Digitalizing trade

One of the companies is Trade Waltz Inc., which aims to digitalize paperwork for international trade around the world, starting in Asia.

Paperwork remains an essential part of trade, which involves not just private-sector companies, such as trading houses, manufacturers, logistics firms, banks and insurers, but also governmental bodies, including customs authorities. Computerization has been on the rise in recent years, but companies need to manually input the information carried in the documents they receive into their systems. This process, which is like a game of telephone on a grand scale but using written documents, takes an enormous amount of time. Trade Waltz’ namesake system takes over the processing of international trade paperwork by making use of blockchain technology.

METI supports the company’s efforts in a variety of ways, and in May 2021 an initiative to connect Japan’s customs-processing systems with those of Singapore, Thailand, Australia and New Zealand was announced during official multilateral talks.

Countries in Asia, including Japan, typically have similar issues and an environment where they can adapt existing programs. On the other hand, high-tech has remained unexplored territory for these countries, which fortunately means it offers “the best stage where (countries) can work together to launch new businesses on an equal footing and bring about open innovation,” said Satoru Someya, director and head of the CEO’s office at Trade Waltz.

Since the region’s systems remain underdeveloped and have few examples to build on, the ideas and sensibilities of young people who can think outside the box are required, which means there are plenty of opportunities for them, according to Someya.

High-quality health care

Another company is Medring Co., which aims to make affordable health care available to all people in Asia.

In Vietnam, access to health care is unevenly distributed. This situation is attributed to the uneven quality of medical services, which has led to distrust of regional clinics. This, in turn, prompts many patients to go to large hospitals. This just makes the situation worse, with health care workers concentrated at large hospitals with many patients. Aiming to help equalize the quality of health care across regions, Medring has set up a clinic that offers high-quality medical services at low cost by combining Japan’s medical know-how with digital technologies, such as artificial intelligence.

The initiative is being supported by METI via the Asia Digital Transformation program and has been adopted by the Japan External Trade Organization (JETRO) as well. At an October 2020 signing ceremony during Prime Minister Yoshihide Suga’s visit to Vietnam, Medring, the only startup in attendance, signed an agreement memorandum with Japan Vietnam Health Bridge Co., which operates a health care business there, to support the operation of smart clinics.

Medring is collecting medical data using digital technology, including online diagnosis and electronic patient records, to develop an AI-based diagnosis service. Emerging Asian countries are often open to introducing AI and have no strict rules on the handling of diagnostic data, due in part to undeveloped health care systems. Partly because there are many growth markets in Asia, “It’s easier to create new businesses using digital technology in Asia’s emerging countries, rather than in Japan, and there’s more growth potential (in such countries),” said Kazuma Abe, director and CEO of Medring.

“Cocreation with local partners is a must” in expanding business in local markets, Abe said. “They are versed in local laws and regulations, as well as business practices, and can provide us with important know-how for expanding business in their regions.“

Government support

To support the Asia DX projects, METI is making the necessary arrangements with overseas governments, operating an online match-making service, holding webinars and supporting joint trials conducted by companies through JETRO in the emerging economies of Asia, as well as in Japan.

For more information about the Asia DX initiatives, visit the following websites:
METI Asia DX projects
https://www.meti.go.jp/policy/external_economy/adx_project/index.html
JETRO’s DX portal
https://www.jetro.go.jp/jdxportal/

The plan was created by Fermenstation Co. The startup manufactures highly pure ethanol from organic rice grown on formerly unused rice paddies in Oshu, Iwate Prefecture, that is used to make final products such as materials for cosmetics and other items. The company’s technology traveled on the train through stations in the Tohoku region, as if to embody its name, a portmanteau combining “fermentation” and “station.”

Value of unused resources

Fermenstation operates on a business model in which unused resources from the production process are recycled. Through its business, byproducts from the ethanol production process are turned into chicken and cattle feed. In turn, their manure is used on the rice paddies and other farms. Rice is not the only material from which ethanol is extracted. The substance can come from the production processes of some other food and drinks. The restaurant train project symbolizes an aspect of Fermenstation’s business.

“What we’re trying to do is to put resources that remain unused in society to effective use by using them to produce ethanol and sediment left from fermentation,” Fermenstation CEO Lina Sakai said. “We want to develop an ultimate recycling model through this process.” She is not originally from Tohoku, nor did she initially have anything that linked her to the primary industry.

Sakai is from Tokyo, and she was working in the financial industry when she learned of a technology to turn compostable waste into fuel. To learn about fermentation technology, she enrolled in the Tokyo University of Agriculture while in her 30s. While there, she met a mentor who happened to be conducting a joint research project with the Oshu municipality in Iwate Prefecture, which gave her a chance to visit the region repeatedly, leading her to eventually start the business there. Although she successfully developed the technology to extract highly pure ethanol from rice, she gave up an idea of turning it into a commercial fuel product as this turned out be an unprofitable proposition. Still, she was determined to find widespread use for the technology that she put so much effort into developing. She launched the business in 2009 to take over the project with an aim to use the rice-derived ethanol as a material for cosmetics production. Behind her passion was a conviction that an age of circular economy was going to be here to stay.

Takeuchi: It’s been 10 years since we last had time for this kind of discussion. Your company has grown so much during this period, hasn’t it?

Nishikawa: Fourteen years ago, Preferred Infrastructure — now PFN — was created by six people, including team members from an international programming competition, as well as my university friends.

We established PFN in 2014 to take advantage of our real-time machine learning technology that focused on the “internet of things.” We are now fortunate enough to have about 300 employees.

Takeuchi: Wow, six of you started the company and it now has 300 employees. That’s impressive. (PFN co-founder and Vice President Daisuke) Okanohara was in MITOU. Do any other former MITOU participants belong to your company?

Nishikawa: We have at least 13 MITOU “graduates.”

Takeuchi: I think that may be the largest number of MITOU graduates now working for a single Japanese company. You have grown the company through identifying outstanding individuals and putting them together as a working team. I think that deserves praise.

I’ve been involved in MITOU as senior project manager. I notice many applicants mention they “did an internship at PFN.” What does it take to successfully join your company?

Nishikawa: First of all, we look for someone who is knowledgeable about computer science. We are divided over whether we should give a coding exam to applicants, but in my opinion, we should. That’s because I think it’s important to find out not only whether a candidate understands theory, but also if they can also practically apply said theory.

For applicants who interned with us over a two-month period, we review how they performed during their internship to find out how they identified issues and how they addressed challenges.

Without strong startups, it is impossible for Japan to win in this intense innovation competition and see economic growth. To support companies facing such challenges from an intellectual property standpoint, the Japan Patent Office (JPO) established the Startup Support Team last July, and have released startup support measures in rapid succession.

Intellectual property strategy

At the end of August, executives of startup companies gathered in Kasumigaseki in Tokyo’s Chiyoda Ward. They were from 10 companies that were selected to receive support from the JPO’s IP Acceleration Program for Startups (IPAS). All were companies gaining attention for their original technologies and business models such as Axelspace Corp., known for the design and development of microsatellites and aceRNA Technologies, which has developed a cell sorting technology.

IPAS was launched to support the startups in building IP strategies for accelerating their businesses. Specialists from various fields formed IP Mentoring Teams and were sent to companies for a given period of time.

In order to develop businesses based on technology or business models and exercise competitive superiority, various intellectual property strategies are needed, such as filing and obtaining patent rights or protecting against imitation by keeping the information within the company, as well as accumulating know-how at the same time.

In addition, appropriate management of intellectual property could lead to recognition for collaboration with large corporations and fundraising.

However, compared to foreign startups highly aware of intellectual property management, quite a few startups in Japan are unable to take concrete actions due to limited management resources, in spite of recognizing the need for intellectual property management.

To address this, the program aims to grow businesses by bringing companies and specialists together to build strategies in which management and IP perspectives are integrated.

“It’s necessary to improve supporting measures focusing on venture companies and create an environment where innovations will constantly take place,” according to the government’s Intellectual Property Promotion Plan adopted last June. It noted that “existing support measures for small and midsize businesses do not sufficiently deal with challenges unique to venture companies.” As to the future direction, the plan also mentioned the need for new supporting measures dedicated to startups.

Realizing speedy reviews

What are challenges unique to startups? How they can acquire rights with the necessary speed to keep up with technological evolution constitutes one factor to provide rapid and flexible management.

As one of the measures to accommodate needs “to secure acquisition of rights before anyone else,” in July 2018, restrictions were eased for “super-accelerated patent examinations,” which allow for faster office action processing than regular accelerated examinations.

Although this system requires that a patent applicant must have an application already filed with a foreign patent office, it has been modified for startups to use the system when the invention is in practice or commercial use, without the submission of a foreign patent application. With this system, initial processing of office actions, which used to take an average of nine months in fiscal 2017, are expected to greatly shorten to an average of 0.8 months.

At the same time, to support startups with limited experiences in patenting for an early acquisition of rights, a new system went into effect. This system offers an interview with an examiner who is able to give detailed advice for patenting during the process of regular accelerated examination. Through this system, initial office action processing in fiscal 2017 was completed in an average of 2.3 months.

IP community for startups

The JPO has come up with innovative support measures such as IPAS, super-accelerated examinations and compiling collections of intellectual property strategy examples.

What they envision after these series of measures is the formulation of a “startup intellectual property community.” In December, a membership networking site IP Base was launched as a base for various activities and to encourage social interaction among startups, venture capitalists, accelerators and IP experts such as patent attorneys and lawyers.

For participants including startups and relevant people, as well as specialists, it plans to host study sessions in different themes such as artificial intelligence and biotechnology.

“We want Aizu to produce global enterprises like Google LLC and Apple Inc.,” said Masayuki Hisada, director of Aizu Laboratory Inc., based in Aizuwakamatsu, Fukushima Prefecture, at a Japan Patent Office symposium on IP, information technology and startups, held at his alma mater, the University of Aizu on Jan. 22.

His company developed a service to monitor the elderly using blockchain technology, as well as a system to control electricity via smart plug. The firm is now involved in a test of self-driving cars on public roads in Namie, Fukushima Prefecture. Though Namie’s evacuation order was partially lifted at the end of March 2017, progress in returning the residents remains slow.

The recent test run of self-driving cars is meant to lead to the swift recovery of public transportation services, while providing a new means of transportation to local residents.

Shinichi Kaneyama, chief and assistant director of Namie’s Planning and Finance Division, said, “We want to attract more companies through providing various innovation test fields.”

Aizu Laboratory conducts business that uses innovative technologies to solve social issues. Key in the choice of Namie for the company’s location was the emergence of a local startup ecosystem.

The University of Aizu specializes in computer science and is giving birth to startups and venture companies in various areas, including advanced technologies such as the “internet of things” and virtual reality.

Those enterprise challenges are boosted by an alliance between industry, the government and academia. Aizuwakamatsu’s industrial promotion policy through information and communications technology is also behind this trend.

Hiroyuki Oka, a senior associate professor at the University of Aizu’s Revitalization Center, is involved in IP management for local companies and academia-business collaboration support. On temporary assignment from the Japan Patent Office to the university, Oka stressed the importance of IP-conscious company management.

“IP is a lubricant and driving force for the locale, companies and universities to collaborate and proceed to the next stage,” he said. Evidence of this can be seen as new industries are now sprouting up throughout Fukushima Prefecture.

Patents as ‘weapons’

Some manufacturing companies are using patents as “weapons” to succeed in entering growth areas.

One example is Syntec, headquartered in the city of Iwaki. Originally involved in the development of memory devices for industrial computers at Hitachi Ltd., Syntec President Kazumi Akatsu established his technology venture in 1996, employing about 20 people. Syntec has been aggressive on IP strategy as it has submitted 15 domestic patents to date, of which 12 have already been registered.

The company had been earning stable profits from cellular phone antennas and radio wristwatch antennas. However, an incident occurred in the mid-2000s after they had successfully developed a unique antenna technology, following a consignment from a major partner to do so. The technology leaked during the mass production phase and the business partner decided to produce the antenna on its own. This resulted in Syntec suddenly losing its orders. Akatsu regretted placing too much priority on development and not acquiring patents beforehand.

After this bitter experience, Syntec began conducting an IP-oriented approach to business. It entered the medical equipment field by capitalizing on its unique twisted wire processing technology to develop dental braces and medical internal fixation cables connecting bones and other parts of the human body, such as artificial tendons.

Syntec was hit by the Great East Japan Earthquake shortly after it began research and development on medical equipment. Although its facilities were destroyed in the disaster, Syntec restarted its plant two months after the earthquake, and established an industry, government and academia collaboration together with Fukushima Medical University among other partners.

“I cannot deny that in the beginning we blindly submitted patents, and I realize that doing so was inefficient,” Akatsu said.

Currently, Syntec seeks advice from patent attorneys and other specialists and receives multifaceted support from the initial stages of R&D and product planning, in addition to the support when they submit a patent. By using a “patent map” that sorts out and analyzes patent information, the company is able to keep its R&D focus on areas where it has few competitors.

Encouraging the birth of IP

In Fukushima, conditions are ready to facilitate the emergence of IP. In the Hamadori area, the Fukushima International Research and Industry Development Project (Fukushima Innovation Coast Framework) that seeks to nurture the robot and energy industries, as well as the Fukushima Renewable Energy Institute, which belongs to the National Institute of Advanced Industrial Science and Technology, play central roles in putting next-generation technologies into practical use.

IP is essential to innovative technologies and making IP adequately into an exclusive right is expected to lead to further innovation. The test run of Aizu Laboratory’s self-driving car in Namie is also subsidized with money allocated in line with the Fukushima Innovation Coast Framework.

The government thinks the power of local small and midsize corporations is just as integral as research institutions and large companies to help promote the Fukushima Innovation Coast Framework. Patent registration fees for small and midsize companies in the Hamadori area will be reduced a further 25 percent to a quarter of the regular fee, from April, to help such companies with their business.

Upon establishing an environment for true independence and reconstruction of the disaster-affected areas, IP’s potential is growing.

A teacher standing in front of a blackboard oversees a large class — this image of the typical classroom has persisted for more than 150 years since the Meiji Era.

Daisuke Inada, CEO of atama plus Inc., which provides study support through artificial intelligence, says he wants to drastically transform this long-lasting image. He jointly founded the company, based in Tokyo’s Chuo Ward, in April 2017 with two of his classmates from his alma mater, the University of Tokyo, after working at a major trading house.

The company offers an approach that utilizes AI to analyze a customer’s learning history, degree of concentration and propensity for mistakes on a real-time basis. This enables the firm to provide customized learning materials for each individual. Although the service has only been around for a year or so, it has been increasingly utilized by major private preparatory schools.

The advantage of using AI is being able to unfailingly identify the root cause of why a student is unable to solve a problem. For example, the sine formula is something first-year high school students tend to struggle with. People generally believe that simply solving similar problems over and over would eventually lead to overcoming their struggles. However, the reason behind this difficulty varies among students.

One student was told through the service that the reason of failing to solve a sine formula problem was their lack of understanding of what a triangle’s circumcenter is, which is necessary preliminary knowledge. The student went on to be advised that it’s efficient to review the Pythagorean theorem, which is taught in junior high school. The company says if a student works on solving problems for a while, its AI can figure out their strong and weak points, as well as the student’s level of understanding.

Inada hopes to halve the required time for basic learning through the company’s service and to enable students, using the surplus time, to nurture abilities to live independently in the future society. He thinks teachers would be able to play a primary role such as encouraging and taking care of students, without having to engage in a one-way lecture, if AI and humans share roles; with the former committing to teaching and the latter to coaching.

Winning hearts of test-takers

Affectionately known as “stapura,” a portmanteau of “study” and “plus,” and popular among students preparing for entrance exams, Studyplus Inc. based in Tokyo’s Shibuya Ward offers an education-related app. The company is famous as a platform provider for such students with more than 3 million users.

If a student types when and how much they studied, as well as reference books they used into the smartphone app, those pieces of data would be visualized with graphs showing daily, weekly and monthly records. On first glance, it merely appears to be a digitalization of one’s study history, which used to be recorded manually. However, the company’s service has various features to grab the interest of the digital native generation whose smartphones are always with them.

One of them is the utilization of social networking services (SNS). Some users have said that they would like to boost their motivation by actively interacting with students aiming for the same schools, rather than with close friends, as they prefer not to discuss such topics with them. To meet this demand, the company enhanced its SNS functions, leading to a sharp increase in its app’s users. Additionally, increasing numbers of cram schools and private preparatory schools have used the service, hoping to keep tabs on their students’ study progress at home.

“All in all, what matters is motivation.” This phrase that came up frequently in conversations that Studyplus President Takashi Hirose had with his friends when he was a student preparing for entrance exams. These conversations served as the origin of the development of the service.

“In conventional education, viewpoints from the teaching side were stronger and students’ individual characters and differences among them were not taken into consideration,” Hirose said. “If technological help is introduced, a proactive learning style would take root among students. How to fuel motivation will be a key in the process.”

Talents in programming

Based in Tokyo’s Minato Ward, Life is Tech Inc. is a company leading a new market of programming education. The firm currently focuses on developing online learning services in addition to its core business of operating camps and schools where junior high and high school students study programming and IT.

One of the products resulting from the company’s efforts is a set of educational programming materials that launched in April. The firm signed a license agreement with The Walt Disney Co. (Japan) for these materials, which feature an enhanced taste of entertainment to raise the continuity rate — a challenge of online learning. The product features works to maintain user interest here and there, including popular Disney characters who appear in its lessons and the “Book of Magic,” provided offline that works with the online content and stories.

It has sold well, despite costing ¥128,000, which is by no means inexpensive. Not all of the purchasers have prior experience with programming. However, according to the company, some consumers believe it’s actually a bargain if it’s viewed as an investment since they can enjoy learning programming, a beneficial skill for their futures.

Superheroes in IT field

Life is Tech was founded in 2010 by CEO Yusuke Mizuno, who used to work as a part-time teacher at private Kaisei Senior High School in Arakawa Ward, Tokyo. It is one of the well-established companies among edtech startups.

What led to the launch of the company was an inquiry from one of his students at the high school, who said, “I’d like to create and introduce a self-built game at the school’s cultural festival.” Mizuno thought there must be a similar number of students who like computers and IT as those who are fond of baseball or soccer, but there were no places where they can learn or opportunities to take chances in those fields.

Mizuno has worked on expanding the base of personnel in programming. “We need a system to produce superheroes in the IT industry — something like we see in the baseball world where there is a path to go professional following a successful career at Koshien,” he said. Koshien is a famous national baseball tournament for high school players held at Hanshin Koshien Stadium in Nishinomiya, Hyogo Prefecture.

Eight years after launching his company, he feels social changes surrounding programming education, which has led to the expansion of his company’s businesses. Besides the introduction of compulsory programming education at elementary schools in the near future, close proximity to IT — thanks to the widespread use of smartphones — has spurred on motivation among students to learn.

At the Teens Apps Awards contest where junior high and high school students compete in developing smartphone applications, many students who participated in the camps organized by Life is Tech have won prizes.

Many students have come to share awareness and sentiments such as, “I’d like to do it by myself,” and “Programming is not a special skill.” According to the company, this occurs after they actually see their peers in the same generation solving problems faced by family members or have come to bring their everyday ideas into being, with the help of technology.

A market of $40 billion

According to American consulting firm Frost & Sullivan Inc., the average annual growth rate of the edtech market is estimated to be 18.3 percent. The market revenue is expected to grow to over $40 billion.

Some people point out that Japan lags behind, especially in introducing technology to public education. However, Inada of atama plus said: “It’s the same anywhere in the world in that it takes time to transform the classroom. Once the national strategy becomes clearer, Japan would rather have more rooms to have explosive growth in introducing such technology.”

Mizuno of Life is Tech has his eyes on developing the service overseas, noting, “High-quality Japanese educational materials have been well-received in the U.S.”

Japan has embarked on educational reform, adding the promotion of edtech to the government-led initiative of the so-called human resources development revolution. The edtech market has been driven by fledgling startups, but these days, major firms are active in mergers and acquisitions in this field. Edtech is possibly about to kick into gear after going through this period of growth.