Open Innovation for Regaining SME Power in Japan
Prof.Kazuyuki Motohashi,The University of Tokyo

5th Article: The Contour of SME Management Required in the New Era

In this fifth and final article of the series, I would like to present what type of SME management is required in the age of Open Innovation and Ecosystem.

It is important for management to develop customers on an ongoing basis to ensure the continuation and development of the company's business. However, many SMEs have a limited scope of business (existing customer company) and it is difficult for them to come up with ideas for developing businesses that are significantly different from each other. The first step in open innovation is to redefine relationships with existing customers. What management needs in implementing these measures is a flexible, unconventional way of thinking.

Of course, it is also very important and necessary to "protect” by steadfastly making profit from existing businesses. However, it is very difficult to "attack" and "protect" at the same time. If a company has ample human resources, it is possible to assign the right person in the right position from within the management team. However, in many SMEs that do not have sufficient human resources, business owners/management themselves need to fulfill multiple roles, and it may be difficult to carry out these tasks effectively. On the other hand, SMEs do not have to expand their businesses as large companies do. Rather, by pursuing "personalized" innovation (monetization of technology) that other companies do not have, they can do it even with fewer resources while increasing their effectiveness.

What is critical here is to match potential needs with proprietary technology that are not available in other companies. The key is the creativity and ability to apply the technology to potential customers and industries. To that end, again, the first thing to do is to get a deeper understanding of your own technology. For example, it is necessary to thoroughly clarify the scientific principles of technology that a company considers to be unique. The first step in the next stage is to examine whether the company's technology has versatility, whether it could be used as generalized technology, that is not limited to existing customers or industries. (Please refer to the second article on Komatsuseiki Kosakusho Co., Ltd, where the company analyzed its own technology through industry-academic cooperation and transferred it to other industries.)

Based on this self-analysis, the company narrows down the target business fields and study the ecosystem movement in those industries. Then, it must gather a great deal of information through corporate networks within the same and different industries, as well as from regional support organizations and universities with industry-academia collaborations to narrow down promising fields for applying its technology. In particular, it is important to examine the trends of the leading customers (keystone company) who lead the overall industry. Furthermore, it is important to collect and analyze this information repeatedly to improve accuracy.

Amid intensifying changes in the business environment due to the globalization of economic activities and the progress of digitization, the future is uncertain, and the risks of conventional corporate management, which focuses on responding to the demands of existing customers, are only increasing.

In a world of open innovation and an expanding ecosystem, SME management is required to have the ability to formulate and implement innovation strategies from a broader perspective.

In this age of integration of technology and management, the ability to gather information and the scientific thinking process of innovation strategies are required of SME management.

How about taking the first step and start by analyzing your own company and redefining your customer relationships?

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