I love low-tech solutions. They are more likely to be solving real problems, and if we are being honest with ourselves, a true a minimum viable product (or business) usually does not involve cool new technology.
Hiroki Kudo of MerryBiz has rolled out a minimal solution to address their client’s bookkeeping needs, and he is now in the process of trying to gently walk his customers from this small, sustaining innovation to something more disruptive. Something that will change things in the long term. It’s an interesting path to be walking.
We also talk about the changing attitude towards risk among Japanese startups and Japan as a whole. And Hiro talks openly about the biggest mistakes he made early on as a founder and the skills he had to learn.
It’s an interesting discussion and I think you’ll enjoy it.
Show Notes for Startups
- The advantage of low-tech and going slow
When Japanese B2B customers will finally embrace mobile
Why innovation happens slowly in some industries and why that’s a good thing.
The most important lessons learned from outsourcing
What kinds of companies should be in Japan right now
Working in a bilingual engineering environment
When startup bootcamps are worthwhile
How to plan for innovation that your customers don’t want yet
Links from the Founder
- The MerryBiz Home Page
- MerryBiz on Twitter @merrybiz – The Sheep tweets
- Follow Hiroki @hirokii
- Friend Hiroki on Facebook or connect on LinkedIn
- Interesting Japan startup events
- Tokyo Startup Weekend
- FinTech Meetup in Japan
Transcript from Japan
Welcome to Disrupting Japan. Straight talk from Japan’s most successful Entrepreneurs.
I am Tim Romero and thanks for listening.
Far too many people associate start-ups with cool technology, and associate innovation with high tech solutions. Sometimes good business is low tech and boring at first glance. In fact, I think the more exciting and fun an idea seems at first the less chance it has to make real money.
There is a lot of value to add, and a lot of money to be made by solving simple, boring, but highly irritating problems that people face everyday.
Hiroki Kudo has just such a business in Merry Biz. Fundamentally, and we will get into the subtleties in the interview. Merry Biz’s customers send them a box of receipts by post and Merry Biz scans them and enters the data into Excel. Low tech.
Now, you will hear my skepticism, hopefully polite skepticism early in the interview about the viability of this approach. As the interview progresses you begin to understand the series of situations and decisions that led Hiro here to this strategy.
Hiro and I talked in an open office, so you will hear a bit of background noise as people come and go. You will hear some laughter in the background after a comment I made about Japanese Corporate Innovation. It’s a great discussion. I think you will enjoy it.
Tim: I am sitting here with Hiroki Kudo of Merry Biz. You started this in 2011, and it is a Crowdsourced Bookkeeping Business. You can explain it much better than me, and also kind of clear up the difference between Online Bookkeeping and Online Accounting.
Hiroki: I started like Bookkeeping, this Crowdsourcing Bookkeeping Service in 2011 originally because I had trouble doing Bookkeeping. It was my own pain. I kind of looked at services such as Odesk, but they didn’t have any Japanese.
Hiroki: At that time they had Lancers and Crowdworks. I started looking into those kind of Crowdsourcing services to kind of help my own needs. That’s kind of where I started. I helped a few friends.
Tim: To clear it up. The difference between Bookkeeping and Accounting? Because there is a lot of Online Finance Applications that people say are Accounting, but Merry Biz is a much more focused product from what I understand.
Hiroki: We do the very basics. We get the receipts, like invoices and such and such and input that. Also, other things and they get out POBS also. All the financial statements, also tax-related documents.
Tim: Actually, the original version of your product was really Old School technology wise. Your customers basically mailed you a bunch of receipts, you sorted them out and put them in Excel and e-mailed the files back to them.
Hiroki: Yeah. You know that very well, yeah.
Tim: When was that? That was 2012?
Hiroki: Around that time, yes.
Tim: In terms of like minimal viable product, you know that is a really solid one. Why did that level appeal to the Japanese customers, that simplicity?
Hiroki: A lot of people asking Tax Accountants and using software. They didn’t have the basic Accounting knowledge and skills to actually do that.
Tim: You didn’t even have a web application until last year, right?
Hiroki: Yes, yes.
Tim: Did you feel any pressure in those 3 years, where your customers are saying to to the web? Or were they saying no this is exactly what we want? Take our receipts, send us Excel.
Hiroki: A lot of users ask a lot of requests.
Hiroki: We wanted to narrow down on what really burning needs, what the pain points were. I didn’t want to develop something right away. Because I was sure we would get it wrong. Try to figure out the operation, actually what the business is.
Hiroki: Make what we really need to do, what the pain points are. Then we start you know building down into the system.
Tim: There are a lot of options out there.
Tim: For receipt reporting and Management. Where the employees will take a picture of the receipt on a Mobile Phone and everything. It is uploaded in real time. Have the Japanese customers been anxious to use tools like that, or do they want to stay with their existing work flow?
Hiroki: For companies who are established and actually have a system or an operation already inbuilt. They tend to want to stick to that.
Hiroki: There is usually switching costs involved. For a lot of small enterprises, they tend to have no system. Very messy, there is somebody, a kind of Assistant. Who comes like maybe 1 or 2 times a week or something that takes care of all these receipts, invoices, et cetera.
Tim: Now, I mean Accounting and Bookkeeping. These are functions where you don’t want to necessarily be innovative or creative.
Hiroki: No sir.
Tim: Creative Bookkeeping it is not a good thing. Do you see Japan changing that workflow in the future? Do you think that the new technologies, the mobile phones, the fact that everyone has a web browser. Do you think that will change the workflow?
Hiroki: This is a cost-centered function.
Hiroki: People tend to like think of that later although the technology is ready, although the service is ready. Going to take a bit more time. One thing that is like an advantage for us is that the law is slowly changing. In the Japan law, you were to keep receipts for like 7 years.
Hiroki: Like in paper. The law has changed now that you can have that is kind of a digital format.
Tim: It sounds like these are very small incremental changes. Do you think there are going to be any really big changes in this space in Japan, or do you think it is going to be very, a lot of small incremental changes going forward?
Hiroki: We want to dramatically change this area. Right now we are doing it very hands on using Crowdsource.
Hiroki: Labor intensive in a sense. Right now we have the Developers preparing to Artificial Intelligence and Machine Learning. Everything will be instantly automatically done.
Tim: What is the machine learning to do? Is it just recognizing the receipts? Is it sorting them into the proper categories?
Hiroki: Having the scanned image, recognizes like which type. Is it from a Taxi Company? Is it from a Convenience Story? Then it kind of leads, realizes the date, where is the total amount, what like is the item. Then as you mentioned it kind of translates that into categories.
Tim: I see. You personally, before started Merry Biz you had worked for some pretty big companies. You worked for IBM and too, right?
Hiroki: Yes. Mm-hmm.
Tim: You also worked at Rocket Internet Company briefly.
Tim: What was that company? Was it E-Commerce?
Hiroki: E-Commerce, yes. We sold shoes. Now, they sell like all fashion goods, yeah.
Tim: That company had a tremendous amount of turnover.
Tim: A lot of people came in. A lot people left very quickly.
Tim: What was your experience there? Why did you leave so soon?
Hiroki: Originally when I joined local company I was contacted by Oliver. Who runs together with his brothers, Rocket Internet. The came first from Groupon. Which I was not interested, as I kind of helped advise them. The second time, was involved with Service. Local that was a Zappos Model.
Hiroki: It was very oriented around Service. Which I was very interested in. I was wanting to understand like how could you improve service in an already very sort of savvy country?
Hiroki: That was my huge interest, therefore I joined. Why I left? They were very demanding around the Financials. They wanted high revenue for the very first year. I started to discount the products and et cetera, and they weren’t that focused anymore on Customer Satisfaction. It kind of wasn’t what I wanted to do. Thus, I left.
Tim: Was the original focus on Customer Satisfaction just a Marketing Position? Or, was it something that the Management kind of changed priorities?
Hiroki: It was change of priorities. Everybody originally wanted to do, you know was related to Customer Service. We decided on which Distribution Logistic Company that we would use based on that criteria.
Hiroki: We found out that the numbers weren’t going to reach what was required for Rocket Internet, so everybody had to switch.
Tim: I think in the last 10 years Japan has become a lot more friendly towards foreign start-ups. Well, foreign companies in general.
Tim: What kind of firms do you think should be looking at the Japanese Market? What kind of companies do really well here?
Hiroki: Consumer business is very crowded. They have their varied tastes of like people differ from country to country. Thus, I think it is very competitive.
Hiroki: I think a lot of companies who actually B2B actually do great success if they just understand the business behaviors.
Tim: Like what sort of behaviors?
Hiroki: For example, like how the decision is made. At first, some traditional companies like decision process like takes so much time. You have to be very patient and you have to have like understand lead time.
Tim: Sure. Yeah, the sales cycle in Japan is much, much longer than it is anywhere else I have done business.
Hiroki: . Yes. As long as you understand that, and like you understand each individuals kind of you know incentive and why he/she is you know in that role. It makes it much easier. There is a lot of personal relationships involved.
Tim: I think that’s true. I think that is one of the things that many foreigners coming into to do business are surprised at. There is a lot of personal relationships and a lot of the sales, in fact most of the selling happens after the meeting, outside the meeting when you are not actually there.
Tim: Talking about Japan becoming more and more friendly for foreigners. A little earlier we were talking about your own engineering stuff, and that you are recruiting engineers from all over the world now.
Tim: How is that working out? What kind of led you to that decision?
Hiroki: Merry Biz currently is a local service, but we have ambition to you know move to Global arena.
Hiroki: That’s why it makes a lot sense to have you know a very diversified team. Fortunately because we do our business only in Japan is that not many people from outside of Japan would kind of fit on the business side. On the engineering like system developing side it is much, much more easier to have like wonderful Developers.
Tim: It’s a big step for first one or two that have to come in and maybe don’t speak Japanese that well.
Hiroki: Our team is not like completely English fluent, but I want to kind of see like as engineers to engineers they work well together or not. Yes.
Tim: I found that too. My own experience, Engineering Staff if you are working with people who might speak a little bit of English as their second language. It is much easier than trying to manage a multilingual Sales Staff, for example.
Hiroki: Yes, mm-hmm. Engineers in general they can draw things you know. It is much more easier to talk about.
Tim: Yeah, the code is universal.
Hiroki: Mm-hmm. Exactly.
Tim: . Everyone understand the same code. Even with quite a few different aspects of start-ups and market entry, and open innovation. At one point you ran some Entrepreneurial Boot Camps, right?
Tim: Tell me about that. Was that worthwhile do you think?
Hiroki: Actually, I like to do that more.
Hiroki: Because I kind of really have my hands fool.
Hiroki: With my own business at the moment. Japan, the ecosystem for entrepreneurialship is still very young. I, and I am sure a lot of other people want to have this ecosystem more larger.
Hiroki: Have a lot more people involved. Having like Boot Camps and like Events related to that. I am hoping that we can generate this kind of momentum going forward.
Tim: In your experience, the people who participate in the Boot Camps here. Did many of them go on to start companies or start projects?
Hiroki: I haven’t kept track of everybody. Yes, I know some of the people who actually have done their entrepreneurship and they have gone on with their project.
Hiroki: Some people, who haven’t done their own project, some have actually joined other people’s projects. In total, like I think we have you know developed some strong interest.
Tim: I think that is a good point. I think that one of the most important aspects of the Boot Camps, or the Training Programs is connecting people with similar interests. Like I say, even if they don’t start their own, or they might join, or they might stay friends and come up with a completely new idea in several months. That’s really valuable.
Hiroki: Well, a lot of people got involved, so they can help like each element. Because start-ups are tough financially and psychologically. A lot of hurdles to go over. We need a community to you know, a friendly community to support that.
Tim: I agree completely. It is interesting watching this community develop. Part of it is developing around these Boot Camps, part of it is developing around Accelerators and Incubators. A lot of it is developing around the Venture Capitalists here. Where do you see is the core today, or where should it be?
Hiroki: I started. I joined J.P. I was you know project that was not my own. I experienced how it would work. I am guessing like a lot of people would join like you know Tech Companies, Start-ups, and kind of experience how it is. Get to know how the process is and all of that. It kind of gives you a reality of like how it works. The reality is usually not as harsh as people would imagine.
Hiroki: Oh, I’m going to go completely broke. I am going to be on the streets. . That usually doesn’t happen.
Tim: No, not usually. .
Hiroki: . That will kind of reduce the pressure and you know the stress of actually of actually going through the first step.
Tim: The more exposure people have to real people doing it the less scary it seems. I guess it is role models.
Hiroki: I guess you could say that, yes. Like for example, if you have a family member who is an entrepreneur I think it is like one of the options. Like oh should I go to a big corporate, or should I do my own business? It is you know very simple. You know very kind of open option.
For people who haven’t had any friends or family members that have done like entrepreneurship. It’s like oh scary thing. Like what happens? Like they have no idea.
Tim: When you set off on your current career path for like when you left IBM. Were your friends and family supportive of that? Or did they think you were crazy to leave such a great company and do something risky?
Hiroki: After IBM, actually doing a Consulting Firm. That was like small steps going to more of Management side.
Hiroki: Then like I started to consult start-ups. I was taking like baby steps toward that, and kind of touching the water. Try to figure out like you know is this for me or not. I was kind of scared at the start.
Hiroki: Through the experience you kind of realize that it is not going to kill you. Worst case scenario you can probably fall back to go join another company. Just that like you need to avoid you know these killer kind of risks, such as getting involved with your own personal.
Tim: That’s something that has actually changed recently. Because up until 10 years ago Pure Equity Financing was very unusual.
Hiroki: Yes, yes.
Tim: You know the founder would be expected to like basically sign for the loan.
Hiroki: Yeah, he would be personally liable for the loan. Mm-hmm.
Tim: I suppose it is one of the reasons the ideas of risk have shifted.
Hiroki: Mm-hmm. If you are like an old company. Like if you had a loan and you business unfortunately didn’t work out. You wouldn’t be able to do your second start-up. You would be on Black List. You would be completely, personally in bankrupt.
Tim: Well, this is interesting. Because in America, and among Japanese entrepreneurs. This whole idea of you know fail fast, fail forward. You know there is no shame in failure. You learn from it. I think people are not just saying it, but really believing it, and there is no shame in failing something you have tried hard at. That is among the Entrepreneurs and Founders in Japan. Do you think that is starting to change among normal people? .
Hiroki: . We are not normal.
Tim: We are not normal.
Hiroki: Slowly, but surely yes. Not a lot of Corporates are interested in this domain because they found out themselves that they are not very innovative. We need to kind of get that kind of power. These ideas, these risk takers involved in their kind of branches. For them, themselves to . Going into the company, touching and like experiencing. Seeing people actually do that. Kind of makes them change their mind. Makes them understand that you know, hey these people may look crazy and they maybe aren’t.
They are the same kind of people, human and they are doing their best. It’s not that they really want to fail, and like get successful. They will start again.
Tim: Are they changing the behavior? Because what I have seen is a lot of the open innovation programs. Different companies have different levels of sincerity.
Tim: It seems to be the desire for the company is like all right go out and find me some innovation. Find me some Corporate Creative crazy ideas that we can use. Are large companies starting to hire mid-career Professionals? Or are they changing the way they view failure internally do you think?
Hiroki: I don’t think that is happening yet.
Hiroki: They don’t understand innovation yet, but will. It’s like you know this kind of magic thing. You know oh just find this idea. The idea will work itself out. As the Corporate gets bigger and you know as a way, further away historically from its origins. It probably gets more difficult and difficult to understand.
Tim: I guess a lot of it were just going to have to wait and see. If today they are studying this. You know maybe in a few years they will so okay, now we understand it. We are going to try and adopt.
Hiroki: I hope like you know large Corporates understand it as well. Like, as start-ups we as the destructive ones are kind of force the environment to change, so that they have to accept that. The only way to kind of survive is to adapt you know as quickly as possible to the environment.
Tim: I think so. I think it’s, and I have made this point in past shows as well. The thing that so many people forget is that Japanese large companies use to be incredibly innovative in the 1960s and 1970s. They were the engine of the world’s disruptive innovation. Then things changed. .
Tim: Well, we talked a bit about how large Japanese companies view start-ups. You said that Japanese people thinking of starting a company shouldn’t be too afraid of failing. It is not really the end of the world. They won a debt for their entire life if they fail. What do you think are some of the biggest misconceptions that Japanese have about start-ups or about running a company?
Hiroki: There are some exceptions of course. You know you start an app and it just you know shoots and you know everything is like you know fancy and happy. Then in like a few months you sell it like a million, billion. That’s very rare.
Tim: Yeah. .
Hiroki: Usually, you know you start something. It doesn’t receive any customers. You kind of work on it again. Slowly, but surely you start to get you know revenue and such. At the same time it is not that harsh as well. There is a huge gap of expectations. Oh, I’m going to be a millionaire like an instant. Or, I am going to be like very brutally you debt-related. You know like my family is going to hate me.
Tim: Yeah, people tend to, their vision tends to be only the extreme cases.
Hiroki: Yes. Because they don’t know the reality. They only see somebody like close by.
Tim: Well, I guess the extreme cases make the best stories.
Hiroki: Mm-hmm. That’s going around on the news and that’s why they only know about those things. In those cases, yes.
Tim: Right. That’s true. Just showing up for work everyday and persistence isn’t nearly as interesting. What is it that you find most frustrating about being an entrepreneur?
Hiroki: First thing, I see this new world. Like you know it is going to happen. Everything will be eventually run by deep learning. Everything will be atomized. I see this future. That it will reduce a lot of like work load in this kind of Admin/Back Office world.
Kind of sharing this idea. Like 99 percent of people can’t really understand that. It is probably partially my fault of explaining it. It is sometimes very hard to convince and them and get them excited about it. Then you know okay, so what kind of?
Tim: Yeah. It is hard to get people to understand what your vision really is.
Hiroki: Mm-hmm. Yes. Some people say, really is that going to happen? Kind of difficult for them to actually see that as a realistic, like 10 years from now view.
Tim: For what kind of thing for example?
Hiroki: Like the way people do Back Office would be completely different. People around that job will be doing something completely different. How it will be processed, accuracy. For example, like right now when we exchange contracts we like you know we print it out. We stamp it and we send it.
Before we do that we do a lot of editing back and forth through e-mails. This is just a joke for like NDA or something that simple. It should be done like in 5 minutes.
Tim: Right, right.
Hiroki: It shouldn’t take more than that. Unfortunately, with all of this technology, we still do this very like very labor intensive, very old-fashioned way of doing business.
Tim: This is interesting. It seems almost like a contradiction in your business. Right now you are focused on optimizing the existing workflow.
Tim: Making the painful part go away, and not making the customer change anything really. What is inevitable. What we are all going to see in the future is all of that workflow. All of the way of doing business is going to change.
Hiroki: Change dramatically, yes.
Tim: How are you going to make sure that Merry Biz is a part of that change?
Tim: And that you aren’t kicked out with the rest of the workflow.
Hiroki: I will pay real attention on that, of course.
Hiroki: Like we went to be the innovation leader in that sense. We will kind of address the existing thing because that is the only pain that people can understand. It it is a want. People will wave that away. We still need to address the pain and move forward. We are moving forward in the direction that will change the business dramatically.
Tim: You are pushing change, but right now it is still a little to early?
Hiroki: I guess so.
Tim: Okay. You know, the way you boot strapped up, Merry Biz. You did a lot of things the hard way. From using your own money early on to starting out with a very analog process.
Like I said you got around to doing web enabled just last year. Knowing what you know now. If you had to do things again, what would you do differently?
Hiroki: A lot of things that I actually know that is valuable which is kind of hard for other people to understand, but I have a huge asset around like knowledge, around behavior I use with the customers. Having done that like more quicker, or like jumping right away into the web. I probably would not have accomplished that.
Getting you know ramping up more quickly I might have done that if I read in the news right away. To kind of go and really understand people’s behavior is going to kind of payback eventually. That’s why I am kind of proud that I did it that way.
Tim: That make sense. That part, the deep dive into your customer’s behavior. You wouldn’t want to change that. Is there anything you would change or are you pretty happy with the course you have taken?
Hiroki: The kind of things that I would probably differently is now that I know People Management part. I think is a huge issue with like any kind of Organization of course.
Hiroki: Especially plays a very huge role in the start-up because start-up things change quite quickly and dramatically. Having a core team, having a very strong core team means a lot and is essential. Myself, I kind of reflect back and have some regrets around like how I should you know manage our team. How I should you know act or perform as a leader. There is a lot of things that I have learned through the experience in a kind of hard way.
Tim: This is something that a lot of CEOs say this is one of the hardest things to have to learn is the Management. How to lead people? What kind of things were the hard lessons that you had to learn.
Hiroki: Although that it looks kind of slowly like I did bit by bit, but I did have like pressure, time pressure, and like you know financial there is pressure too. I needed to find out. I wanted to go to the web right away. Okay, I found this guy. He seems to know what he is doing. I get him more involved. He does part of it and leaves. I mean like he doesn’t stick with the company. It is kind of like you know how to get people passionate? How to keep that up? How to figure out if there is really a match? Will he/she stick with the company? Is this good, you know?
Tim: In that case, was this someone that you didn’t have the judgment to realize that oh he is not a reliable person? Or, was it someone that you feel you didn’t motivate him well enough to really stay and be excited about working for the company?
Hiroki: Not blaming his part, but like more of a mix of not motivating him enough, and not understanding whether it was a fit or not a fit.
Tim: Not taking the time to get the right person and the right job.
Hiroki: More like you know my kind of view of that was if the person has a skill set. We just fill that and we have got the skill set.
Tim: Oh right. It seemed like a jigsaw puzzle.
Hiroki: Kind of.
Tim: You find someone that is the right shape and you put him in, yeah.
Hiroki: Functionality wise, yeah.
Tim: Right, yeah. That’s not the way it is. .
Hiroki: I learned. .
Tim: Okay. I think universally almost that is some aspect of that is the biggest challenge of almost every founder I have talked to. You know learning how to motivate people and lead people. Myself as well, that was one of my biggest challenges.
We talked before about the changing start-up ecosystem here in Japan. If you could change one thing. If I gave you a magic wand, and said you could change one thing about Japanese society or economy or education that would most improve Japan for start-ups. What would it be?
Hiroki: I think it has a lot to do with the mentality. People, their families. How would I look when I would join a start-up. Would I have a chance to join a big Corporate? Will they think I am a complete fool? What happens even if I like joined and it doesn’t work out? People are really afraid of that.
It is the society. Like us as a crazy people. We understand that, but like for the kind of normal people like the majority of the people they still think that way. The younger students, talented students a lot people tend to go to the larger Corporates.
Tim: It would be to have people be more comfortable with taking risks.
Tim: Yeah, I think I have go to agree with you on that. That would be one of the most beneficial things that can be done. Well, listen before we wrap up, is there anything you want to tell our listeners about Merry Biz, or about start-ups in Japan, about Leadership, about life in general?
Hiroki: Merry Biz is going to change the way Back Office is done. We are going to innovate. We are going to be leaders innovating that area. Also, like I am very passionate in the start-up world. I wan to really support the ecosystem in Japan. Anybody who is interested in Japan who wants to do a start-up, please come on, contact me right away. I want more people like involved with this so that we can go on in making this a more larger and exciting community.
Tim: Okay. That sounds great. Before the show airs let’s sit down, we will put together some really useful links. Put them up on the websites, so people can explore and get hooked up.
Tim: Thanks for sitting down with me. I really appreciate it.
Hiroki: Thank you very much.
We are back. In this environment of launch fast, quickly and pivot at the first sign of trouble. Hiro’s approach of going slow and building a deep relationship with an understanding of ones customers is an interesting one.
Now, Hiroki knows he is walking a knife edge. He has positioned Merry Biz to be a turn-key, low-cost replacement for an existing workflow, and has achieved some success in that way. However, he also knows that the position leaves him very vulnerable to true Disruption in the Market.
It leaves Merry Biz very vulnerable to technology that will eventually eliminate the need for that part of the workflow altogether.
Merry Biz has the customer relationships, and will have to be able to jump fast when the disruptive opportunity presents itself. To his credit, Hiro is visually watching for that opportunity.
I think we will get some interesting feedback on this one.
Please drop by to DisruptingJapan.com/show23, and leave your thoughts and let us know if you think Hiro and Merry Biz are behind the times or ahead of the curve.
When you drop by you will find all of the links and sites that Hiro and I talked about and much, much more in the resources section of the post.
Most of all, thanks for listening. Thank you for letting people interested in Japanese start-ups know about the show.
I am Tim Romero.
Thanks for listening to Disrupting Japan.