We have touched upon the Japanese side being challenged with internal buy-in/alignment for Australia, and the Australian side on the “customized approach” to Japan or Japanese corporates. While these issues can be anticipated and planned for, unexpected situations always arise. Hence, the actual engagement will become a valuable experience for understanding each other. This Part III (the final part in the series) intends to put a spotlight on how Japanese corporations can engage with Australian universities and research institutes. These institutions offer a wealth of untapped potential and represent a rich source of capabilities Japanese corporations can leverage off, and frankly less explored at this stage.

The wider objective of this piece is our contribution to a conversation about increasing the A-J innovation success cases in the Australia-Japan corridor. Specifically, IGPI shares some of its observations of how Japanese corporates can engage or partner with Australian universities and research institutes – these could be in the forms of straightforward research relationships all the way to commercialization initiatives.

1. Quick Recap on Part I and Part II

Throughout the article series, we have touched on the changing nature of “What” and “Who” Japanese corporations are collaborating with in the Australia-Japan corridor. We explored the capabilities of the broader Australian innovation ecosystem, including universities and research institutes.

However, we also highlighted that both Japanese and Australian sides need to prepare internally before engaging. For Japanese corporations, this involves internal alignment between headquarters and the local arm. For Australians, it means developing a customized Japan strategy to understand and overcome cultural or communication barriers.

You can find Part I can be found here and Part II here.

The next question is “how,” or in other words, the “actions” to take for collaboration.

2. Engaging and Partnering with Australian Universities for Industry Collaboration

It is first important to note that it is common for Australian universities to have a dedicated department for managing industry collaboration and IP-related matters (e.g. commercialization). These departments are generally known as “Technology Transfer Offices” or TTOs¹.

TTO is a general term, and some universities might call it an “Industry Engagement Office” or something similar. TTOs are a crucial point of engagement for any industry partner, regardless of whether they have existing connections with university faculty. This is because the university’s IP management and contractual matters will ultimately be handled by the TTO. Therefore, establishing a holistic relationship with the university early on is important and beneficial.

From the Australian perspective, identifying the right contact within a Japanese corporation is essential. However, this is easier said than done since, unlike Australian universities with their standardized TTO function, Japanese corporate structures vary significantly. To get started, having a Japanese engagement specialist is helpful. If this expertise is not accessible internally, then engaging with government bodies (like Austrade in Japan) or ecosystem participants (like IGPI) can be a strong starting point for your Australia-Japan innovation journey.

Once you know who to contact, the next step is exploring engagement and partnership options. Here are some collaboration methods Japanese corporations and Australian universities can potentially explore (but not limited to):

2.1. Example of Mode of Collab. # 1: Contract Research

Contract research offers a tailored approach for Japanese corporations to access expertise from Australian universities on specific research topics. This could include, consulting, evaluations, lab services, or independent research projects². The scope is flexible and can range from simple research outsourcing to joint research projects led or supported by the university. However, contract research is generally considered a transactional engagement rather than a long-term partnership, though it can be a stepping stone. It’s a valuable way for Japanese corporations in Australia to gain first-hand experience with a university’s research capabilities.

2.2. Example of Mode of Collab. # 2: Center of Excellence (CoE)

Center of Excellence (CoE) is a generic term referring to hubs that have specialized units (or individuals, or even collaborations between organizations) focused on a particular area of expertise³. While not exclusively research-focused, CoEs can be instrumental in driving business or industry transformation.

There are already examples of CoEs in Australia with Japanese participants.

Unlike contract research, a CoE represents a deeper commercial and technical collaboration on a focus area between the partners.

2.3. Example of Mode of Collab. # 3: Intellectual Property (IP) utilisation

Compared to the previous examples, utilizing intellectual property (IP) offers a more direct and relatively immediate path to commercialization. There are several ways universities utilize IP, and Japanese corporations could be involved with⁵:

Methods [1] and [2] are straightforward in concept. However, spin-offs can involve Japanese corporations co-establishing the spin-off, also known as “Joint Venture Spin-off / Spin-out” or JVSO. While not uncommon, JVSO offer practical advantages. The industry partner becomes a part-owner and can influence the entrepreneurial mindset and commercial direction of the spin-off. It could also benefit the venture’s credibility and stability with the support of the industry partner too⁶.

These are just a few examples of how to engage and partner with universities or research institutes. The most suitable method will depend on each partnership’s objectives, timing and situation.

3. Bridging the Gap in Australia-Japan Innovation – What is the Gap to Fill?

In this article series, we have covered the bottlenecks on the Japanese and Australian sides, and explored various forms of engagement or partnership the two parties can action. But it is important to note that there is a critical gap to be addressed for innovation to reach the real-world, this is commonly known as the “Innovation Valley of Death” (hereafter Valley of Death).

The Valley of Death refers to the timing where public funding (i.e. university funds) for research decreases, but there isn’t enough private fundings (i.e. industry partner support) to reach the minimum investment level needed to sustain the initiative⁷.

Graph 1: Idea to Value – The Innovation Valley of Death⁸

Here is a simple scenario to illustrate the Valley of Death:

The above is an example where R&D is run by a separate entity (i.e. university). However, the same principle applies to internal corporate R&D and new business creation cases as well. For example, the initial R&D might be conducted, but further for scaling could be withheld due to core the business being prioritized or facing challenges that require those funds.

Also, it is noted that Australia is experiencing “publishing inflation”, where researchers are prioritizing the number of papers published over the impact of that paper/research⁹. This suggests an entrepreneurial mindset focused on commercialization might be lacking or not prioritized. While university professors and TTOs are aware of this issue and working to address it, change cannot happen overnight.

Despite these challenges, it is critical to outline that a smooth transition from the R&D to scaling / commercialization, enabled by sufficient collaborative funding or support is a vital requirement for any innovation to succeed.

For specific/apt Australian innovations that may appeal to Japanese corporations – to avoid the Valley of Death, several factors are crucial. The “Why?”, “What?” and “How?” of the Australian innovation must be (i) well-defined within an international context and (ii) discovered and identified by the right audience (e.g. Japan Inc.) and (iii) aligned with the right market situation and timing. And this is where IGPI Group can add value.

4. How Can IGPI Group Help Bridge the Gap in Australia-Japan Innovation?

IGPI Group has been working with universities and corporations in Japan to address this issue of innovation commercialization by setting up a subsidiary entity “Advanced Technology Acceleration Corporation”, in short ATAC.

ATAC’s focus is being the bridge to support universities and research institutes, start-ups and Japanese corporations to perform hands-on incubation of cutting-edge technologies, bringing them to the real world based on market needs.

Figure 1: Diagram on ATAC’s support¹⁰

So far, IGPI Group has executed these initiatives for both Japanese corporations or individual Japanese universities. One example is a joint initiative with Toyota Motor Corporation to establish the “Innovative Technology Acceleration Platform” or ITAP, which collaborates with University of Tokyo’s School of Engineering, Tokyo Institute of Technology and Nagoya University on technology incubation¹¹.

Figure 2: Toyota Global Newsroom¹²

Another example is a joint initiative with Nagoya Institute of Technology called “Nagoya Institute of Technology Expansion Platform” or NITEP, which specializes in incubating and commercializing the university’s expertise¹³.

These are just a few examples from Japan, but symbolizes a strong commitment to hands-on incubation and bringing innovation beyond the labs and to the real world through collaboration—literally “Bridge the Valley of Death”. IGPI Group has developed a deep-rooted understanding of innovation ecosystem and incubation processes and we see strong potential for applying our learnings in the Australia-Japan corridor too.

If you are an Australian university or research institute or an Australia corporation that has the ambition of building new businesses through Australia-Japan innovation, we will be glad to have a confidential conversation. IGPI provides highly customized business advisory to its diverse range of clients, including but not limited to:

    I. Building your “for Japan” or “with Japan” strategy
   II. Capability statement prioritization based on needs/wants of Japan Inc.
  III. Market assessment for specific research initiatives x Japan as a market or Japan Inc.
   IV. Strategic partner/capabilities search x Japan
    V. Commercial negotiations support
   VI. Other custom hands-on support (for/in Japan) etc.

To find out more about how IGPI Group can provide support for businesses, browse through our insight articles or get in contact with us.  

Data Sources

1 Knowledge Commercialisation Australasia – https://techtransfer.org.au/ipc-training/commercialisation/who-participates-in-commercialising-universities-ip/
2 University of Melbourne Contract research – https://research.unimelb.edu.au/partnerships/collaborate/research-collaboration/contract-research
3 Catalant Everything you need to know about CoE – https://catalant.com/coe-everything-you-need-to-know-about-centers-of-excellence/
4 The University of Queensland – https://smp.uq.edu.au/research/research-centres/arc-centre-excellence-quantum-biotechnology
5 Knowledge Commercialisation Australasia – https://techtransfer.org.au/ipc-training/commercialisation/commercialisation-pathways-and-vehicles/
6  J-Stage Articles – https://www.jstage.jst.go.jp/article/jsmeicbtt/2002.1/0/2002.1_77/_article/-char/en
7 Idea to Value – https://www.ideatovalue.com/inno/nickskillicorn/2021/05/the-innovation-valley-of-death/
8  Idea to Value – https://www.ideatovalue.com/inno/nickskillicorn/2021/05/the-innovation-valley-of-death/
9 The Age: We’ve hit peak science, and that’s not good https://www.theage.com.au/national/we-ve-hit-peak-science-and-that-s-not-good-20240116-p5exkb.htmll
10 ATAC website – https://igpi-atac.co.jp/
11 Toyota Global Newsroom – https://global.toyota/en/newsroom/corporate/37000298.html
12 Toyota Global Newsroom – https://global.toyota/en/newsroom/corporate/37000298.html
13  IGPI News – https://www.igpi.co.jp/2020/07/28/news_20200728/

About the authors

Mr. Rachit Khosla is the Country Manager of IGPI Australia. Rachit is a seasoned strategy consulting professional with over 14 years of experience in leading and executing market entry and growth strategies (both organic and inorganic) and open innovation engagements for Fortune 500 businesses and large MNCs across the Asia Pacific. He has advised clients in a diverse range of industries, including automotive, fin-tech, industrial and manufacturing, med-tech & healthcare, smart cities, construction materials, travel, IT & telecommunications to name a few. Rachit was the former Country Manager and Director for YCP Solidiance (now Japanese-owned) and Founder and CEO of an online B2B marketplace startup for professional advisory services focused on Emerging Markets.

Mr. Kaoru Shingae is a Consultant at IGPI Australia. Prior to joining IGPI, Kaoru worked at Toyota, BMW and Boston Consulting Group, primarily specializing in the Automotive and Mobility sector and with exposure to wider industrial sectors. Kaoru has both internal and external strategy experience with a deep understanding on ‘What’ is most important for all stakeholder’s future. He has end-to-end experience from corporate and enterprise-level planning to all the way down to operational planning. Kaoru is a holistic all-rounder who engages with both strategic and operational stakeholders throughout the company. Past achievements include crisis turnaround plans, long and mid-term vision plans, CEO’s company goal plans and sales & market operational plans plus delivery, to name a few. Kaoru has graduated from The University of Melbourne with a Bachelor of Commerce.

Ms. Devina Hashifah is an Intern at IGPI Australia (Nov 2023 – Feb 2024). Devina graduated with a Bachelor of Commerce from the University of Melbourne, majoring in Marketing and Management. She has previously worked in the financial advisory sector and student consulting organizations, conducting research for clients from the agriculture, renewable energy, microfinance, and media industry.

 About IGPI

IGPI Group is a Japan rooted premium management consulting & Investment Group headquartered in Tokyo with a footprint in Osaka, Singapore, Hanoi, Shanghai & Melbourne, as well as parts of Europe and India. The organization was established in 2007 by former members of the Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI Group has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation to name a few. IGPI Group has vast experience in supporting Fortune 500s, Govt. agencies, Universities, SMEs and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has ~8,500 employees on a consolidated basis.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.

Australia has rich innovation capabilities and potential that could yield significant benefits for Australia-Japan (A-J) innovation and even beyond.

The key question is “How to enable Australia?”

This entails fully unlocking the innovation capability and potential that Australia holds. This article intends to put a spotlight on the rich capabilities and the missing link which Australia as a nation faces to spearhead their innovation efforts for Japan in particular.

The wider objective of this piece is to contribute to discussions on increasing successful A-J innovation cases within the Australia-Japan corridor. Specifically, IGPI shares some of its observations of the potential bottlenecks faced by the Australian side – these include challenges in gaining awareness and recognition from the Japanese side in a customized fashion, which by no means have easy fixes.

1. Quick Recap on Part I

Australia-Japan relationship has been a longstanding and complementary relationship that started in the form of trading in traditional sectors such as energy, agriculture, and mining.

It was touched upon in part I how this relationship is now evolving in terms of “What” and “Who” in recent years. Examples touched upon were Japan transitioning from traditional fossil fuels to initiatives such as renewable energy generation and hydrogen; and widening the collaboration partners beyond mega corporations to include universities and startups in Australia. It also highlighted the bottlenecks Japanese corporations face, such as “Why Australia?” and their motivation to explore such opportunities, particularly addressing the alignment or misalignment between the HQ and local arm.

For the full article on part I: What are the bottlenecks being experienced on the Japanese side?

However, this does not mean there are no bottlenecks on the Australian side. Australia faces its own bottlenecks as the “Innovation supplier”, providing solutions to the Japanese “demand” side.

2. The Role of Australia as the Innovation Supplier

For decades, Australia has been a key partner for Japan. As previously discussed in part I, this relationship has now dramatically shifted towards sourcing innovative solutions in various forms from broader players in the Australian innovation ecosystem. Namely, these have been from (i) Startups / Spinoffs, (ii) Universities, and (iii) Research Institutes.

2.1. Startups and Spinoffs

Throughout the world, startups have played a pivotal role in driving innovation.

Australia, recognized as having one of the largest startup ecosystems in the world (9th in the world, 2nd in Asia-Pacific)¹, is home to numerous unicorns such as Canva, Atlassian, and Airwallex, to name a few. But most recently, the B2B sector startups have been on the radar of Japanese corporations, showing notable progress in Japan and beyond:

Both examples illustrate Japanese corporations leveraging solutions from Australian startups in Japan and beyond.

One unique fact to note is that both icetana and Hivery are startups but started off as spinoffs of an Australian university or a research institute. The term “spinoff” describes a new and separate entity created by the parent entity that holds all or partial shares⁴. In the context of an Australian university or a research institute, spinoffs are created with the aim to boost entrepreneurial activities to commercialize a certain innovative technology⁵. In the same line, icetana was spun off from Curtin University (Perth, Western Australia), and Hivery from the Commonwealth Scientific and Industrial Research Organization (in short CSIRO, Australia’s National scientific research agency).

As these startups and spinoffs aim to commercialize the innovative technology they possess, they represent the significant potential for collaboration with industry partners in technical, business, or financial forms to realize new business opportunities.

2.2. Universities

On the other hand, Australia is a rich source of innovation from numerous universities. Australian universities are recognized for their world-class capabilities, comparable to the institutions the USA and UK universities. Based on QS World University Rankings 2025, the composition for Australia, Japan, the UK, and the USA in total count and the count in the “Top 50s” are as follows:

Figure 1: QS World University Rankings 2025⁶

Factually, Australia ranks 3rd in the Top 50 coverage, behind the USA and UK. The interesting fact here is that despite being 3rd, Australia has the highest “coverage ratio” relative to the country’s total university count within the ranking (6 in the top 50 out of a total 38 = 16%; compared to 8% for the USA and 9% for the UK). This highlights the exceptional quality of Australian universities despite being fewer in number.

This excellence is evident in the “International Research Network” metric introduced by the QS World University Ranking in 2024, which provides insights on how internationally connected an institution’s research is as well as recognizing the importance of collaborative research more broadly⁷.

Here’s how the top 3 Australian universities fare against their counterparts in the USA and UK in terms of international research connectivity:

Figure 1: QS World UnivTable 1: QS World University Rankings International Research Network Scores⁸

Again, despite the overall ranking being lower, the research capabilities of the top 3 Australian universities are on par with, or even exceed, those of the leading institutions in the USA and UK. It should be noted that overall ranking includes metrics outside of research capabilities, such as international student ratio, and non-capability specifics.

In addition, Australian university’s research and development spending is notably high on a global scale. This is illustrated by the “HERD” or “Higher Education Expenditure on R&D” metric, which measures the R&D expenditure by higher education entities such as universities as a percentage of GDP. Below is a comparison of the USA, UK, Japan and Singapore:

Figure 2: OECD Stat Dataset – Main Science and Technology Indicators Higher-Education Expenditure on R&D as a percentage of GDP⁹

Table 2: OECD Stat Dataset – Main Science and Technology Indicators Higher-Education Expenditure on R&D as a percentage of GDP¹⁰
* Note: Estimate (Australia case) or slight definition differs (USA case), Data based on full available data for all 5 listed country comparison

Apart from the UK, which has increased significantly since 2018, Australia is represented with a consistently high level of expenditure or investment into R&D from a GDP percentage basis, which is by contrast, much higher than the likes of the USA or Japan.

Australian universities offer world-class innovation potential, which can be nurtured as business opportunities. The key importance is to make that “critical step” to collaborate with industry partners to realize that capability outside of the lab and apply it to the real world.

2.3. Research Institutes

Separate from universities, Australia also has numerous research institutes. These can be categorized into individual organizations or “Cooperative Research Centers” (hereafter CRC).

Individual organizations can range from national science agencies such as the CSIRO to more niche specialized research institutes (e.g., Health – Melanoma Institute Australia, or even university spinoff R&D entities, etc.).

Most notably, CSIRO is the largest research institute in Australia and one of the significant globally, is often compared to the Australian version of Japan’s “AIST” (産業技術総合研究所) or “RIKEN” (理化学研究所). Typically budgeted with approximately $1.6B AUD annually, it is ranked as the 6th or 7th against selected international applied research organization over the past 10 years and with over 4,000 industry and government partners¹¹. For reference, AIST’s annual expenditure in FY22 was around $1.1B AUD¹²**. CSIRO’s R&D ranges in 9 fields (further split into subcategories) and works in a collaborative manner with the universities and industries to bring innovation to the real world¹³.

Figure 3: CSIRO Research fields¹⁴

With its broad coverage and extensive network of connections, CSIRO represents the diverse capabilities of Australia’s national science agency.

The other important research institute category is the CRCs. CRCs are Australian government programs since 1990 with the government providing funding support for industry-led collaborations. CRC themes vary depending on each CRC but are all aimed at addressing industry identified problems and key issues. Typically, CRC are mid to long-term programs that can range from 5 to 10 years, but shorter programs (CRC-P) up to 3 years also exist¹⁵. CRCs require at least one Australian industry organization and one Australian research organization, but they are not limited in total numbers, and can include non-Australian corporations as partners as well. Below are examples of CRCs that interacted with Japanese corporations:

Note that entities can be part of the CRC itself (official CRC partner) or engage in a collaborative form, such as the Future Energy Exports CRC with companies like JX NOEX. It is also important to highlight that government grants require the applicants (i.e. CRC lead and partners) to at least match the amount of government grant / funding either through cash and / or in-kind contributions. With both long-term support and commitment, CRCs are unique research initiatives that bring like-minded partners together ²⁰.

3. What Are the Bottlenecks from the Australian Side in Increasing the Number of Success Cases?

While each Australian startup / spinoff, university or research institute faces unique challenges, a common issue is the limited “Awareness” of Australian innovation capabilities. Despite the high quality and rich sources of innovation, Australia’s recognition by Japan lags behind that of global innovation hubs likes of Silicon Valley or Europe.

Unlike the USA or European countries, Japan is a unique country that requires a very different approach culturally or communication wise. Hence from an Australia point of view, applying a global strategy may not necessarily be most effective approach.

IGPI has seen many cases on both the Australian and Japanese sides having basic misunderstandings due to certain cultural differences or communication methods. In particular, the cultural differences can at time cause unnecessary friction unintentionally.

For example, due to the size and organizational structure, Japanese corporations may cause mass communication delays to get to the “Right” person. Even after making contact, an “unwritten” authorization or approval process, known as “Nemawashi”, might be required. This process of consulting stakeholders informally can significantly extend timelines and might be seen as a loss of momentum from a non-Japanese perspective. However, these processes are often integral to Japanese culture, intended to show respect and give courtesy updates to the people who may be impacted by a certain decision, just that it took a bit of time, which may have been out of their control.

To address this type of barrier, it is important for the Australian side to consider a dedicated and specific Japan strategy. This strategy should focus on deepening engagement and forming partnerships with Japan and Japanese corporates. Elements could include prioritizing capabilities that are particularly relevant to Japan, appointing an internal advocate for Japan-related initiatives, and establishing dedicated channels for promotion and interaction with Japanese entities.

It is important to be clear on the details of “what is requested” and “what can be offered as an exchange” from the Australian side to the Japanese side.

Unless there is a clear ambition and direction set for Japan, it could be difficult for both Australian and Japanese side to understand “what is the aim or goal”.

By addressing these bottlenecks with a targeted approach, Australia-Japan collaboration can improve, leading to more successful innovation partnerships across the Australia-Japan corridor.

4. How Can IGPI Australia help?

IGPI Group has developed a deep-rooted understanding of Japanese Corporations and has been a part of the global expansion and ambitions of many prominent companies across the APAC and beyond. If you are an Australian startup, university or research institute, and believe in the potential of Australia-Japan on the pillars of innovation and keen to enhance your approach to Japan / Japanese corporations, we will be glad to have a confidential conversation. IGPI provides highly customized business advisory to its diverse range of clients, including but not limited to:

• Internal alignment initiatives
• Open innovation roadmap
• New business creation support
• Market assessment for business opportunities
• Strategic partner / capabilities search
• Commercial negotiations support
• Other custom hands-on support (in-market)

To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.  

Data Sources

1 StartupBlink – Global Startup Ecosystem Ranking
2 icetana – https://www.icetana.ai/investor-updates/global-technology-giant-macnica-takes-strategic-investment-in-icetana
3 Hivery – https://www.csiro.au/en/news/All/Articles/2019/November/hivery-exports-ai-solutions-to-the-world
4 investopedia – https://www.investopedia.com/terms/s/spinoff.asp
5 Taylor & Francis Online – https://www.tandfonline.com/doi/full/10.1080/1331677X.2022.2086148
6 QS World University Rankings 2025 – https://www.topuniversities.com/world-university-rankings
7 QS World University rankings Methodology – https://www.topuniversities.com/qs-world-university-rankings/methodology
8 QS World University Rankings 2025 – https://www.topuniversities.com/world-university-rankings
9 OECD. Stat – https://data-explorer.oecd.org/
10 OECD. Stat – https://data-explorer.oecd.org/
11 CSIRO Annual report FY22-23 – https://www.csiro.au/en/about/Corporate-governance/annual-reports/22-23-annual-report
12 AIST: Employees and Budget – https://www.aist.go.jp/aist_e/about_aist/facts_figures/fact_figures.html
** RBA Exchange rate at $1 AUD = ¥97 JPY as of 12/08/24
13 CSIRO Research – https://www.csiro.au/en/research
14 CSIRO Research – https://www.csiro.au/en/research
15 Business.gov.au – https://business.gov.au/grants-and-programs/cooperative-research-centres-crc-grants
16 Food Agility CRC – https://www.foodagility.com/about
17 Future Energy Exports CRC – https://www.fenex.org.au/about/
18 Future Energy Exports CRC news – https://www.fenex.org.au/australian-japanese-partners-execute-rd-project-agreement-to-develop-safe-and-efficient-solutions-for-industrial-scale-shipping-of-co2/
19 HILT CRC – https://hiltcrc.com.au/about/
20 Business.gov.au – https://business.gov.au/grants-and-programs/cooperative-research-centres-crc-grants

About the authors

Mr. Rachit Khosla is the Country Manager of IGPI Australia. Rachit is a seasoned strategy consulting professional with over 14 years’ experience of leading and executing market entry and growth strategy (both organic and inorganic) and open innovation engagements for Fortune 500 businesses and large MNCs across Asia Pacific. He has advised clients in a diverse range of industries including automotive, fin-tech, industrial and manufacturing, med-tech & healthcare, smart cities, construction materials, travel, IT & telecommunications to name a few. Rachit was the
former Country Manager and Director for YCP Solidiance (Japanese owned) and Founder and CEO of an online B2B marketplace startup for professional advisory services focused on Emerging Markets.

Mr. Kaoru Shingae is a Consultant at IGPI Australia. Prior joining IGPI, Kaoru has worked at Toyota, BMW and Boston Consulting Group, primarily specializing in the Automotive and Mobility sector and with exposure to wider industrial sectors. Kaoru has both internal and external strategy experience with deep understanding on ‘What’ is most important for all stakeholder’s future. He has end-to-end experience from corporate and enterprise level planning to all the way down to the operational planning. Kaoru is a holistic all-rounder in engaging with both strategical and operational stakeholders throughout the company. Past achievements include crisis turnaround plans, long and mid-term vision plans, CEO’s company goal plans and sales & market operational plan plus delivery to name a few. Kaoru has graduated from The University of Melbourne with a Bachelor of Commerce.

Ms. Devina Hashifah is an Intern at IGPI Australia (Nov 2023 – Feb 2024). Devina graduated with a Bachelor of Commerce from the University of Melbourne, majoring in Marketing and Management. She has previously worked in the financial advisory sector and student consulting organizations, conducting research for clients from the agriculture, renewable energy, microfinance, and media industry.

 About IGPI

Industrial Growth Platform Inc. (IGPI)  is a Japan rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation to name a few. IGPI has vast experience of supporting Fortune 500s, Govt. agencies, Universities, SMEs and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has ~7,500 employees on a consolidated basis.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.

Within the Australia-Japan realm, the “energy-heavy” relationship has evolved across two related dimensions — “what?” and “who?” — with more stakeholders such as universities and startups garnering the limelight. This article intends to put the spotlight on such examples.
The wider objective of this piece is our contribution to a conversation about increasing the A-J innovation success cases in the Australia-Japan corridor. Specifically, IGPI shares some of its observations of the potential bottlenecks faced by the Japanese side between the HQs and local arms of Japanese corporations. These are internal and complex matters that by no means have easy fixes.

1. Brief Snapshot of A-J Relationship Thus Far…

It is no secret that Japan and Australia have cultivated a longstanding and complementary trading relationship, underscored by traditional sectors such as energy, agriculture, and mining. In 2022, Australia contributed to Japan’s resources by supplying Japan with 43% of its liquefied natural gas (LNG) and 66% of its coal, with a predominant share of 75% in thermal coal^[1]. On the other side, 7% of total Australian imports comes from Japan, including vehicles, machineries, and electronics (as of Dec 2023)^[2]. Japan and Australia have built their relationship on comparative advantages, with Australia serving as a raw materials supplier and Japan as a manufactured goods producer^[3].

2. How Is the Nature of Partnership(s) Evolving Between Australia & Japan?

The nature of the “energy-heavy” partnership between Australia and Japan is evolving in two related dimensions — these are “what?” and “who?” referring to needs and players, respectively.

2.1. Evolving Needs (“What”?)

Japan is a highly developed nation but lacking in natural resources, and Australia possesses abundant natural resources that can complement Japan’s requirements. Japan drew up a national strategy to achieve net-zero carbon emissions by 2050^[4], which encompasses a systematic transition from traditional fossil fuels to initiatives such as renewable energy generation and hydrogen transportation. While traditional energy sources will continue to play a role in Japan’s energy strategy in the mid-term, the trend towards a long-term transition to decarbonization is steadfast. In this global trend towards decarbonization and a sustainability focus, collaborations between two nations are widening. Some examples:

2.2. Evolving Partnerships (“Who”?)

The transition of “what” is marked by widening of the players. While mega corporations once held a dominant position, the Australia-Japan collaboration is now witnessing increased participation from innovative participants such as universities and startups.

Australia’s innovation network is characterized by a highly complex yet proactive landscape, where collaborations and partnerships evolve to meet the demands of a rapidly advancing technological era. The collaborative partners between Japan and Australia are in a state of transition from (i) “Corporations x Corporations” to also include (ii) “Corporations x Universities”, (iii) “Corporations x Startups” and (iv) “Universities x Universities”. It symbolizes the growing realization of the strengths of Australian universities and startups, which Japanese corporations can leverage upon for mutual benefit. Some examples:

These select examples corroborate the fact that Japanese corporations are increasingly taking note of Australia’s innovation potential. The complementing strengths and common goal synergies can lead to collaboration not only limited to Australia or Japan but in the wider region/world. For this to happen at scale, a long-term view of investment and nurturing is critical. Corporations and stakeholders must actively address these aspects to incubate and support the growth of innovative ideas and technologies.

3. Giving More Flavor to the Diversity of the Diverse A-J Innovation Partnerships

It is also noteworthy to share that these collaborations take place across diverse sectors and typically are in some combination of business, technical, and financial partnership. Apart from the well-known and time tested (i) “Corporations to Corporations”, some more examples occur across (ii) “Corporations x Universities”, (iii) “Corporations x Startups” and (iv) “Universities x Universities”.

3.1. Corporations x Universities – Examples

Table 1. Collaboration between Japanese Corporations and Australian Universities

3.2. Corporations x Startups – Examples

Table 2. Collaboration between Japanese Corporations and Australian Startups

3.3. Universities x Universities – Examples

Table 3. Collaboration between Japanese Universities and Australian Universities

4. What Are the Bottlenecks for Japanese Corporations in Increasing the Number of Success Cases?

The nature of Japanese corporation’s associations varies significantly. Regardless of size, corporations may have had extensive length of association with Australia (over multiple decades) or extremely short time. However, the key issue faced in boardrooms is the depth of “Why Australia?” within that corporation and “how motivated” they are to explore such opportunities. IGPI has seen in many cases that the local arm understands the potential on one side but is challenged to convince HQ/RHQ to take any further action (e.g., strategic alignment, etc.). On the other hand, the RHQ/HQ looks at various countries and is not always clear on “Why Australia?” etc., and doesn’t offer much support to the local arm (e.g., funding, human capital dispatch, etc.).

So, the key is addressing these complex and layered internal issues to get the ball rolling. Based on IGPI’s diverse experiences of working with Japanese corporations’ HQs and various in-market offices, as well as supporting JETRO for a case study, there are eight key elements that need to be addressed for smoothly exploring innovation opportunities in a cross-country setting. It usually begins with alignment on strategy, mission, vision, and values (MVVs).

Image: JETRO Case Study Summary Report^[25]

Regardless of the Japan or Australia side, unless the counter-country element is identified as part of the future, there will be misalignments, lack of actions, and/or insufficient implementation.

There are notable companies that have already overcome such challenges. For example, companies like NTT and Fujitsu have defined Australia as a “Testbed” market. In NTT’s case, Australia’s unique geographic landscape was perfect for developing next-gen agricultural sensing and communication technologies — with proactive consumers to test new technologies^[26]. And in Fujitsu’s case, setting up a “Digital Transformation Center” within Macquarie University in Sydney was to take advantage of the university’s capabilities directly for ideation and co-creation of new solutions for customers — exemplifying the benefits from the diversity of talents^[27].

These are examples of “Defining a clear role for Australia”, but high in impact to enable HQ/RHQ and local arm alignment.

5. How Can IGPI Australia help?

IGPI Group has developed a deep-rooted understanding of Japanese corporations and has been a part of the global expansion and ambitions of many prominent companies across APAC and beyond. If you are a Japanese HQ or a local arm and believe in the potential of Australia-Japan based on the pillars of innovation but feel constrained due to any or all of the eight elements in this article, we will be glad to have a confidential conversation. IGPI provides highly customized business advisory to its diverse range of clients, including but not limited to:

• Internal alignment initiatives of HQ & local arms
• Open innovation roadmap
• New business creation support
• Market assessment for business opportunities
• Strategic partner/capabilities search
• Commercial negotiations support
• Other custom hands-on support (in-market)

To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.  

Data Sources

[1] https://japan.embassy.gov.au/tkyo/resources.html

[2] https://tradingeconomics.com/australia/imports

[3] https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Foreign_Affairs_Defence_and_Trade/Completed_inquiries/1999-02/japan/report/c05

[4] https://www.meti.go.jp/english/policy/energy_environment/global_warming/roadmap/

[5] https://www.lavo.com.au/blog/marubeni-lavo-exporting-hydrogen

[6] https://www.fenex.org.au/australian-japanese-partners-execute-rd-project-agreement-to-develop-safe-and-efficient-solutions-for-industrial-scale-shipping-of-co2/

[7] https://www.fujitsu.com/au/about/resources/news/press-releases/2023/fujitsu-and-macquarie-university-establish-new-research-lab-to-accelerate-development-of-human-sensing-and-generative-ai-technologies.html

[8] https://www.morsemicro.com/2022/09/06/morse-micro-raises-140m-in-series-b-funding-to-accelerate-iot-connectivity-and-revolutionize-our-digital-future/

[9] https://www.uts.edu.au/about/faculty-engineering-and-information-technology/global-engagement/international-news/tracking-technology-wagyu-beef

[10] https://www.uts.edu.au/about/faculty-engineering-and-information-technology/news/ntt-data-uts-partner-enhance-data-security-research

[11] https://www.uow.edu.au/media/2023/uow-and-nec-australia-join-forces-to-drive-smart-city-innovations-in-the-illawarra-.php

[12] https://idomi.com.au/2023/04/20/idom_rmit_partnership/

[13] https://www.nipponsteel.com/en/news/20220722_100.html

[14] https://www.eneos.co.jp/english/newsrelease/2021/pdf/20211102_01.pdf

[15] https://www.appliedev.com/suzuki-press-release-30-march-2023

[16] https://www.icetana.ai/investor-updates/global-technology-giant-macnica-takes-strategic-investment-in-icetana

[17] https://www.roborigger.com.au/sumitomo-mitsui-construction-teams-with-roborigger/

[18] https://uniquest.com.au/rapid-serum-blood-collection-technology-developed-by-uq-startup-q-sera-to-be-made-in-japan/

[19] https://www.powerledger.io/media/power-ledger-kepco-extend-trial-to-create-and-track-renewable-energy-credits

[20] https://www.adelaide.edu.au/newsroom/news/list/2022/12/14/fusion-of-expertise-aims-to-develop-sovereign-capability.

[21] https://www.dfat.gov.au/people-to-people/foundations-councils-institutes/australia-japan-foundation/grants/2021-22-grantees

[22] https://www.dfat.gov.au/people-to-people/foundations-councils-institutes/australia-japan-foundation/grants/2021-22-grantees

[23] https://www.dfat.gov.au/people-to-people/foundations-councils-institutes/australia-japan-foundation/grants/meet-our-2020-21-grantees

[24] https://japantoday.com/category/tech/first-grant-awarded-under-rio-tinto-australia-japan-collaboration-program

[25] JETRO “Case Study on Management Innovation of Japanese Companies in Southeast Asian Markets and Identification of Key Points” Summary Report

[26] https://www.foodagility.com/posts/australia-the-testbed-for-new-green-iot-technologies

[27] https://corporate-blog.global.fujitsu.com/apac/2019-12-20/digital-transformation-centre-brings-co-creation-to-life-in-australia/

About the author

Mr. Rachit Khosla is a seasoned strategy consulting professional with rich experience in leading and executing market entry, growth strategy and open innovation/new business creation engagements for Fortune 500 businesses, large MNCs and Govt. bodies across the Asia Pacific. He has advised clients in diverse industries including green and digital areas. Before joining IGPI, Rachit was the Country Manager at YCP Solidiance, and after that, a co-founder of Conquerem — an online B2B e-bidding platform for boutique consulting firms. Rachit is an avid traveler who has set foot in 40+ countries and lived in 4 countries.

Mr. Kaoru Shingae is a Consultant at IGPI Australia. Prior to joining IGPI, Kaoru worked at Toyota, BMW, and Boston Consulting Group, primarily specializing in the automotive and mobility sector and having exposure to wider industrial sectors. Kaoru has both internal and external strategy experience with a deep understanding of ‘What’ is most important for all stakeholders’ future. He has end-to-end experience in corporate and enterprise-level planning, all the way down to operational planning. Kaoru is a holistic all-rounder who engages with both strategic and operational stakeholders throughout the company. Past achievements include crisis turnaround plans, long and mid-term vision plans, CEO’s company goal plans, and sales & market operational plan plus delivery, to name a few. Kaoru graduated from The University of Melbourne with a Bachelor of Commerce.

Mr. Jiachen Wang is an Intern at IGPI Australia (Nov 2023 – Feb 2024). Jiachen is currently pursuing his Master’s Degree in Finance from the University of Melbourne. Prior to this, he completed an Honours Bachelor of Science from the University of Toronto, majoring in Statistics and Geographic Information Systems. He has had previous internship experiences in the financial sector, spanning equity research, investment banking, and corporate venture capital.

 About IGPI

Industrial Growth Platform Inc. (IGPI)  is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.

In recent times, the escalating geopolitical rivalry between the United States and China has revived bipolar dynamics reminiscent of the Cold War, when much of the world became pawns in a superpower competition. Moscow’s aggression against Ukraine has only intensified pressure on developing nations to pick a side between the democratic West and authoritarian China and Russia — a choice that many resist. Meanwhile, a succession of systemic shocks — including the coronavirus pandemic, economic fallout from Ukraine, and deepening climate emergency — have underscored the gross inequities at the core of the world economy and the vulnerability of lower- and middle-income nations to political, economic, and ecological crises not of their own making.^[1] Within this, there stands a nation that is uniquely positioned because of its ties to ‘both camps’ that can help bridge the divide potentially like no other — but easier said than done!

What is the structural understanding of the North-South divide?

The Global South is a multifaceted concept encompassing geographical, geopolitical, historical, and developmental aspects, with certain exceptions.^[2] Used since the late 20^th century, the term has seen increased application as we moved into the 21^st century. Carl Oglesby, a political activist, is credited with first using “Global South” in 1969. In an article for the liberal Catholic magazine Commonweal, Oglesby discussed how the Vietnam war represented a peak in the North’s dominance over the South. But it was only after the 1991 breakup of the Soviet Union — which marked the dissolution of the so-called “Second World” — that the term gained momentum.

The Brandt line, a definition from the 1980s dividing the world into the wealthy north and the poor south.
https://handwiki.org/wiki/index.php?curid=1098296 ^[3]

In a global context, “the North” and “the South” serve as alternative terms for “developed” and “developing” countries, respectively, based on the Brandt line. Together, these terms constitute nearly the entire global population.^[4] The two groups are often differentiated by their levels of wealth, economic development, income inequality, democracy, and political and economic freedom, as measured by freedom indices. States that are seen as part of the Global North tend to be wealthier, less unequal, and considered more democratic and developed countries. Southern states are generally poorer, developing countries with younger, more fragile democracies, often reliant on primary sector exports and frequently share a history of colonialism by Northern states.^[5] After colonialism, the North continued to maintain unequal trade relationships with the South, which further perpetuated the economic disparities between the regions.^[6]

Nevertheless, the divide between the North and the South is often challenged and said to be increasingly incompatible with reality. For example, the differences in the political, economic, and demographic makeup of countries tend to complicate the idea of a monolithic South.^[7] How can countries like China and India, each with about 1.4 billion people and GDPs of about $18 trillion and $3.4 trillion, respectively, be lumped together with the Pacific island nation of Vanuatu, with a population of a little over 300,000 and a GDP of $984 million, or the southern African country of Zambia with 19 million people and a GDP of $30 billion?^[8] Furthermore, globalization has also contested the notion of two distinct economic spheres.

Why has the North-South divide within the Global South been garnering limelight?

In 2023, many newspaper articles and reports have increasingly referenced the “North-South divide”, predominantly in the context of the war-struck era our planet is experiencing. Illustrating this point, Russia’s invasion of Ukraine sparked unity among Western democracies not seen since the first Gulf War. However, the Global South did not meet the Western expectation of global, unified condemnation and action against Russia.^[9] As such, the unwillingness of many leading countries in Africa, Asia, and Latin America to stand with NATO over the war in Ukraine has brought the term to prominence once again. Global South leaders have been demanding an end to the “plundering international order,” calling for a more representative and responsive global system that caters to the needs of developing economies.^[10]

Apart from this, not long ago, the pandemic also posed many challenges for the Global South. The challenges were daunting for a myriad of reasons varying across the diverse countries.  They include weak public health systems, lower living standards, and a lack of services in densely concentrated cities or widely dispersed rural populations. Even amongst middle-income countries, whose economies tend to be export-oriented and commodity-dependent, the collapse of global demand puts significant pressure on their national accounts. For some, dependency on tourism and foreign remittances makes up a substantial portion of their GDP, and any losses in these sectors exacerbate unemployment and revenue losses.^[11]

From a Japanese lens, the term “Global South” has become such a buzzword that it graces the daily news.^[12] Japan has been actively engaging with the Global South, pursuing this engagement through various means such as frequent visits, dialogues, and regional forums, including the G20. Japan’s approach is characterized by its desire to foster a free and open international order, ensure global peace, and address global inequalities.^[13]

What are the keys to addressing the North-South divide?

The North-South divide remains relevant today, as global inequality continues to pose a significant challenge. This divide surrounds economic, social, and environmental disparities.^[14] While some countries in the Global South have achieved considerable economic and social progress, others still grapple with poverty and underdevelopment. The divide also influences vulnerability to climate change, with developing countries in the South often facing a disproportionate share of the impacts. Factors such as limited resources for adaptation and mitigation, widespread poverty, and exposure to natural disasters contribute to this vulnerability.^[15]

Addressing the North-South divide thus requires a comprehensive and coordinated approach that includes policies to promote sustainable economic development, improve governance and political stability, increase access to education and healthcare, and reduce inequality within and between countries. International cooperation and partnership are also essential for addressing global challenges and promoting equitable development. Although easier said than done, some of the ways to address the North-South divide can include:

1. Trade Policies: Reforming international trade policies to ensure fair and beneficial trade relationships for the countries in the Global South.
2. Investment in Education and Healthcare: Increasing investment in education and healthcare to reduce disparities in access to these essential services.
3. Environmental Protection and Climate Action: Addressing environmental challenges and climate change, which disproportionately affect the Global South, through international cooperation and support.
4. Technology Transfer: Facilitating the transfer of technology from the North to the South to support development and economic growth in the Global South.

To that end, Japan is setting a five-year investment target of more than $13 billion to support developing countries in the Global South, a move that aims to deepen ties with growing, resource-rich economies. The 2 trillion yen ($13.3 billion) in funding would come from investments by Japanese companies backed with government aid, Japan’s Minister of Economy, Trade and Industry (METI) stated.^[16] As per the then METI Minister Nishimura, “We will strengthen collaboration through support and investments that lead to solutions to societal challenges facing emerging markets, such as carbon reduction and digitalization; Japan aims for ‘win-win’ relationships with the Global South, in which aid leads to economic expansion, local investments by Japanese companies, and export growth.”^[17]

Japan’s focus on the Global South brings a ray of light amid an increasingly chaotic global situation.^[18] As an example of the themes mentioned above, such as climate change and investment, an initiative that was recently announced is India-Japan Fund (IJF). IJF is a $600 million fund launched by the Japan Bank for International Cooperation (JBIC) and India’s National Investment and Infrastructure Fund (NIIF). The fund will be supported by JBIC-IG Partners (a JV of JBIC and IGPI) and aims to invest in environmental sustainability and low-carbon emission strategies, focusing on areas such as renewable energy, e-mobility, and waste management.^[19] Interestingly, the fund will have almost equal financial contribution from the Japanese and Indian sides, which is significant in the North-South discussion as it brings in connotations of equality — one of the root issues of this historical divide.

What role can Australia potentially play in bridging the Global North-South divide?

From a global North-South lens, Australia’s role in this divide is complex due to its unique position. Geographically located in the Global South, Australia is considered part of the Global North due to its economic and political ties. If we examine Australia further, it is a regional superpower and one of the richest nations in the world,^[20] situated in an important and strategic position for Global North allies with Asia-Pacific interests. Its Western-influenced political economy, combined with its relations with many Asian countries provide a unique geopolitical context.^[21]

The above makes Australia’s role in the Global North-South divide crucial, and based on Australia’s worldview, including the growing importance of the Global South, Australia can contribute to the world order in a way that matches its interests. Some of the dimensions along which Australia is/can further play a role include economic, environmental, and security aspects, acting as a bridge in the divide:

1.    Economic Partnerships and Aid for Development

• Foster economic partnerships with Global South countries by increased trade, investment, and joint ventures.
• Providing targeted development aid to less economically developed countries as well as showcasing successful case studies of aid initiatives that have positively impacted Global South nations.

2.    Environmental & Innovation Cooperation

• Emphasizing the significance of addressing environmental challenges in the context of global development as well as Australia’s potential role in collaborating on climate change initiatives and sustainable practices.
• Australia can contribute to the Global South through technology transfer/exchange and the potential impact of sharing innovations in sectors like agriculture, healthcare, and renewable energy.

3.    Regional Stability, Security & Cooperation

• Playing its part in the regional stability for sustainable development as well as Australia’s contributions to diplomatic efforts and peacekeeping missions in the Southern Hemisphere.
• Multilateral cooperation by engaging in multilateral forums and organizations can be Australia’s potential contribution to global initiatives aimed at addressing the North-South divide.

4.    Education, Knowledge & Cultural Exchange

• The role of education in addressing the North-South divide, e.g. facilitating educational exchange programs and knowledge sharing.
• Cultural exchange is of vital importance in fostering collaboration. Australia has a strength in its diverse cultural landscape and potential role in promoting understanding.

It is essential to note that the role of any individual country, including Australia, is complex and multifaceted. Furthermore, we have established that all Global South countries can’t have a ‘one-size-fits-all’ strategy due to their diverse global views and progress.

IGPI established its Australian operations in 2020 as we recognized the increasingly prominent role that Australia is playing and can play in APAC and the wider world. Although Australia is not new to corporate Japan, since business relationships go back several decades, the nature of the relationship has been evolving quickly.  There are many untapped opportunities waiting to be introduced to the world — based on the fact that Australia has a relatively high quality of innovation,^[22] but commercialization of those innovations hasn’t been its strong point. This is one area where Japanese expertise in globalizing businesses can complement Australia in solving global issues. On that note, IGPI supports JETRO’s J-Bridge program, which encompasses open-innovation-driven collaborations between Japanese corporations and Australian companies in their strength areas of “Green” and “Digital”.

Several Australian innovations can potentially solve issues in the Global South. As a public example of the above point with regards to innovation cooperation — Australian insurance company, Hillridge Technology helps farmers lessen the financial impact of adverse weather events by using blockchain technology to immediately and automatically pay out insurance claims as soon as a weather event occurs within a certain distance from a farmer’s operations.^[23] Also, Hillridge Co is co-operating with Mitsui Sumitomo Insurance Group (MSIG) in Vietnam to launch a new agricultural insurance product that protects farmers in Vietnam from the risks of drought.^[24]

In future, IGPI Australia will endeavor to continuously focus on joining more dots between Japan, Australia and the rest of the world through its business pillars of advisory and investments to play its part in making this planet a more cohesive place.

To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.  

[1] https://carnegieendowment.org/2023/08/15/term-global-south-is-surging.-it-should-be-retired-pub-90376

[2] https://economictimes.indiatimes.com/news/international/world-news/everyones-talking-about-the-global-south-but-what-is-it/articleshow/103453914.cms?from=mdr

[3] https://encyclopedia.pub/entry/37558

[4] https://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/north-and-south-global#:~:text=As%20terms%2C%20the%20North%20(also,were%20increasingly%20seen%20as%20pejorative

[5] https://encyclopedia.pub/entry/37558

[6] https://tourismteacher.com/north-south-divide/

[7] https://apnews.com/article/what-is-global-south-19fa68cf8c60061e88d69f6f2270d98b

[8] https://economictimes.indiatimes.com/news/international/world-news/everyones-talking-about-the-global-south-but-what-is-it/articleshow/103453914.cms?from=mdr

[9] https://ppr.lse.ac.uk/articles/10.31389/lseppr.88

[10] https://theconversation.com/the-global-south-is-on-the-rise-but-what-exactly-is-the-global-south-207959

[11] https://www.lse.ac.uk/international-relations/centres-and-units/global-south-unit/COVID-19-regional-responses/COVID-19-and-the-Global-South

[12] https://asia.nikkei.com/Opinion/Japan-must-take-its-Global-South-vision-forward-in-2024

[13] https://ecfr.eu/article/what-europe-can-learn-from-japans-approach-to-the-global-south/

[14] https://tourismteacher.com/north-south-divide/

[15] https://tourismteacher.com/north-south-divide/

[16] https://asia.nikkei.com/Politics/International-relations/Japan-aims-for-13bn-in-Global-South-investments-economic-minister

[17] https://asia.nikkei.com/Politics/International-relations/Japan-aims-for-13bn-in-Global-South-investments-economic-minister

[18] https://asia.nikkei.com/Opinion/Japan-must-take-its-Global-South-vision-forward-in-2024

[19] https://www.jbic.go.jp/en/information/press/press-2023/press_00102.html

[20] https://www.primecapital.com/insights/australians-are-the-richest-in-the-world/#:~:text=In%20terms%20of%20mean%20wealth,United%20States%20and%20Hong%20Kong.

[21] https://eprints.qut.edu.au/123774/1/North-In-South.pdf

[22] https://www.linkedin.com/pulse/why-isnt-australia-moving-up-ranks-global-innovation/

[23] https://research.csiro.au/aus4innovation/australian-insurer-helps-vietnamese-farmers-though-new-technology/

[24] http://bizhub.vn/corporate-news/hillridge-msig-team-up-to-protect-farmers-in-vn_344956.html

About the author

Mr. Rachit Khosla is a seasoned strategy consulting professional with rich experience in leading and executing market entry, growth strategy and open innovation/new business creation engagements for Fortune 500 businesses, large MNCs and Govt. bodies across the Asia Pacific. He has advised clients in diverse industries including green and digital areas. Before joining IGPI, Rachit was the Country Manager at YCP Solidiance, and after that, a co-founder of Conquerem — an online B2B e-bidding platform for boutique consulting firms. Rachit is an avid traveler who has set foot in 40+ countries and lived in 4 countries.

 About IGPI

Industrial Growth Platform Inc. (IGPI)  is a premier Japanese business consulting firm with a presence and coverage across Asian markets. IGPI was established by former members of the Industrial Revitalization Corporation of Japan (IRCJ) in 2007. IRCJ, a US $100 billion Japanese sovereign wealth fund, is known as one of the most successful turn-around funds supported by the Japanese government.

In 2017, IGPI collaborated with the Japan Bank for International Cooperation (JBIC) to form JBIC IG, providing investment advisory services and supporting overseas investment. In 2019, JBIC, along with BaltCap, jointly established Nordic Ninja, a €100 million venture capital fund to focus on deep tech sectors such as autonomous mobility, digital health, AR/VR/MR, artificial intelligence, robotics and IoT in the Nordic and Baltic region. In 2019, IGPI established IGPI Technology to focus on the area of science and technology. The company invests in technological ventures and provides hands-on management support. The company also provides business development support towards commercialization and monetization of technologies.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

The market has entered a down cycle with fundraising across all stages hit

October 2023 findings from Deal Street Asia (DSA) reveal a notable shift in market dynamics, with Southeast Asian (SEA) startups navigating through the lowest quarterly deal volume in nearly three years. The third quarter, spanning July to September, witnessed only 151 deals being closed, representing a significant 27% quarter-on-quarter decline. Yearly, this translates to a substantial 34% year-on-year reduction in total deal volume and a noteworthy 52% year-on-year decrease in total deal value.

Quarterly Deal Volume per Funding Round

This market shift extends across early-to-later stage funding rounds. Seed-stage deals, in particular, hit a three-year low in Q3 2022, experiencing a volume drop of 44% compared to the same period the previous year. Additionally, the median value of seed rounds softened, falling by 22% over the last nine months. Similarly, Series A to Series D rounds have also encountered significant reductions. Series A deal volume faced a particularly challenging scenario in the initial nine months, while Series C witnessed the deepest correction in median value, plummeting by 59% from the same period the previous year.

This phenomenon has varying impacts on different sectors

A sector-wise comparison by quarter in Southeast Asia (SEA) reveals the following trends:

• Declining sectors: The Retail, Enterprise Application, and FinTech sectors suffered the most, declining by 81%, 40%, and 60%, respectively.
• Resilient sectors: In contrast, the Food/Agri Tech, Energy, and Transportation/Logistics sectors were resilient, securing the highest funding.

In Q3 2023, the Food and Agriculture Tech sector secured funding amounting to $254 million, reflecting a growth of 638% from the $34 million raised in Q2 2023. However, this still represents a drop of 40% compared to Q3 2022. The Energy sector, on the other hand, experienced growth with funding amounting to $89 million in Q3 2023—an increase of 482% and 1014% from Q2 2023 and Q3 2022, respectively.

Key Segment Comparison, YOY, QOQ  

Down rounds for startups – what is the situation?

In 2021, there was a notable surge in startups securing funding at inflated valuations, driven by a pursuit of rapid growth and increased cash burn. However, the trajectory shifted in 2022, signaling a return to normalcy. The market experienced a decline in deal frequency, a moderation in valuations, and a rise in flat and down rounds.

While specific statistics for Southeast Asia (SEA) regarding the proportion of up, flat, and down rounds are unavailable, insights from the U.S. market provide a glimpse into this trend. Carta’s Q3 2023 report revealed that nearly one in five investments in the U.S. was characterized as a down round. The Coller Capital Global Private Equity Barometer for Summer 2023 noted that 59% of Asia-Pacific (APAC) Limited Partners (LPs) anticipate more down rounds in the next 12 months, contrasting with 24% of APAC LPs expecting fewer down rounds.

Highlighting this shift, notable instances of down rounds in SEA in 2023 include Bitkub. As reported by Asia Tech Review, Bitkub, a Thailand-based crypto exchange, attracted a $500 million investment from Siam Commercial Bank (SCB) in 2022 for a 51% stake at a valuation exceeding $1 billion. However, in July 2023, Bitkub agreed to sell a 9.22% share to Asphere for approximately $17 million, valuing the company at $184 million. This case exemplifies the recalibration in valuation dynamics and investor sentiments that have become prevalent in the evolving landscape of startup funding in the region.

What are the reasons that have contributed to the current downcycle?

Through discussions with investors, industry practitioners, and startup founders, several key reasons have been identified as contributing to the current fundraising downcycle. These include:

– Uncertainty in macro-economic conditions
The recovery in economic performance post-pandemic has been patchy, and geopolitical tensions, such as the Ukrainian-Russian war, the ongoing trade war between the US and China, and the Israel-Gaza War, have brought uncertainty to the overall economy. This has led to supply chain issues that partly contribute to the inflation we see today.

– Higher cost of funds
As a corollary to the prevailing inflation, the US Central Bank, commonly known as “The Fed,” has undertaken a series of 11 interest rate hikes since March 2022. Presently, the Fed Funds rate stands within a range of 5.25-5.5%, while the 10-year Treasury has reached its zenith at above 5%. This upswing in the cost of funds plays a pivotal role in shaping asset allocation strategies.

The escalation in the cost of funds brings forth numerous implications, among others:

• The alteration in investors’ asset allocation strategies is driven by the heightened requirement for returns.
• Additionally, this surge in the cost of funds contributes to increased volatility in the capital market, resulting in a less favorable environment for Initial Public Offerings (IPOs).

The recent lackluster performance of stock markets in October, coupled with the anticipation of prolonged higher interest rates and subdued after-market showings of recent IPOs from the summer, has created a challenging landscape. The potential for significantly reduced valuations is prompting many IPO aspirants to reconsider or delay their market debuts. The continuous rise in the 10-year Treasury yield is especially discouraging for potential deals. Those still contemplating an IPO may face the necessity of accepting substantial reductions in valuation.

– Startup performance not meeting investors’ expectations
Amidst the pandemic, a notable surge in deals at impressive valuations occurred. However, this optimistic trend did not translate universally for startups, as a substantial number faced challenges meeting these elevated expectations. Some even resorted to returning investors’ funds, while others succumbed to bankruptcy and had to implement cost rationalization measures.

One example is Zume, backed by Softbank, which ceased operations in June 2023 after an eight-year run. Initially, the startup embarked on ambitious plans to revolutionize the pizza industry by investing $446 million in equipping delivery trucks with robotic pizza-makers and smart ovens, aiming to freshly cook pizzas en route to customers. However, Zume encountered various technological challenges, including issues with cheese sliding off pizzas. These challenges resulted in increased expenses and faster depletion of funds compared to revenue generation, ultimately leading to the cessation of operations.

Another case is IRL, an event discovery and planning app. Despite raising approximately $200 million across various funding rounds and achieving unicorn status in 2021, the startup faced numerous challenges. A significant expansion in its headcount was followed by a 25% workforce reduction in 2022, indicating deeper underlying issues. The situation worsened when both an SEC probe and an internal investigation revealed that a staggering 95% of the app’s reported 20 million active users were fake accounts. This unsettling truth dealt a fatal blow to the company, resulting in its permanent shutdown. These instances underscore the intricate challenges faced by startups, even amid a backdrop of prolific deal-making during the pandemic.

– Recent IPOs of well-known startups have been disappointing
The recent post-IPOs performance of a handful of startups has been disappointing.

– VC funds have faced difficulties in raising monies, with some having to downsize aspirations
The first quarter of the year has witnessed a notable shift in the venture capital landscape, as reported by Preqin’s latest venture capital report. In a departure from the quarterly average of 460 over the past five years, only 144 venture capital funds successfully closed during this period.

Moreover, the fundraising market is displaying a growing concentration of larger funds. As larger funds have demonstrated an ability to leverage their brand, track record, and scale to secure more capital, especially during turbulent market conditions. Preqin’s findings reveal that a significant half of the capital raised by venture capitalists in the first quarter flowed into the coffers of just five funds. This trend underscores a notable shift in investor confidence and strategy amid a bear market for technology.

It is also reported that funds with a focus on the Asia-Pacific region appear to be in a more favorable position to attract capital compared to their counterparts in North America and Europe. The first quarter saw the closure of the largest fund, Primavera, an Asia-focused venture capital firm renowned for backing industry giants such as Alibaba and Bytedance, which managed to secure a $4 billion commitment, accounting for a noteworthy 15% of the total value of funds closed in the past quarter.

As the venture capital landscape continues to evolve, these trends shed light on the strategies and preferences of both investors and fund managers in navigating the current market conditions.

What should startups do amidst this challenging climate?

Given the challenging fundraising environment, it is foreseeable that there will be higher pressure from potential investors pushing for a lower valuation – a “down-round” – whereby the subsequent round of funds raised is valued lower than the preceding round. Such a down-round carries both legal and economic implications.

Understand the legal implications of a potential down-round

Often, startup founders may not have a good inventory of terms that they have agreed with in their prior funding rounds; unfortunately, some of these may come to bite them back during difficult times. One of the things that all founders need to pay careful attention to is the anti-dilution provision and specifically how this provision is worded – whether it is full-ratchet or on a narrow/wide-based weighted-average. The full ratchet provision is generally the most onerous one for the founders.

While it is a little too late to modify the provisions of the already agreed anti-dilution terms, knowing, and having a good understanding of these terms will at least let founders plan in terms of potential dilution and how this may impact different stakeholders and guide them in pursuing their future fundraising.

‘Back to reality’ – squeezing every bit of cash

As the old saying goes, “Internally generated cash is always the cheapest source of capital,” so it is very important that founders adopt a “thrifty” attitude. Some of the things that we have come across during such times are for founders to focus on extending the cash runway above all else. To do so, we often see founders re-focusing on their core business. Doing so may necessitate founders closing down pilot/pet projects and non-profitable business segments. An example would be Grab, which has closed its Autoinvest and Earn+ products recently.

At the same time, one tip we have for founders to execute cost restructuring before even considering fundraising. The sooner this is done, the more confident investors are that founders can undertake tough decisions during necessary times. The ability to retain selective key staff and to let go of others is very important in such times. As to profitability, we generally see that many are not yet profitable today, unfortunately. From our feedback and experience dealing with investors and founders of such startups, we strongly advise that founders have a clear idea of how to chart for profitability. Also, some have cut back on spending, and hence growth, just to show profitability. Unfortunately, such a strategy does not work. Clearly, investors, especially VCs, understand that such businesses will not be attractive for funding as well.

Consider extending their latest round of investment

We also advise founders to reach out to the investors in their cap table and consider a follow-on/extension round to raise money under the same terms. Investors who have already invested in your company should be rightfully aware and have a better understanding of your company’s situation. Hence, they are in a better position to help during a downturn. Such a round typically allows the business some room for survival to tide through difficult periods.

Besides this, investors may also seek bridge financing from current investors. The key to successfully executing this is to be very clear on the proceeds of this fund and ensure that the amount raised through this extension leads to a meaningful milestone that will allow them to get through this difficult period.

Seek alternative ways to gain funding

We also advise investors to look for alternative ways to gain funding – one of which has gained popularity these days is to raise debt funding (popularly known as Venture Debt or Private Credit). However, this strategy may work best for startups that have collaterals – such as receivables backed by credible paymasters or have assets that have visible liquidation value – such as land/property.

Many venture debt funders we spoke to have also mentioned that having a good VC name in the cap table and having these VC personnel heavily involved in the startup’s management team, such as being part of the board or having an oversight of the startup’s management, helps in their underwriting. These VC involvements provide some assurance in terms of follow-on funding and governance, respectively.

That said, founders need to be fully aware that the venture debt’s cost of funding today can go as high as 15% in USD term. We also advise that it is important to negotiate credit terms that work best for both parties – not only on the interest rate but also on the repayment schedules. In addition, some venture debts may consider lower interest rates in place of having an option to purchase shares in the startup in the future (Warrants) if they see the startup as promising.

We also see some banks extending a program to financestartups – in Indonesia, for example, recently we saw Superbank – a digital bank supported by Grab and Singtel secure a partnership with Genesis Venture to provide debt-funding solutions to innovative Indonesian startups. This can also be an alternative source of funding that founders need to look into. Other than this, crowdfunding platforms and government grants (where the startups can have access to such funding lines) may also be useful in this difficult time.

Avoiding down rounds by structuring key clauses within the term sheet

Other than sourcing for alternative sources of funding, startups may take away the conversation on valuation this round by having it structured as convertible debt or SAFE (Simple Agreement for Future Equity). Doing so is essentially kicking valuation further down the road.

Another alternative is to perform a structured preferred equity round – for instance, agreeing on friendlier terms for investors during this funding round like a higher liquidity preference – such as a 1.5-2.0x liquidity preference in combination with participation rights or to sweeten things up, you may also include guaranteed terms. Again, founders need to strike a balance between giving out too much and “dirtying up” the investor terms – which will save them in terms of valuation but will haunt them later if things do not go as planned.

Illustration on Spectrum of Options

Down rounds are not the end of the world

At the end of the day, a down round may not be all too bad. Founders need to realize that it is not the end of the world when such things happen. The key is to understand that there are options to mitigate this and if all goes well, while not perfect, allow founders to keep their startups safe through the funding winter.

About IGPI Singapore’s involvement in SEA startup fundraising

IGPI Singapore has worked and collaborated with players in the startup ecosystem, including the founders of startups from various stages and sectors, VCs/ PEs, fellow advisors, and strategic regional and global investors as both strategic and M&A advisors.  Through our vast experience in negotiating and dealing with both up and down cycles, we offer tailored, suitable advisory solutions in different funding environments. We understand the difficulty of today’s fundraising environment and provide our independent, professional solutions suited to your startup’s funding needs.

IGPI Singapore can support your company in its business development and maximize its chances of success – Get in touch with us here!   

About the author

Mr. Erwin Thio is the Senior Manager of IGPI Singapore. His areas of expertise are in M&A deal management (both buy-side and sell-side), deal structuring, valuation and commercial due diligence, market analysis, and project management. He has also spent several years working within the investment and fund management (particularly for Real Estate Private Equity Funds) division of major developers such as Mapletree, Lendlease, Savills IM, and CFLD, where he helped with deal execution and origination, capital raising, fund creation/ development, and management.

Mr. Marcus Tan is an Associate of IGPI Singapore. He has started his career with IGPI. He graduated from Singapore Management University with a Bachelor of Business Management, majoring in Finance. During his time in university, he has gained overseas internship experiences in the chartering and offshore industry.

 About IGPI

Industrial Growth Platform Inc. (IGPI)  is a premium Japanese management consulting and M&A advisory firm headquartered in Tokyo with offices in Singapore, Hanoi, Shanghai, and Melbourne. IGPI has 14 institutional investors, including prominent Japanese mega-corporations such as Nomura Holdings, SMBC, KDDI, Recruit, and Sumitomo Corporation to name a few.

IGPI has vast experience in supporting Fortune 500s, Govt. agencies, universities, SMEs, and startups across Asia and beyond for their strategic business needs such as market entry and growth strategies, various aspects of M&A, innovation advisory, new business creation, etc. IGPI is consciously an industry agnostic firm (work in 10+ industries) and this coupled with its making its venture investments (30+ till date) adds to its uniqueness. IGPI has a JV with the Japan Bank of International Cooperation (JBIC) – one of JV’s initiatives is a VC fund in Europe (EUR 100mn fund) with participation from Honda, Panasonic, and Omron.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

The Startup Ecosystem in Southeast Asia Moves to the Next Stage

In Southeast Asia, the rapid proliferation of the Internet and smartphones in the 2010s, combined with the emergence of a middle class that has accompanied sustained economic growth, has spawned numerous startups that provide digital services that take advantage of the internet and mobile devices. Some of these ASEAN startups, such as Grab and Gojek, have become major regional platform companies, and some Japanese companies have been trying to create innovation in the region through strategic alliances with such platform companies.

In particular, the startup ecosystem in Southeast Asia is becoming more mature in the 2020s, and the assumptions have changed from those of the 2010s.

First, from a macroeconomic perspective, the attractiveness of the region is increasing due to the demographic dividend and the rise of the middle class, and the size of the Internet economy is growing more than fivefold, from $32 billion in 2015 to $174 billion in 2021.  

Moreover, investments in startups have seen a significant increase. The market, which had $0.5 billion in investments and 98 deals in 2013, skyrocketed within less than a decade to $10.4 billion and 929 deals in 2022 (Graph 1). The number of unicorns also increased to 30 as of September 2023 (Table 1).

Graph 1. SE Asia capital invested by year, $B and deals done #^[1]

Table 1. The list of unicorns in Southeast Asia Region (as of September 2023)^[2]

With the rise in investment amounts, deal counts, and the number of unicorns, both entrepreneurs and investors have gained substantial experience. This has resulted in a substantial support network for startups, including incubators and accelerators, with a wealth of experience to offer.

The business areas in which startups operate are also gradually shifting from the previous B2C focus on solving individual problems to B2B services such as fintech, logistics, and business efficiency, although still for SMEs. Of course, the majority of companies are still engaged in B2C businesses, but the number of companies engaging in B2B businesses is increasing.

In summary, the growth of the startup ecosystem in Southeast Asia is transitioning to the next stage. Within this transformation, Singapore, functioning as an innovation hub in Southeast Asia, has ascended from 18th place in the latest Global Startup Ecosystem Ranking by Startup Genome (2022) to 8th place (2023), further solidifying its presence.

Three Opportunities for Japanese Companies

For Japanese companies, Southeast Asia is becoming not only attractive as a “manufacturing base” but also as a “consumer market” and even as an “innovation base”. We believe there are three opportunities for Japanese companies in Southeast Asia as a base for innovation.

First, Japanese companies can leverage their technology and the local ecosystem to create business opportunities that will help solve issues in Southeast Asia.

For example, Santen Pharmaceutical provided new products and services through joint development with local research institutions and collaboration with local startups to solve the Southeast Asian issue of high myopia rates. Despite the high prevalence of myopia in Southeast Asia, there is an overwhelming shortage of ophthalmologists relative to the population, and people suffering from eye problems do not have enough access to the diagnosis and treatment they need. Santen Pharmaceutical therefore established a local R&D base and conducted joint research with the Singapore Eye Research Institute (SERI). By combining SERI’s myopia-related research results with Santen Pharmaceutical’s medicine development know-how, a new medicine was developed to suppress the progression of myopia. In addition, the company has formed a strategic alliance with Plano, a Singapore-based startup that has developed a smartphone application to prevent myopia in children, to provide a comprehensive management application to solve the issue of myopia.

Secondly, Japanese companies can utilize Southeast Asia as a testing ground for their technologies, accelerating innovation.

The strictness of Japan’s regulations and the slowness of the approval process for new business ventures is frequently highlighted. One notable benchmark to consider is the Doing Business 2020 ranking^[3]. According to this ranking, Japan is placed 29th. In contrast, Singapore holds the 2nd position, Malaysia the 12th, and Thailand the 21st. This suggests that in certain aspects, Southeast Asia may offer a more favorable environment for conducting proof-of-concept projects for new businesses.

In fact, foreign startups with innovative technologies face barriers in the form of regulations when attempting to enter Japan. For instance, CarbonCure, a Canadian startup with technology to produce concrete that absorbs CO2, highlighted the challenges in business expansion in Japan during an interview with Japanese media. Compared to countries like Singapore, they mentioned that regulations in Japan, especially in terms of approvals, are notably stringent and time-consuming.

In this regard, it makes sense to conduct verification and experimentation of one’s own technology in Southeast Asia, where regulations are relatively more relaxed compared to Japan. There are also some programs that Japanese companies can make use of in conducting PoC projects in the region. Through the “Asia Digital Transformation (ADX) Project in Japan-ASEAN” supported by JETRO, which IGPI helped establish, Japanese companies collaborate with ASEAN companies and institutions, aiming to address economic and social challenges in Japan and ASEAN by leveraging digital technologies and other innovations. In the recent third call for proposals in 2022, 28 projects were selected for support (Table 2).

Table 2. The result of the call of Asia Digital Transformation (ADX) Projects in 2022^[4]  

Third, Japanese companies can address societal challenges within Japan by extending the approach used to tackle social issues with digital technology in Southeast Asia.

For example, Singaporean startup SWAT Mobility, founded in 2016, has been providing innovative transportation solutions primarily in Southeast Asia. Since its expansion into Japan in 2020, the company has been promoting innovation in public transportation in rural areas to address the issue of insufficient mobility options for elderly residents. Starting with a verification project in Kitakyushu City, they have continued verification experiments across various locations in Japan, including Nagano Prefecture and Osaka Prefecture. Their new mobility solution, enabling on-demand vehicle services using algorithms and technology, contributes to Japan’s efforts in promoting DX in regional cities.

The Key to Success in Partnering with Local Startups Is to Clarify Your Company’s Issues

In order to seize such opportunities, forming partnerships with promising local startups is an effective strategy. Initiatives such as organizing pitch events locally or investing in local funds as limited partners are seen as entry points for this. It’s important to note that we’re not discrediting the effectiveness of these initiatives themselves, but we should be mindful of not losing sight of the ultimate goal and turning these means into ends. To drive successful innovation through partnerships with promising startups, it’s essential to begin by clearly defining your company’s challenges. This entails formulating hypotheses for viable business models and identifying the necessary technologies that are lacking within your organization to realize these hypotheses.

An illustrative example of successful collaboration between a Japanese corporation and a local startup, facilitated by IGPI, involves the enhancement of the corporation’s display solution through the integration of pedestrian traffic data analysis technology of the startup. This enhancement led to a solution that generated revenue expansion ideas based on the analysis results. The Japanese corporation had initial hypotheses to improve their in-house solution. Consequently, upon discovering a startup with the requisite technology to realize their hypotheses, they promptly made decisions and advanced toward detailed partnership discussions.

Certainly, during exploration activities, there are cases where discussions about partnering with local startups begin without clearly defining your company’s challenges. Even in such cases, it’s important to formulate hypotheses as soon as possible about what your company wants to achieve using the technology of the startup. One Japanese construction giant, for instance, initiated an approach with a local startup without hypotheses about the business model. However, with support from IGPI, they managed to formulate a hypothesis of a joint venture scheme to bid on construction projects in Southeast Asia together, leveraging the strengths of both companies (the Japanese company’s brand and the local company’s license). As a result, they made progress in partnership discussions with the startup.

How can IGPI Singapore help?

Since its establishment in 2013, IGPI Singapore has been supporting many Japanese companies for market research, strategy planning, execution support including partner search and approach, ideation, and related training for new business creation in Southeast Asia.

IGPI Singapore has a wealth of experience in selecting and partnering with local partners, and can lead your company to a successful alliance with a local partner through an approach that has the following characteristics:

◆ Comprehensive partnership considerations that envision the desired outcome through collaboration, based on a thorough understanding of the market and your company’s objectives/issues
◆ Selection of potential partners with a focus on achieving partnership objectives and eliminating subjectivity
◆ Involvement of local staff to conduct in-depth research on real trends in each country’s market and potential partners

Get in touch with us here  on internationalization, strategic planning, and fundraising-related topics!   

[1] Source: CENTO VENTURES：Southeast Asia Tech Investment – 2022

[2] Source: CB Insights – The complete list of unicorn companies

[3] Doing Business captures several important dimensions of the regulatory environment affecting domestic firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency

[4] Source: ADX Projects Briefing Materials, August 2022, JETRO

About the author

Mr. Jongwoo Lee worked for a Japanese general IT consulting firm, where he was involved in numerous projects such as business planning and implementation support, new business planning, operational efficiency improvement, and business management enhancement support in a wide range of industries including trading companies, energy, manufacturers, automobiles, and systems, etc. After joining IGPI, he has extensive experience in new business creation in Southeast Asia, including the development of new business models and strategies for expanding sales of new solutions in the Southeast Asian market, and the study of new business entries for local companies in Southeast Asia.

Graduated from the University of Tokyo, Faculty of Economics. Japanese Certified Public Accountant

 About IGPI

Industrial Growth Platform Inc. (IGPI)  is a premium Japanese management consulting and M&A advisory firm headquartered in Tokyo with offices in Singapore, Hanoi, Shanghai, and Melbourne. IGPI has 14 institutional investors, including prominent Japanese mega-corporations such as Nomura Holdings, SMBC, KDDI, Recruit, and Sumitomo Corporation to name a few.

IGPI has vast experience in supporting Fortune 500s, Govt. agencies, universities, SMEs, and startups across Asia and beyond for their strategic business needs such as market entry and growth strategies, various aspects of M&A, innovation advisory, new business creation, etc. IGPI is consciously an industry agnostic firm (work in 10+ industries) and this coupled with its making its venture investments (30+ till date) adds to its uniqueness. IGPI has a JV with the Japan Bank of International Cooperation (JBIC) – one of JV’s initiatives is a VC fund in Europe (EUR 100mn fund) with participation from Honda, Panasonic, and Omron.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

This article aims not to delve into these technicalities but rather to provide insights on high-level topics, such as the “sophistication of business activities”, “transformation in the workstyle of business professionals”, and “societal shifts and business opportunities” due to the advent and proliferation of generative AI.

The Overall Picture of Generative AI in Business

There are several conceivable patterns for utilizing generative AI in business. The following chart illustrates the broad overview.

As shown on the left, while there are four layers to the value proposition of generative AI, most businesses will likely engage primarily with the topmost “Application Layer”.

The diagram on the right breaks down this Application Layer further, emphasizing that, depending on the target area of operation and level of customization, there are a plethora of use cases.

It is anticipated that there will be a surge in use cases related to “Fine Tuning”. Notable strides by OpenAI and its partner companies to offer AI services for businesses mean that enterprises can soon develop AI services optimized for their own tasks and operations without security concerns by training on their own data.

Value Proposition of Business Professionals in the “With Generative AI” Era

i) Delivering Value as a Business Professional with AI

Every business professional’s job can essentially be defined as “problem-solving”, which can be broken down into a five-step process:
1.   Identifying the problem.
2.   Formulating a solution hypothesis.
3.   Testing the hypothesis.
4.   Updating the hypothesis.
5.   Making decisions.

Generative AI excels at steps 2 and 3 and can manage step 4, though with limitations when it comes to ChatGPT due to outdated or inaccurate data. Nevertheless, using metrics like plug-ins can ameliorate these limitations to some extent.

In the “With generative AI” era, two major takeaways emerge for business professionals. Firstly, the value of AI-non-compliant steps 1 and 5 will rise. Secondly, for 2 to 4, rather than AI entirely replacing human tasks, humans will collaborate with AI to dramatically boost productivity—a point often overlooked.

Many people often debate statements like “Job A will be replaced by AI, but Job B will remain.” However, every process requires judgment, and judgment inherently comes with responsibility. Given the current legal system, where AI cannot bear legal or economic responsibility, any task involving judgment will always necessitate human involvement. Therefore, the crucial question is not “Which jobs will be replaced by AI?” but rather “In which tasks, and how, can humans leverage AI to dramatically enhance their own productivity?”

ii) Message to Leadership

To be a valuable leader in the future, it’s essential to: define problems, decide what not to tackle and focus on high-impact areas, and be prepared to take responsibility.

As top talents become more productive with AI tools, they may be more inclined to go independent. To retain them, businesses will need to empower these individuals with unique assets.

The potential use cases for ChatGPT are still evolving. Companies may need to innovate in-house, and leaders should encourage bottom-up initiatives for finding use cases.

– Embrace a blacklist approach over a whitelist, defining what shouldn’t be done and letting departments decide on their best use cases.
– Foster inter-departmental competition and sharing of success stories, which can catalyze a DX (Digital Transformation) culture within the company.
– Some data suggests frontline staff may be more cautious about introducing ChatGPT than executives. Ensuring psychological safety for these employees is paramount.

iii) Message to Staff member

Everyone now essentially has an excellent AI assistant at their disposal. Work with them, and try to solve higher-level problems.

Essential skills for this new landscape include: the ability to frame issues, proficiency in one’s native language (preferably English), and the courage to provide sharp insights.

AI can be the best mentor or coach. They’re always available, always patient, and customizable in their feedback style.

On the other hand, transitioning between industries or roles might become more challenging. The future might require investing in new experiences like internship programs and reaping the benefits once one climbs the ladder.

Societal Shifts and Business Opportunities with the Advent of Chat GPT

Throughout history, numerous cutting-edge technologies have tackled and resolved societal challenges. Conversely, reflecting upon the past, we realize that while these tech innovations emerged to solve existing issues, they sometimes inadvertently introduced new dilemmas. Most likely, people from the 2010s never anticipated that the then-innovative technologies of smartphones and social media platforms could lead to pervasive feelings of anxiety and stress due to excessive interconnectedness.

Lastly, I’d like to delve into the potential societal transformations stemming from the widespread adoption of Chat GPT, a particularly notable generative AI, and the resultant business opportunities that may arise.

i) It will become commonplace for humans to interact with each other through AI assistants.

In the foreseeable future, it might become common for individuals to relay their messages to a generative AI, which would then reformulate them into more polished communications before delivering them to the recipient. The recipient might then utilize another AI to craft a response. For instance, when sending an email in the local language to an overseas executive, many business professionals might rely on ChatGPT to ensure their messages remain courteous and error-free. Eventually, human involvement might merely entail approving, disapproving, or requesting modifications to AI-generated message drafts. There is a school of thought that suggests that human agency might become confined to something akin to the “free won’t” concept proposed by Benjamin Libet’s experiments on free will.

The following business opportunities might arise in this scenario:  
– Development of services to construct “person-specific” message/response via personal AI.
– Creation of applications allowing humans to manage and edit AI-generated content.

ii) Humanity’s linguistic ability (prompting skills) improves

Technology not only supplements human abilities but often reshapes them. As interfaces evolved, so did humanity’s skills in blind typing, keyword searching, and concise writing within 140/280 characters.

With the widespread use of ChatGPT’s interface, there might be an enhancement in humanity’s skills to pose low-context questions or make requests. Paradoxically, a “prompt divide” may arise between those with high and low prompting skills. As societal systems are generally designed for the majority, services in the future might be primarily tailored for those with elevated linguistic capabilities. For example, those who can’t engage in chat-centric communications, like the trending “Chat Commerce”, might find themselves unable to access a vast array of products and services.

Business opportunities in this domain might include:
– Development of new customer journeys starting with user prompts.
– Establishment of communities where individuals compete, share, and boast about their prompting skills.
– Offering training sessions for those with weaker prompting abilities.

iii) Talented professionals increasingly operate independently, utilizing AI as staff

As previously highlighted, the explosion in productivity potential due to generative AI hints at the likelihood of top-tier managers, who previously oversaw human subordinates, embracing this cost-effective tool and venturing independently.

Prospective business opportunities here might encompass:
– Developing generative AI platforms tailored to support the jobs of freelancers.

iv) The search & advertisement revenue model collapses, and writers refrain from public dissemination

Traditionally, a bulk of web content was monetized by integrating relevant ads, providing incentives for writers and creators.

However, the current landscape lacks a mechanism to compensate creators of blogs or web articles that have been incorporated into generative AI, leading to a situation where content providers aren’t duly rewarded.

Such circumstances might eventually cause the collapse of the ad-driven model based on search engines. Consequently, writers and creators might confine their publications to closed platforms (like online salons) that aren’t reached out to by web crawlers.

Emerging business opportunities could involve:
– Establishing platforms that manage and offer intellectual property rights and revenue-sharing incentives for writers.
– Innovating data security solutions for these enclosed spaces.

How can IGPI Singapore help?

IGPI has deep experience in strategizing, developing, analyzing, and implementing cutting-edge technology into your business. We have a team that focuses on AI/Analytics strategy: IGPI Digital Intelligence. We don’t just suggest the implementation of technologies into your operation, but co-develop your business by leveraging technologies hand in hand.

To find out more about how we can support your value-creation endeavors, get in touch with us.

IGPI Singapore offers a range of services to support Singapore businesses in their overseas expansion. Services can be broadly divided into:
◆ Management consulting, where we help companies identify growth opportunities, develop strategies to establish a presence in the target market. In the process, we often employ business matching techniques to find suitable local partners which could be crucial to successful market entry
◆ M&A advisory, where we guide companies through the end-to-end deal process, ensuring successful transactions

IGPI Singapore can support your company in its business development and maximize its chances of success – Get in touch with us here.      

About the author

Mr. Tadasuke Noguchi is a Manager at IGPI Singapore. Before joining IGPI, Tadasuke worked in an IT company and a think tank in Japan, where he engaged in consulting projects such as new business development in various industries: automotive, logistics, retail, finance, etc. He has experience in hands-on new business development while on loan to Toyota Motor Corporation’s R&D department. In IGPI, He mostly focuses on consulting projects such as market entry/expansion in the ASEAN market, M&A advisory, and the formulation of long-term visions. Tadasuke graduated from the University of Tokyo with a B.A. in Language and Culture and acquired a certification from the Graduate School of Public Policy of The National University of Singapore. He enjoys traveling and has visited around 50 countries.

 About IGPI

Industrial Growth Platform Inc. (IGPI) is a premier Japanese business consulting firm with presence and coverage across Asian markets. IGPI was established by former members of Industrial Revitalization Corporation of Japan (IRCJ) in 2007. IRCJ, a US $100 billion Japanese sovereign wealth fund, is known as one of the most successful turn-around funds supported by the Japanese government.

In 2017, IGPI collaborated with Japan Bank for International Cooperation (JBIC) to form JBIC IG, providing investment advisory services and supporting overseas investment. In 2019, JBIC along with BaltCap has jointly established Nordic Ninja, a €100 million venture capital fund to focus on deep tech sectors such as autonomous mobility, digital health, AR/VR/MR, artificial intelligence, robotics and IoT in the Nordic and Baltic region. In 2019, IGPI established IGPI Technology to focus in the area of science and technology. The company invests in technological ventures and provides hands-on management support. The company also provides business development support towards commercialisation and monetisation of technologies.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

Highly priced and rare coffee shops Only 400 coffee shops can be transacted

Alongside housing, the sale and purchase of coffee shops are increasingly reported in the press. Coffee shops are a collection of several small-scale eating and drinking establishments located usually on the ground floors of the busy town centre, HDB, and industrial estates. Many of which are owned by private companies and individuals, in contrast to “Hawker Centres” which are owned by the National Environment Agency (NEA). In June 2022, the news of the Eastern 21 Street Eating House in Tampines being sold for S$41.6 million (approximately JPY 4 billion) and KPT Kopitiam in Yishun in the north for S$40 million (approximately JPY 3.9 billion) hit the headlines. More surprisingly, both coffee shops were sold at a new historical high price. The Tampines coffee shop was purchased from the Housing and Development Board (HDB) for S$3.45 million (approximately JPY 330 million) in 1992, and 30 years later, it was sold for 12x the price, while the Yishun coffee shop was purchased for S$6 million (approximately JPY 580 million) in 2007 for 15 years after it was sold for nearly 7x the price. It is also astonishing to note that the acquisitions are leasehold (fixed term usage) and not freehold (unlimited term usage) and that the selling prices are comparable to a ground-floor shop in a prime location on Orchard Road, Singapore’s busiest shopping street (Figure 1).

Coffee shops are like a ‘second kitchen’ Coffee shops perform well in the COVID-19 pandemic

What measures can be taken to increase the profitability of coffee shops? It is vital to implement measures without thinking outside the box.

A need to fully understand the industry structure and consumers’ purchasing behaviour Start with the daily use of coffee shops

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In Australia, the minimum weekday wage is over 2,000 yen per hour with up to doubled hourly rates on Sundays

Population density of Australia is 1/100 of Japan. Automotive industry driven out of business by Dutch disease

1) Investment and management policies with good intentions that support low population density

There are many industries that are not suitable for countries with low population density. Cell phone base stations, EV charging facilities, retail chains, and public transportation are some examples of extremely inefficient investments when population density is low. In Australia, there are existing policies to ensure minimal unsound or unnecessary investments or operations in these areas.

For example, only Sydney and Brisbane have train services from the international airport to the city center, while other airports offer cab or bus services. In addition, many gas stations are unmanned, and retail stores are closed at times of the day when customer traffic is low.

2) Technology to support low population density

In Australia, a number of technologies have been developed to support low population density. For example, there are innovative technologies to support the operation of gyms that are open 24 /7 or to automate agriculture. Among these, a company that provides IoT technology called Myriota is attracting particular attention. Starting as a spin-off venture from the University of South Australia in 2015, the company aims to build a large-scale, low-cost, low-power consumption satellite communications network using nano-satellites. Its technology is currently being used in a wide range of applications, from monitoring wind farms to water tanks on farms.

It has raised more than A$50 million in funding to date, and investors include Innov8, a Singapore-based venture capital firm run by SingTel, one of Asia’s largest telecommunications companies, and HorizonX, Boeing’s venture capital arm.

3) Role of the federal and state governments in supporting the creation of new industries

A key factor in creating new industries in Australia is the federal government’s management of industry portfolios and state governments’ focus on specific industries. For new industries, startups in each state’s region focus on a specific business area, such as FinTech in New South Wales, AgriTech and HealthTech in Victoria, and CleanTech and SpaceTech in South Australia.

Moreover, each state governor has made efforts to develop their cities to maximize the growth of the industries they are focusing on. For example, in South Australia, the incubation hub Stone & Chalk is located within walking distance of the University of South Australia, the University of Adelaide, and research institutes. Myriota, introduced in 2) above, is also a university startup born in such an environment.

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Products have lifecycles

A product has a lifecycle, which may be long or short depending on its characteristics, as shown below.

The lifecycle of introduction, growth, maturity, and decline is easy to understand if we compare it to the life of a human being. Naturally, infants and adults, as well as the young and old have different values and use money differently. In the case of business, our way of looking at sales and profits should also be different, as shown in the figure below.

Management styles differ depending on the stage of the lifecycle

 During a period of decline, fact-based, top-down decision-making is required to determine whether to remain in the declining market or to withdraw from it. Making a decision to withdraw from a declining market, even if it is an inherited business or still profitable at that point in time, requires autocratic management.

Ageing of organisations is inevitable

Architects are unlikely to be born from a well-developed organisation

• Able to draw a vision from a blank sheet of paper
• Consider all facets of the company
• Possess the ability to think in solitude
• Free from constraints of existing ‘common sense’ and rule in their thinking
• Able to incorporate a personal touch to their company

Innovation and new ideas are needed at various levels and in various situations

Governance reform to bring diversity to the management is important

Issues are occurring on-site

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