Japanese HR departments are in a bit of a panic right now.

The increasing job mobility that startups have unleashed is forcing them to rethink their entire mission.

Today we sit down and Takako Ogawa, co-founder and CEO of Panalyt, a startup at the center of this transformation, and we talk about the changing career paths in Japan, when startups need to change CEOs, and the dangers of going global that people don’t seem to talk about.

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

Show Notes

  • Why it’s so hard for HR to answer simple questions
  • Google’s approach to people analytics and why that’s important in Japan
  • The dangers involved in the freemium model
  • Why a Singapore-based startup started focusing on Japan
  • Why it’s better to build a startup today in Japan rather than Singapore
  • How to change a startup CEO
  • The importance and danger of transparency in a startup
  • The problem most enterprise SaaS dashboard startups never overcome
  • The right way for a startup to go global
  • HRs new mission in Japan and its struggles to fufill it
  • Why your next head of HR might come from marketing
  • How Japan punishes failure
  • Takako’s near “career-ending” mistake in corporate HR that put her on the path to entrepreneurship

Links from the Founder

Transcript

Welcome to Disrupting Japan. Straight Talk from Japan’s most successful entrepreneurs.

I’m Tim Romero and thanks for joining me.

Japanese HR departments are in crisis right now.

Oh, life was simple back in the good old days when the big firms all recruited straight out of university and employees stayed with the company until they retired. But things are changing in Japan. People are starting to switch jobs. Companies are hiring mid-career and startups?

Well, startups are a source of employee mobility, that is forcing enterprise HR to completely rethink its entire mission.

Today we sit down and talk with someone at the center of this transformation, Takako Ogawa, co-founder and CEO of Panalyt, a startup bringing modern people analytics to Japanese HR departments.

But that was not always the case. Takako was not always the CEO and Panalyt, was not always a Japanese startup.

So, Takako and I talk about that journey. We’ll dive into how you know when a startup needs a new CEO, how to decide on your first overseas market including a few big mistakes that you should be sure to avoid. And the very important difference between having a global mindset from day one and actually being global from day one.

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

Interview

Tim: So I’m sitting here with Takako Ogawa, the co-founder and CEO of Panalyt, who’s bringing modern people analytics to Japanese enterprise. So, thanks for sitting down with us.

Takako: Yeah, thank you.

Tim: It’s really great to have you on the show. But just for a background, what is people analytics?

Takako: So, in a nutshell, how I see people analytics is taking a scientific or data approach to HR, kind of in the same way that when you build a new product, you do AB testing, or when you’re building financial models, you test out a lot of things in numbers. And the super exciting thing is in the people space, now we can do this as well. Modern enterprises who uses a payroll system, a time and attendance system, HRIS, they have enough data to make data-driven approaches to people.

Tim: So, data-driven is good. We all like data, but what kind of decisions are these companies making? What are they improving?

Takako: I can definitely share some of the experiences at Google because back when I was there, we used data in everything. Like everything. I was astonished by how Google approached HR and that’s what got me excited in people analytics in the first place. But some of the decisions that Google made through data are things like recruiting. Google figured that after your fourth interview, you’re not getting as much returns, but you’re wasting interviewers and candidates’ time. So, we decided that there’s a rule of four, only four interviews, and you’ve got to make a decision then.

Tim: So, what data tells you that? Is it that after a candidate is passed four interviews, 99% of them will pass the next three? Or what is the data?

Takako: I guess it was more related to after you joined the company and the performance then. But that’s one example. There’s plenty others if you, if you want some of the other nuggets.

Tim: In my case, and I think for most people who are not directly involved with these startups, we see it from some of the outside. So, everyone is promising data-driven better decisions, and it’s kind of vague. So, better hiring decisions sounds great or more connected workforce sounds great, but like what are you measuring? Is it things like how much time people spend in meetings or…?

Takako: That’s a great question and I almost want to show you the product because you’ll be surprised how much things you can see through data about your organizations.

Tim: But this is an audio podcast.

Takako: Exactly. I don’t do well on audio. So, some of the easier things are like employee headcount, like how is my organization growing, have grown over the years? What’s the gender ratio? What’s the gender ratio in your management team? What’s the gender pay gap? Those are some very, very simple things. And then you get into, okay, well what’s the overlooking like, and is there a particular season your workforce is overworking or what’s the relation between overwork hours and attrition? Like, all these are KPIs that you can measure. And at Panalyt, we’ve identified close to 400 people KPIs that you could be monitoring about your company.

Tim: So, let’s talk about the overtime because I think this is something that Japan needs to work on especially. Companies are required to report over time. So, there’s a lot of nonsense in there. People will just fill out what they’re expected to. So, are you using data to, for example, see if people are really working on weekends or sending email at three in the morning?

Takako: We could do that. Well, we have this thing called organizational network analysis, but what we use is emails and chat and your action that can be tracked over your communication tools. And we could do that. But most of our customers are getting started with more simple stuff. Like a lot of our customers, when they get started with Panalyt, they don’t know their employee head count at any given time. The companies that we service are big enterprises and imagine a company that’s headquartered in Japan, but they have offices in 30 other countries. Each of these 30 different countries are using a different HRIS. So, obviously those systems don’t talk to each other. This is why you don’t understand how many people you have in your workforce.

Tim: Okay. So, currently where is this data stored? Is it just stored in a variety of different local accounting and payroll systems?

Takako: The data that we use in HRIS and payroll systems, time and attendance system, our surveys, like whatever service that they use. But we collect that do data ETL and data cleansing. And that cleaned up data that you can use for analytics is stored in our system.

Tim: Okay. I want to get back to a more deeper explanation of how this is used now and kind of the future of HR in Japan. But before that, I want to back up a bit because I think the story of Panalyt is just as interesting as Panalyt product. Panalyt was founded back in 2017 by Daniel West, and you quit Google and joined in 2019 to run Japan and eventually ended up as CEO. Let’s talk about that journey.

Takako: A good friend of mine was a good friend of Daniel, so he brought us together saying that, hey, Daniel’s building this people analytics system. It’s still in beta, but you worked in people analytics at Google, so maybe you should see the product, give him some device. And that’s how we got connected in the first place. And when I saw the mock of the product, how it moved and what kind of metrics that’s shown, it really reminded me of a system that I used as an analyst back at Google called People View. Like Google built our own in-house dashboards and like just a system where you can click a few buttons and get exactly the data you want. But I didn’t really like how the UI was set up. It’s like it was a system for analyst. But the opportunity I saw in Panalyt at that time is that this is an analytics product that looks beautiful, that this is built for line managers or executives who don’t really have the time, but they want the data, they want the information. That’s what I loved about the product.

Tim: The company was originally in Singapore.

Takako: Yes.

Tim: Actually that kind of makes sense though, because Singapore, a lot of global companies kind of have their APAC HQ in in Singapore. And was that the logic behind putting the headquarters there, or was that just where it was founded and…

Takako: It was more the latter, I think it was where Daniel was at the time.

Tim: And did that play out for you? Where did you get a lot of the international contracts in the early days?

Takako: So, in the earlier days, more in a freemium way I think it worked, but not the national brands. It’s like smaller companies. So, but big enough that they would want a people analytics product. Setting up in Singapore was maybe a good idea because a lot of the companies, their mentality is not as closed off. They’re not as afraid to be the first penguin. And you would know Japanese enterprises does not want to be the first penguin. So, I wonder maybe having startup in Singapore and having the initial few logos, even if it was premium, was a good way to get started.

Tim: Well, That’s interesting. So, you started with a freemium product in enterprise?

Takako: Mostly freemium. So, when I joined, there was almost no revenue.

Tim: So, it’s interesting. I usually caution startups against using a freemium model.

Takako: Oh, I’m the same way. When I started Japan market, I was like, no one’s getting product for free because I don’t trust words of free customers, like they’re not real customers.

Tim: It’s really interesting because I find that in B2B sales, especially enterprise sales, the cost of your product is actually a very small percentage of the cost that the customer has to pay. They’ve got to train people and go to meetings. And I find that it’s a really important filter that if the person can’t sign off on a couple thousand dollars, it’s probably best to pass.

Takako: I’d say it played out in Singapore as well, because when you look at our current customer base, all of them are Japan based mega enterprises, all of them. So, all of the initial like small accounts that we got in Singapore eventually churned.

Tim: So, who was the customer base? Was it Singaporean companies? Was it more southeast Asian companies who’d set up headquarters in Singapore for the kind of the stability? Who were they?

Takako: Even in the earlier days, and this is now thinking back, it was probably not a good thing. But in the very earlier days, the customers we were getting weren’t really Singapore companies. We had companies that were based in UK. We had companies based in well, Southeast Asia, Asia too. So Singapore, Malaysia, Indonesia were some of the locations. And obviously Japan was a big market. We had partners in Italy and Brazil so it was everywhere.

Tim: So, how did that happen? I mean, going global is a great thing, but was it just serendipity? Was it just people finding you on the web? Were you reaching out to partners? How did you end up with such a diverse customer base?

Takako: Number one is because the demand was everywhere. This is a good thing for our business. Demand was everywhere. And we were also doing a lot of things online. So, posting on LinkedIn or just online marketing. And then customers would find us and we’d be, oh, you’re a HR agency in Italy and you’re interested in being a resale partner, or, oh, you’re a FinTech company in UK and you needed a product like ours. And we never shut doors. So, everybody kept on coming. But the problem is, every startup you need to find your niche and dominate it. You need to understand your customer’s core pain and needs very, very clearly in order to grow your product well. And when you’re spread thin across regions, across different sectors, and across different employee sizes of clients, it was a mess.

Tim: I think this is a really important thing to understand because I mean, especially a lot of Japanese founders, everyone’s telling them the importance of going global, which is absolutely true. And it’s really hard to turn down business. You just don’t want to do that. So, were the needs of the customers in Italy significantly different from those in Brazil? And did you find yourself getting pulled in a lot of different directions?

Takako: Absolutely. But even worse, I’d say we weren’t even there. We did not understand the customers in Brazil or the customers in UK. That’s why eventually they all churned without telling us what the problem was.

Tim: Oh, right, right, right.

Takako: So, that’s even worse because you’re not like even getting the demands from all these different places. You don’t understand your customers so much to a degree that they’re churning. You’re like, we don’t know why.

Tim: So, but let’s go back to when you’re getting pulled in a bunch of different directions. So, how do you prioritize there? How did you decide where to focus?

Takako: When we decided that we are going to focus our energy into Japan, first it was because we had the most customers that stayed. So, that was one. But then also when we looked at the market, it’s a big enough market that dominating this niche in Japan that will give us a steady business. So, the market size was another thing. And the last thing, which is unique about Japan is that there’s customer demand on a people analytics product and they cannot service them themselves. So, that data talent in Japan is very scarce. And these data engineers and data scientists, they’re not going to come into HR. Like there’s other stuff to do. So, it’s really hard to hire for these positions. So, what the HR and executives or the problem they had is that if you can’t hire someone to do this, like make this internally, you just need a product.

Tim: Yeah. And like Google can make a product like that internally, but most companies can’t.

Takako: Exactly.

Tim: Yeah. Well, it sounds like refocusing on Japan was a great decision. So, you moved the headquarters from Singapore to Japan. And you raised a funding round about the same time. Were those two events related?

Takako: Right. Yes. So, we transitioned our headquarters from Singapore to Japan in 2021. And this is when we raised a pretty big seed round. The total raise was about three mil. It was all Japanese VCs. So, we saw that when the client is mostly in Japan talent, well, more than half of our team members were at that time based in Japan too. So, when your talent is based in Japan and when you’re VCs are based in Japan, just makes sense to have headquarters here.

Tim: This was a huge change in a lot of ways as well. It wasn’t just a normal startup pivot because at the same time you were changing CEOs. You were becoming the CEO and Daniel was stepping down and you’re moving the headquarters and this has to be a really difficult time internally. So, what was going on internally there? Did most people stay on?

Takako: So, we didn’t change CEOs immediately. So, Daniel was still group CEO when we transitioned the headquarters to Japan. And for two years he served as the CEO. I think throughout that two years we were starting to realize that, well, what’s the role of the CEO? And will he be able to do that now that our whole business is really centered around Japan. We had a lot of discussions not just between me and Daniel, but also with our other C levels. Like we have a CTO and a COO, both of them in Japan. As collectively, we decided that it’s time for change and that happened end of last year.

Tim: So, those kind of transitions, it is rare and wonderful when they are done smoothly. A lot of times the startup doesn’t survive that transition. So, did most of the staff move from Singapore to Japan, or do you still have a team in Singapore working remotely?

Takako: We still have a team in Singapore working remotely. And the Singapore entity was basically all engineering or product function. So, even today they’re working absolutely fine. And one of the first things I did when I moved into the group CEO role is that we did offsite in autonomy. Everybody, like it’s a global offsite, and where we reconfirmed our mission, let them recharge because we went through some really, really difficult financial times where the whole company had to cut down their salary by 20%, management by 40% just to survive an additional few months so that we can get a big client account or a big investment coming in. And I’m really to this day so thankful to all my teams for really staying in the game together. Like no one likes being cut their salary to a 20% and for the members to stay on the company because they believe in the mission so much. That’s a very strong team.

Tim: So, what percentage of the company stayed on through the transition? Was it pretty much the whole…?

Takako: Pretty much the whole thing. Pretty much the whole thing.

Tim: That’s fantastic. So, you mentioned the offsite, but what else did you do to keep the communications going to give people this confidence that everything was okay?

Takako: Well, one of the things that I do, I have focused on is transparency. The dev team and the data team, like those who are furthest from our clients, they would know what kind of big deals we’re working on. And I keep up the momentum so people don’t think that this is a dead end. Like you see huge deals that we were about to sign there. And I actually did close it in this really particularly tough time.

Tim: What about the other side? I mean, were you transparent about like, okay, team, we have a month and a half of runway.

Takako: I mean, it’s not even month and a half. We actually did not have money and yeah, we were pretty clear. And also when you are explaining to your members that we need to cut down salary for the next three months, you need to let them know why and where’s the end of the tunnel.

Tim: So, in my first startup, which it was an e-commerce company back in the dotcom era and the bubble kind of burst around us and we had to sell. I adopted a completely open books Q&A question for the whole company. And I think that was the only way that people were like, okay, yeah, things are bad, but they’re not that bad. So, you had very much the same approach where you would just say, here’s our financial situation.

Takako: Yeah. The company didn’t start off that transparent, but we’ve like reformed ourselves to be much more open about communication and much more communicative.

Tim: And when the danger had passed and you’d raised new funding and did that level of transparency continue or did you pull it back a little?

Takako: Yeah, absolutely. Right now too, like we have our monthly KPI meeting, you see the good news and the bad news in the numbers and also what we’re going to do about it. So, we have much more transparency now even because now we have the time to structure the KPIs and like things that you didn’t get to do when you were in like live or die mode. Right now because our runway has extended and we’re also getting bigger accounts, we are okay until next year.

Tim: Well, I think knowing you have the longer runway, let’s everyone focus on the long term. Even like the product and the dev, the engineers suddenly are thinking in terms of months and years rather than weeks.

Takako: Right, that’s a good thing.

Tim: That’s a very good thing. Well, actually, let’s talk a bit about that. So, as you are refining your offering and you’ve decided to target more on Japanese customers because they were your initial traction, any changes of strategy or feature sets that resulted from focusing on the Japanese market, that the Japanese customers particularly wanted or that were a particular sales driver in Japan?

Takako: I mean, it would just come down to one thing. One thing we added and one thing we took out, maybe. The one thing we added is quality of data, data assurance. And this is something that I don’t think it’s just because we focused on Japan market. If you are in the people analytics market, there’s tons of data product in HR that does half job. The data you’re seeing is not right. There’s no customer trust in the data. That’s why all of the companies that try to develop a data product in HR has failed. Because at the end of the day, the HR people don’t trust the data. They don’t trust the data, so they can’t present it in front of the executives. What they do is they go back to Excel sheets where they actually can see all the data and spend hours on it cleaning the data. But at least it’s correct. They have confidence in it. But I do believe that focusing on the Japan market, the level of detail to accuracy has, Japanese companies are very strict on this, but it’s a good thing because if we do this right, if we can make Japanese enterprise customers happy with the quality of data, it’s going to be good for any country.

Tim: So, I agree totally. I think that this is a real gap in the market. Most, I don’t want to say most HR systems because that’s picking on HR systems, but I think most decision support systems in general often are very pretty UIs backed by questionable data. But that data cleansing the roll-ups is a lot of non-scalable systems integration human labor. So, how much of your time is invested in doing that work versus the high margin SaaS licensing business?

Takako: So, our product offering has that bit of data maintenance and data cleansing also a part of the offering. So, when you look at our order forms, the initial like part where we do the data cleansing, that’s a chunk too. But I’d say maybe 20% of the whole contract. It’s not like data cleansing is you do it once and then it’s perfect forever. You have to do it. The first initial, it’s hard labor, but afterwards too, there’s like small maintenance too, and it’s baked into our SaaS model.

Tim: Oh, okay. Are most of your clients, because they’re all Japanese clients, are they mostly running the same backend systems? Or is there a lot of variation?

Takako: It’s a lot of variations.

Tim: Let’s talk about going global again or going global again. So, do you plan on going global again?

Takako: Absolutely. Yes.

Tim: So, what’s going to be the trigger for that?

Takako: So, I’d say if you look at even companies, mega companies like Amazon, they started with books. They started in USA only, and that’s how they started, right? You have to first reach a point where you know that this is the group of people, this is the group of users that love our product and this is how they’re using it. We need to really define that and dominate that niche. And once we know that, okay, well this is working and the product also needs to stand on its foot. Right now, I’d say Panalyt is still 50% product, 50% service. And that totality is what’s winning over the customers. So, it’s still very effortful, but whatever we’re doing on the service side can be made into features, into Panalyt. And hopefully in the long run it will be something that is easily set up by the customers themselves. And at that point in time we are able to scale in at scaling stage, we would go find another market that fits our scope.

Tim: So, are you looking to be more of an 80-20 software versus services before you branch out? Or do you want to get to the point where you’re almost a hundred percent turnkey SaaS before you’ll go overseas again.

Takako: That’s an interesting question, but first I like 20-80. Sounds like a good point. And also there’s a market similar to Japan probably that a 20-80 model will work even maybe 50-50 might work in another country as well. It’s just a little bit too resource intensive for us to start at that point. So, we just need to find a market that that combination is going to work. And if we’re going to the Southeast Asia market, then I’d say I would like to get the product to be doing pretty much everything because the cost price point in Southeast Asia is much, much lower than Japan. So, they are willing to do a self-start kit or like self-service, but they need the price point to go down. And in order for us to service a market like that, the product needs to have a lot more features, which enables that setup on the client side.

Tim: Okay, that makes sense. So, if you’re going into a relatively wealthy market like Korea or Taiwan, you could get away with having a much higher percentage on a services. But if you’re going into Indonesia, you’d have to get it down to almost a hundred percent pure SaaS.

Takako: Absolutely. So, one of the reasons that we never got a client in the India market is not because there’s no demand there. We actually had tons of client inquiries, but at the end of the day in our current pricing model, they’re like, Hmm, I can hire two engineers.

Tim: Yeah. That makes sense.

Takako: So yeah, every market has its right timing to approach. And I think that’s the biggest learning we’ve had over the years is that we know there’s global demand. That doesn’t mean we have to start global from day one.

Tim: Yeah. Think global, but don’t necessarily be global from day one.

Takako: Exactly.

Tim: You mentioned before that that the HR in Japan is very attracted to the quality of data that’s lacking right now in their current systems. What do you get most pushback on? What are they resisting? What’s their biggest objection to buying SaaS like this?

Takako: Well, first of all, they look at, okay, who else is using it? And if you don’t have who else, that’s going to be tricky. But then I think especially in the people analytics market we’ve had the challenge of, hmm, we get the concept and it feels like it’s something that we have to do in the long run, but maybe not necessarily today. Oh, that’s the feedback that we get a lot.

Tim: Okay. If you have a lot of prospects who are saying, this is great, not now, you know someday, that someday might be coming pretty soon. So, HR is really changing in Japan, the whole nature and mission of HR departments are really being rewritten right now. I mean, certainly until the nineties, all large companies just hired straight out of university, people would stay in the company until they retired. And HRs function was simply a bit of administration and handling transfers. And that was it. And now it seems like they’re being asked to do a lot more than that.

Takako: Yeah, absolutely. HR is now tasked with something that they’ve never had to think about before. And that transition is very hard when you have a market that’s becoming a lot more moving. Like now the younger generation don’t enter a company and stay there for 50 years. Like, that’s not how it works anymore. So, what that means for HR is that they’re going to be asked by executives, why is our attrition for the twenties and the thirties generation so high? What’s happening? They need to provide answers and they need to provide answers in a way that business executives would understand. So, it can’t be like based on my gut feeling, or based on a few anecdotes that we’ve gotten from these two managers, this is it. Like they can’t get away with that anymore. They have to provide concrete evidence that this is happening, therefore the attrition is getting higher. So, if we are going to be implementing these few different projects that’s going to solve this problem. And that’s what the executives want from HR, that strategic support.

Tim: Yeah. So I mean, it makes sense that they’re suddenly having to be responsible for retention talent development…

Takako: Acquiring talent.

Tim: Yeah. Recruiting, not just like hiring masses out of university. How are they dealing with this? Do you see HR departments changing now?

Takako: Some of the things I’m seeing that’s pretty exciting is we are seeing big companies adopt a head of HR that’s not from traditional HR background. So, there’s a big bank in Japan, everybody knows it’s a blue bank, hired as the CHRO, an ex-executive of marketing. She’s found HR very interesting because she thought that the skillset that she had as a marketing specialist, so much of them translate into HR.

Tim: Now that’s interesting. So, in the recruiting or the communication, what aspects?

Takako: First of all, definitely in communications and recruiting, but in other like internal comms, that’s a huge part of HR and that is completely communication. I’ve seen a prior product development specialist becoming head of HR. That’s why some of the companies that we’ve sold to, when you see the individuals who wanted our product, when the general market’s like, well, we don’t need to be speaking numbers. This is not an immediate need. When you look into it, it’s the people who are not traditional HR background, they come into HR and go, oh my God, why, why is nothing making sense? And they started to build these dashboards with Tableau and they do it themselves, but so much maintenance work and building takes a lot of time. And they would go, okay, well there has to be a product that does this, and they find us. Those are our early day customers.

Tim: Okay. Because I do think the kind of transition in Japanese HR right now, it’s fascinating to watch, although it’s a very slow transition.

Takako: But Japan HR, it’s not like they can’t do it. Like think about Covid and all of a sudden Japanese workplaces needed to adopt work from home.

Tim: Yes.

Takako: They did that. They actually were able to do it in half a year.

Tim: Yeah. And they spent a decade explaining why it was absolutely impossible, couldn’t be done. And then within a month and a half, like, okay, it’s done.

Takako: Yeah, it’s done. Like I feel like Japanese people are so good at figuring out the process when it needs to get done. They’re just not great at making the decision that this needs to get done.

Tim: There needs to be a lot of pressure and urgency for things to change. Well, listen, Takako, before I let you go I want to ask you what I call my magic wand question. And that is, if I gave you a magic wand and I told you that you could change one thing about Japan. Anything at all, the education system, the way people think about risk, the attitude towards lifetime employment, I mean anything at all to make it better for startups and innovation in Japan, what would you change?

Takako: Such a hard question, but really good question.

Tim: It’s a fun one. And it’s a magic wand, so it doesn’t even have to be possible.

Takako: Right. I think this is probably a culture change, but a culture change in like not punishing failures. And it is not just about startups, but people say this about Japan all the time, and I think there’s a lot of truth in it. Like, why don’t customers want to be the first penguin? It’s because that person, if this guy or girl brings in a startup product and he or she fails, then automatically this is like a failure on this person’s part. And then they’re not going to advance their career in this company anymore. And when you have that kind of punishment, no one’s going to want to do something new. And if no one wants in the bigger enterprises or the company wants to take risk that means the startup ecosystem is not going to grow either. So, there has to be something that, not punishes failure, but even going a step further, like a company should be thanking individual that makes a failure because that challenge…

Tim: That is this odd cultural. Yeah it’s a punishment for taking risks, but it’s deeper than that. So, I mean, I don’t know how many meetings I’ve been in where someone has proposed a new idea and then everyone goes around the table saying, well, here’s what I think’s wrong with it, and here’s what I think’s wrong with it. And no one ever actually proposes a solution. Just like everyone wants to chip in and say, oh, well here’s the problem, here’s the risk I’ve identified.

Takako: Kind of a funny story, but I used to be an HR back at Google, but also before that I was an HR person. Like my whole career was HR and I started off in a Japanese company and I’ve done some magical things to how HR was done in this company, but I made some really stupid error. And that’s one. So, the stupidest mistake that I made during this time is that, when you’re recruiting candidates we were using like three different systems like recruit, Minvi in Japan, all the main ones. And each of these systems had different rules in name conversion on an email. So, instead of saying, hey, you, it’s like, hi Tim, here’s what our company does, and we are recruiting for these positions, we want you to come take an interview. Something like that. But it’s better when you have your name called and better if you call out multiple times. But the symbols are different for each of these different systems. So, one time I sent out an email with no sun, so instead of saying Tim Sun, it’s like, you’ll be Tim. And it was repeatedly done.

Tim: That’s really rude in Japan.

Takako: Exactly. It sent out to 20,000 people and someone screenshotted that and posted on social.

Tim: Oh no. Saying what a rude company.

Takako: Yeah. And it was too funny because it was a rude company, but the rest of the email was so polite. So, this person who put the screenshot, he said that, okay, I don’t know if this company is super rude or super nice, I’m getting mixed messages here, and then everyone’s commenting on it, it blew up. And then my manager, got super angry, and this is why I knew I’m never going to advance in HR because I’m not that detail oriented. But on the flip side, what I did in the same company is that I analyzed all the different ways that we can get the ratio of people opening the emails higher to set out all these different communication, all these different titles. And I made 360 different types of emails and instead of sending one message out to everyone, clustered each of the target segment into like smaller pieces and then identified what kind of things that they would be interested in. And then made customized emails, 360 different types of it, and then sent it. And by doing this, I reduced the cost per inquiry to one third. That’s a huge savings for the company. And I did some great stuff, but because I was penalized for doing a very bad, operationally very bad things, that’s how I felt about like, advancing in career and HR for me in a Japanese company was going to be very difficult. But Google was a great fit because they would see all the different good things. And maybe if something is not your strength, then there’s tons of people in HR that’s great at operational things, but not a lot of HR people can think outside the box and do new things, which is what I’m good at.

Tim: Well, I think that is true. I think that a lot of the foreign companies have a much better sense of, if you’ve got really detailed people that love that, put them in accounting where you don’t want mistakes ever. You know right? But I feel like the foreign companies do a much better job of providing career paths and letting people fail once in a while in the right roles than the Japanese companies do. Although there’s a lot of talk, there’s a lot of mission statements and CEO messages about the importance of innovation and risk taking. But do you see that changing?

Takako: Not so much yet. Yeah. No, I think it’s easier said than done.

Tim: That’s for sure. I guess maybe the change is going to be driven from like the startup side. That’s the startups, the ones that introduce that into business culture and hopefully the enterprises can learn from the startups.

Takako: Hopefully now enterprises are fighting over talent with startups, which is insane when you think about it. So, in that way, maybe they have to start adopting a new way of thinking because otherwise all the good talent is going to go to the startups.

Tim: To the startups. Well hopefully we’ll see them make that change. Well listen, Takako, thank you so much for sitting down with me.

Takako: Not at all. It was fun.

Outtro

And we are back.

Takako gave a great explanation of why Japanese enterprise tends to be so slow to try anything new, even when there’s a broad consensus that something new is required. And her potentailly career-ending mistake in HR is unfortunately a very common story in Japan.

In fact, my old boss, Tanaguchi-Bucho years ago, explained it to me like this, promotions in both American and Japan are based on the point system. Whoever has the most points gets promoted. The difference, however, is that in America you get points for your wins and successes. But in Japan you don’t really get points. You can only have points subtracted for your losses or your failures.

In Japan, zero is the highest possible score.

With that kind of promotion structure, with those kind of incentives. It’s no wonder Enterprise Japan is risk averse. And it’s no wonder that startups are the driving force of innovation today.

The other lesson that’s important to learn from Takako’s experience is not to go global too early. Founders are told to think globally from day one. And you know, that’s actually good advice. Think globally, but don’t try to execute globally from day one.

Products are refined and product market fit is developed by focusing on a single market and often only a subset of that market.

By trying to serve early customers in multiple markets Panalyt found itself being pulled in many different directions at once, and they were unable to deliver meaningful value to anyone. Only by focusing on the set of customers that seem to benefit most from their product, in this case, Japanese enterprises. And then actually moving the company to be close to those customers where Takako and Panalyt able to turn things around.

 

 

If you want to talk more about going global or selling software to Japanese enterprise, Takako and I would love to hear from you. So come by disruptingjapan.com/show 215 and let’s talk about it. And hey, if you enjoy Disrupting Japan, share a link online or just tell people about it. Disrupting Japan is free forever and letting people know about it is the absolute best way you can support the podcast.

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.