Japan’s Challenge: An Entrepreneurial Approach to Disaster Recovery
Taro Sato, Class 15
At midnight in my office on March 11, 2011, I gave up on going home and helplessly watched television reports on the earthquake and tsunami destroying houses, infrastructure, and people’s lives in Japan. Tears kept rolling down my cheeks. I could not believe that a disaster of this magnitude had happened in Japan. The next morning, still at the office, I was deeply moved by the footage of an old woman in a shelter joining her hands in prayer on her knees, in front of a rescue team. I was struck by her respectfulness and strength at such a time of crisis.
Two days later, I was in Palo Alto to participate in the third module of the Kauffman Fellows Program. Even though I knew that I myself could not do anything immediately to deal with the disaster in Japan, I had an intuition that this event could provide an opportunity for a “sea change” in the country’s innovation paradigm.
Known to be vertical and big-company driven, Japan’s industry structure was once a model for miraculous economic growth that led the country to become the world’s second (now third) largest economy. After the bubble economy burst in 1991, however, this strength became an obstacle to Japan’s adaptation to the dynamic changes in the global economy. In 2009, I established the Innovation Network Corporation of Japan (INCJ) out of my belief that the country still has deep potential in technology development and much to offer the rest of the world. With INCJ, I took up the challenge of introducing entrepreneurial innovation to Japan’s business arena; however, I was hampered by the widely shared mindset that “entrepreneurial innovation will not happen in Japan.” When the earthquake hit in 2011, I knew intuitively that this tragic event could be a cornerstone for Japan’s structural change.
Because I knew the value of the Society of Kauffman Fellows’ global network, I was convinced that I could introduce a new approach to Japan’s recovery process by leveraging that network. I sought an entrepreneurial path with global connectivity—an approach that seemed unlikely to be adopted by Japanese policymakers. With the image of the old woman praying in the shelter lingering in my mind, I was determined to find out if it is really possible to take a connective approach, and if so, how.
In this article, I consider traditional responses from the Japanese government to disaster assistance from both inside and outside Japan, and then present innovative ground-zero disaster responses that arose spontaneously after the earthquake and tsunami. Based on those innovations and on conversations with Kauffman Fellows, I close by suggesting a new disaster response model for those seeking to help.
Traditional Disaster Responses
The earthquake and tsunami on March 11 undoubtedly comprised one of the most destructive and tragic events in Japanese history. Required also to deal with the ensuing nuclear accident, the Japanese government responded slowly to the catastrophe, and confusion surrounded the process. It was not until July 29—more than four months after the quake—that guidelines for relief and reconstruction were officially adopted, and the $120 billion (¥9.2 trillion) supplementary budget took another three months to approve.
The government’s reconstruction plan, the Basic Guidelines for Reconstruction in Response to the Great East Japan Earthquake,1 mainly focuses on restoring the affected areas to their pre-disaster status quo. Recovery efforts are simply focused on actions that involve building temporary housing, disposing of disaster-related waste, and repairing essential infrastructure such as water, electricity, gas, transportation networks, farmland, and fishing ports.
The government’s guidelines do include some forward-looking measures—that are neither specific nor concrete. For example, they use vague phrases like “shaping disaster resilient regions,” “restoration of life in communities,” “revival of local economic activities,” and “introduction of renewable energy” without offering any details.2
Reconstruction policies for large-scale disasters in Japan often lack specifics because the national government, which is unable to identify particular community needs, usually develops the policies. Ideally, local governments and communities should lead recovery efforts as they can identify the community’s priorities, but they are often unable to because most of their functions have been suspended by the disaster. The Japanese government has yet to find a fundamental solution to this problem so that effective reconstruction plans can be created.
Significantly, the Japanese government does not consider the recovery process an opportunity to incorporate measures to foster innovation. Despite the fact that the government encourages the private sector to participate in reconstruction and introduces measures to encourage activities by nonprofit and volunteer organizations, these groups are seen as playing only a supplementary role to the public sector. Sadly, the word “entrepreneurship” does not appear a single time in government guidelines.
Assistance from the international community is also seen as a minor supplement to the Japanese government’s recovery effort, and there are no plans to integrate support from other countries into the recovery process. Similar to conventional business practices in Japan, the government has only considered options to “go it alone,” effectively isolating itself from the rest of the world; there is no awareness that looking outside the boundaries of the country through open innovation can help find effective solutions.
Innovative Disaster Responses at Ground Zero
In the past, Japan has used its confrontations with crisis as opportunities to propel entrepreneurship. After its defeat in World War II, young entrepreneurs like Sony’s founder Akio Morita and Honda’s Soichiro Honda helped the country rebuild from ashes to achieve remarkable economic growth. After the 1995 Kobe earthquake killed more than five thousand people, a young man from Kobe decided to quit a major corporation to start an internet electric commerce venture called Rakuten, which has since grown into a corporation with a market value of $13 billion.3 These facts raise hope that this time too, Japan can reinvent itself from tragedy.
Is the government’s reconstruction plan the only recovery path for Japan? To find out, I visited the devastated Tohoku region one month after the quake, meeting amidst the rubble with many business and community members from different generations and fields. I was touched by their courage and fortitude.
After those meetings, I was certain that there is indeed a more dynamic recovery path for the region and for the country as a whole. Four individuals in particular made a strong impression.
Shinta is a 17-year-old high school student who was surprised by the gap between the reality of needs in the Tohoku region and the presentation of those needs in the mass media. In response, he formed a bicycle group that visits the shelters one by one, asking evacuees what they need. Volunteers then upload the information to a website he co-created with a nonprofit organization in Tokyo, and people who read the website can provide appropriate help.
Originally from Sendai, Hanae is a 23-year-old Master’s student at Tohoku University. She established a student volunteer organization during spring break despite the fact that only limited infrastructure was available.
With an energetic and dynamic personality, 33-year-old Kazuma has become a central hub for local and outside nonprofit organizations (NPOs) working in the Tohoku region. His own local NPO provides college students with internship opportunities, and he is very influential among people in their 20s. The information he obtains through this network has also helped him become a central figure in nongovernmental rescue operations.
A junior member of Tohoku Innovation Capital (the only venture capital organization in the region), 36-year-old Tomo decided to take the risk of leaving his stable job after the disaster to set up his own venture firm. He holds a PhD in life science from Tohoku University and acts as a central hub for young businesspeople in the region. Tomo is determined to bring recovery to Tohoku, and recently helped establish a microfinance fund.
These young individuals’ compassion and determination to contribute to the recovery process through entrepreneurship is inspirational. I believe that by empowering people like these, we can introduce a more human-centered, innovation-driven, and agile reconstruction path than that offered by the public-sector approach.
Having said this, many young people in the Tohoku region are undoubtedly facing difficult situations as even before the crisis, Tohoku was one of Japan’s poorer regions. The business environment in the area is traditional and seniority is still regarded as important; therefore, many people in the “establishment” do not recognize that young people could play an important role in the recovery process, and are denying them the opportunity to help. Many young men and women are open to any input and feedback they can get, but unfortunately they only have access to local mentors.
One positive outcome of the catastrophe is that the younger generation now feels closer and more open to the rest of the world, thanks to the surge of goodwill and assistance from the global community: 163 countries and regions and 43 international organizations offered disaster-relief assistance to Japan.4 The quantity of donations and relief supplies that poured in along with warm messages from private companies also far exceeded people’s expectations. Tomo, for example, feels that to repay the generosity the Tohoku region has received, it is now their mission to connect with the rest of the world in the process of rebuilding. Unfortunately, Japanese policymakers have so far overlooked the potential that this closer relationship to the world offers among young people.
A New Model for Disaster Response from Abroad, at Ground Zero
I feel privileged and proud to offer the following model based on my interviews in Tohoku and the advice and feedback I received from the Fellows of Class 15. These recommendations are of course grounded in Japanese culture and the situation in Japan, but nonetheless offer a useful perspective for those in other parts of the world.
Identify a Local Leader
As the disaster has filled people’s minds with negative thoughts, it is important for a local leader to be able to empower capable individuals to regain the courage to pick up their lives while spreading an entrepreneurship-driven culture. It is essential that a leader be in position to not only gain trust from the younger generations, but also from conservatives with traditional values.
Equip that Leader with a Professional Understanding of Capital Formation
Whether the entrepreneurial business is for-profit or non-profit, the leader must have a high degree of professional skill and an understanding of the “science of capital formation,” or the benefit of forming capital around talents. The Kauffman Fellows Program teaches that to make the most of capital, one should align interests among the people involved with a project as well as generate trust among them. The art and science of capital formation is the engine to make things happen—even if a business is started with good intentions, it cannot deliver results and create true impact without knowledge of capital formation.
Provide the Leader with High-Quality Global Connectivity
Natural disasters often occur in rural areas that are not equipped with the resources to respond; in addition, young local leaders are often ignored by conservatives in the community. If a young leader can draw on resources from the global community through a network based on trust, and utilize those resources in recovery projects, they may gradually gain recognition and inspire people to join in and help—creating significant impact. Such resources can be in the form of knowledge and experience, such as advice helping to identify the right persons with whom to do business.
Conduct Academic Research with an Analytical Framework
It is rare for persons playing an active role in a chaotic recovery process to be able to objectively assess what they are doing. Therefore, it is imperative to objectively evaluate projects using a global analytical framework so that lessons can be passed on to other parts of the world and future generations. Ideally, local universities will play an important role in such research.
After this model is adopted in Japan, it can be shared and adapted to future disaster recoveries in other parts of the world. I would like to start a project to analyze Japan’s experience using a global academic framework, so that these lessons can be shared across the world.
I believe the Society of Kauffman Fellows will play an extremely important role in implementing this model universally. The Society network can be utilized in introducing an agile disaster-recovery process, and sharing and incorporating that experience into future measures around the world adds value back to the network.
Lastly, I would like to extend my deepest appreciation to the Center for Venture Education board for its generosity in accepting Tomo Takei, one of the leaders I selected from the Tohoku region, as a Kauffman Fellow of Class 16 on full scholarship. At the end of June 2011, Tomo left the local venture capital firm, which was dominated by seniority, to launch his own firm that supports entrepreneurs contributing to the Tohoku region’s recovery process; he is currently raising funds. The Kauffman Fellows Program and the Society network are teaching him world-class skills and know-how in capital formation, and providing him with the opportunity to connect with high-caliber attendees from venture communities around the world.
Taro directed the planning and establishment of the Innovation Network Corporation of Japan (INCJ), a private-public funding scheme with $9 billion to invest in areas of cleantech, life science, and high-tech. He seeks to restructure the “ecosystem of innovation” in Japan, believing the country still has a deep potential in technology development and a lot to offer to the world. At INCJ Taro is establishing a platform to facilitate cross-sector cooperation in business building through forming partnerships. Previously, Taro worked in policy-making at the Japanese Ministry of Economy, Trade and Industry, building an extensive network in Japanese industries. Taro holds a Master’s degree in public administration from the Kennedy School of Government at Harvard University and a Bachelor’s in economics from the University of Tokyo.
1 Provisional English translation available from Reconstruction Headquarters in Response to the Great East Japan Earthquake website: http://www.reconstruction.go.jp/english/pdf/Basic%20Guidelines%20for%20Reconstruction.pdf.
2 Ibid., 2, 14, 19, 23.
3 Bloomberg Businessweek, “Rakuten Inc. Stock Quote and Company Profile,” http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=4755:JP.
4 Ministry of Foreign Affairs of Japan, “Emergency Assistance From Overseas,” in Great East Japan Earthquake (Details), http://www.mofa.go.jp/j_info/visit/incidents/index2.html#assistance.