project is government strategies.

Tim: Okay, I mean, that does make sense, even the history of drones, they started out being financed largely by military, then they moved into, well, still mostly military but the hobbyist, and you think moving forward, it’s mostly going to be commercial applications and particularly logistics?

Takayuki: Mm-hmm.

Tim: Tokyo and, well, a lot of cities in Japan, last year, maybe the year before, they banned most outdoor drone flights. So the law regarding piloting drones and flying drones in Japan is still uncertain. Blue Innovation is doing a lot to try to make sense of that.

Takayuki: Three years ago, we developed Sorapass for the drone maps. Sorapass had no-fly area and can-fly area displayed. We provide this application to the drone users. In Japan, all most people use this application.

Tim: So the drone pilots know where they can fly and where they can’t fly?

Takayuki: Yes, that’s right

Tim: When do you think the Japanese government will be able to update the laws to be more drone-friendly?

Takayuki: In Japan, the government, maybe, I think don’t want to develop the drone pilot certification because if the government installed this system, there may be very, very big money. In this stage, it’s very difficult to develop the certification system.

Tim: So you think it will be done by industry associations?

Takayuki: Yes, yes, yes, that’s right.

Tim: Okay. Are the restrictions on outdoor drone use one of the reasons that you’re focusing on indoor usage?

Takayuki: Yes, yes, yes.

Tim: Yeah?

Takayuki: So we focus on indoor flight system. The reason why is in Japan, outside, there is so many, many rules. So the application and the solution are very, very difficult to install. So we focus on the indoor system, and the sensor system is stronger than another country, so Japan is very strong on this part.

Tim: Okay, that makes sense. So it’s a specialized area where Japan might become uniquely strong because it’s forced to focus inside?

Takayuki: Yeah, that’s right.

Tim: Alright, let me ask you, in terms of application, I mean, drones are a fascinating combination of hardware and software. Are most drone applications limited by the hardware side or the software side?

Takayuki: So I think the hardware side, maybe. The hardware is the commodity, same as parts of a computer. So we focus on the software in the system.

Tim: Is the main problem with the hardware, is at price, weight?

Takayuki: So I think the big problem is the flight time. Many, many drones use lithium polymer battery. Using the lithium polymer battery drone takes about 10 or 20 minutes. It’s very, very shortest. Some drone venture developed the longtime flight drone, the hydrogen drone system. This kind of drone takes about two or three hours flight time. Yeah, the big problem is flight time.

Tim: Yeah, I can see that being hugely important, especially in things like sewer inspection or power line inspection.

Takayuki: That’s right. The second problem is the payload.

Tim: Right, and that’s especially in logistics, it’s all about how much payload they can carry, how far. That makes sense. So right now, China is really considered like world’s leader in drone technology but do you think Japan can catch up and surpass China?

Takayuki: I think in China, it’s very stronger, the hardware development, number one technology all over the world. So Japanese companies focus development on drone service. The service layer, Japanese company has a big chance.

Tim: So the big software and the sensor integration?

Takayuki: Yes, yes, that’s right.

Tim: The specific application?

Takayuki: Yes, yes, that’s right.

Tim: Alright, that makes sense.

Well, listen, before we wrap up, I want to ask you what I call my “Magic Wand” question and the question is, if I give you a magic wand and I said you could change one thing about Japan, anything at all – the legal system, the education system, the way people think about taking risks, anything at all to make it better for startups in Japan and innovation in Japan, what would you change?

Takayuki: So I want the high-level sensor unit. High-level accuracy sensor. The robotics and the mobility, and the drones are very accuracy moved.

Tim: I can see why that would solve one of your company’s biggest problems and open up lots of applications but what would change about all of Japan?

Takayuki: So in Japan, this is a social problem: investors, there are some venture capital in Japan, but in USA, the venture capitalist invest huge money to the venture, venture company, so in contrast, in Japan, a small size invest money, so they invest money, very different, so Japanese venture focus on the very narrow area because they have very small money. In USA or in Europe, they can gather the big money. So they try to develop hardware, software, or etc. Large area, they can try to develop. The are big, big area.

Tim: Yeah, that’s true. In Japan, it’s very easy to raise small amounts of money – $50,000, $100,000, but yeah, when it comes to that next stage where you have to raise $2 million or $5 million, it’s hard to get that from Japanese VCs.

Takayuki: Yes, yes, so Japanese venture-capital invest the huge money very later on, not startup round. In USA, the startup round, there’s huge money to invest, yeah.

Tim: Oh, I see, and so as a result, Japanese startups focus on those areas where they can quickly turn up profit, and so if Japanese VCs were willing to invest more money, Japanese startups who take more risks and try different kinds of industries. Excellent. That makes a lot of sense.

Takayuki: So many, many Japanese venture companies own business here.

Tim: Yeah. Well, listen, Takayuki, I want to thank you so much for sit sitting down with me today, I really appreciate it.

Takayuki: Okay, thank you, thank you very much.

And we’re back.

Okay, let’s talk a little bit about the T-Frend, anti-overtime drone. Now, sure, it’s easy to criticize this as a silly idea, and when they announced it, media around the world ran stories about it. Most were brief, made a joke, and then moved on, but you and I, we can do better than that.

Let’s take a look at this and see what it can really tell us about Japan and about ourselves.

You see, technology always amplifies who we are. It doesn’t necessarily make society better; it just makes it more efficient. It can make both our good decisions and our stupid mistakes much faster and cheaper than we can, and more importantly, when we use technology to make these decisions, it removes a layer of accountability, and sometimes, we use technology to hide a problem that we know is real and we know is wrong, but we just don’t know how to fix it.

This can be seen in the computer systems used in the United States for criminal sentencing and the setting of bail bonds. They are no less discriminatory or biased that individual judges, but the use of the technology gives the illusion of fairness and objectivity. That’s what’s happening with the T-Frend drone.

I’m sure that you and Disrupting Japan listeners have heard of karōshi, death by overwork. It’s a real thing in Japan. The amount of time worked is crazy in Japan and the amount of unreported and uncompensated overtime is even worse. Most Japanese say that this is the result of a Japanese business culture that rewards loyalty and hard work, but it’s not that. Many countries, in fact, almost all come countries have a business culture that rewards loyalty and hard work.

No, the root of this problem is a bit deeper. It goes to the Japanese idea of the honne and tatemae, and very, very quickly translated, tatemae is what you say and what you are expected to say, and honne is what you mean. The unique Japanese twist on this idea is that you are never really expected to say honne, what you really mean to those around you, who are expected to intuit it not from your words which are simply tatemae but from, well, here is where things start to go wrong: knowing when you can ignore what someone is saying and be able to divine what they really mean is workable family members and maybe close friends, but it doesn’t scale well to a corporate hierarchy.

This is why it is so hard for Japanese companies to reduce overtime. Most of the staff don’t want to work overtime and frankly, most of the management does not want their staff working overtime but there is no way for a manager to communicate with this that does not sound like tatemae. Despite the best efforts of both managers and employees, the employees left to guess at whether it is really okay to go home as scheduled or if it’s all just tatemae and they will have their reputation damaged and be labeled as a shirker, and to be fair, the managers themselves can’t be sure if their firm really wants them to reduce overtime or if it’s just tatemae, something the company should be saying. As a result, we get crazy ideas like Premium Friday or that T-Frend drone that address the overtime issue by, well, not addressing it at all but by sidestepping it, by pushing responsibility onto technology and policy, and then washing our hands of the problem, and so the debate goes on.

Is the desire to reduce overtime hours honne or tatemae? And the truth, is that even that debate itself is just tatemae. If Japanese companies wanted to show they were serious about reducing overtime, there’s a very simple way to do it: you adopt the perspective that while yes, sometimes, overtime is needed, a manager who consistently requires his staff to work overtime is clearly terrible at planning and resource management, and that that person should not be promoted to greater responsibility. We see that attitude in some Japanese startups but never in enterprises where visible effort is valued far more than results, that’s the honne; everyone understands it.

If I were Japanese, it would be incredibly crass and vulgar for me to state this so directly, but I’m not Japanese. Premium Friday and the T-Frend drone are just two more tatemae and perhaps, the worst kind of tatemae where the executives can talk about reducing the stress on their employees while actually enacting policies that increase that stress.

To be fair, a lot of Japanese, I think most Japanese understand the absurdity of this situation, and Takayuki was quick to point out that he did not see the need for T-Frend at his company.

Startups and that innovative midsized companies might be the answer here. In fact, they are overwhelmingly setting up cultures that discourage work for work’s sake and focusing on results, and they are being far more productive than Japanese enterprise because of it. Japanese startups are not only discovering new technologies and new revenue models but are quietly solving some of Japan’s biggest business problems as well.

If you’ve got an opinion or some thoughts to share about overtime in Japan or about flying, swimming, and/or crawling drones, Takayuki and I would love to hear about it, so come by disruptingjapan.com/show 116 and tell us about it. When you drop by, you’ll see all the notes and resources that Takayuki and I talked about and much, much more in the resources section of the post.

Oh, and hey, I know you’ve 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 one of the best ways you can help support the show and help me get the word out.

But most of all, thanks for listening and thank you for letting people interested in Japanese startups know about the show.

I’m Tim Romero and thanks for listening to Disrupting Japan.