Transforming failures into opportunities through trust in Japan

In April 2023, the world witnessed a pivotal moment in Japan’s space exploration programme. ispace, a Japanese startup, undertook the ambitious mission of making the first private probe touchdown on the moon.

Although the mission ultimately ended in failure, the response from Chief Executive Takeshi Hakamada was unconventional and refreshing. Rather than dwelling on the setback, Hakamada highlighted the achievement of obtaining valuable data, portraying the failure as a significant step forward for future missions. This rare perspective on failure is a beacon of change in a society where failures are traditionally treated as taboos.

Japan has long been known for its societal aversion to failure, which manifests throughout life, from education to career pursuits. The emphasis on avoiding mistakes and consistently delivering the correct answers has been deeply ingrained in the culture.

The consequence is a society that is less forgiving to those who have encountered setbacks, often making it challenging for individuals to rebound and improve. In this environment, failure becomes an obstacle and a recipe for further setbacks, hindering progress and innovation.

The reluctance to embrace failure has held back entrepreneurship in Japan. According to a survey of venture enterprises conducted by the Venture Enterprise Centre, the most frequently cited requirement for increasing entrepreneurship in Japan is a change in “consciousness, culture and trends.” The deeply rooted practices of lifetime employment and seniority-based systems are barriers to fostering a culture that encourages risk-taking and learning from failures, hampering the country’s ability to compete globally.

The Global Innovation Index (GII) 2023 rank Japan as the 13th most innovative economy globally. While it is a commendable position, sustaining and improving this ranking necessitates a fundamental shift in the societal attitude towards failure. Embracing failure not as a deterrent but as a catalyst for growth and innovation is crucial for Japan to unlock its full potential and compete effectively in the dynamic global innovation landscape.

Recognizing the imperative for change, the Japanese government launched the “startup incubation five-year plan” in November 2022. The plan aims to invest 10 trillion JPY ($6.7 billion) in startups by 2027, creating 100 unicorn companies and 100,000 startups to position Japan as Asia’s leading startup hub. While progress has been made, challenges persist in terms of funding and the number of unicorns, with Japan currently trailing behind the United States and the United Kingdom.

The sense of urgency for change is the same for the Japanese companies. Keidanren, one of the most influential business associations in Japan, acknowledges the importance of strengthening the startup ecosystem as a way to accelerate innovation for implementing digital transformation and green transformation to ensure sustainable economic growth in Japan. According to Nikkei Asia, 13 unlisted startups are approaching unicorn status, the highest number to date but those that have made it remain in the single digits, way behind the United States, China and India.

Despite these challenges, there are instances where Japanese innovation has shone on the global stage. In December 2023, Aillis, a company specializing in artificial intelligence-assisted influenza diagnosis, won the Startup World Cup held in San Francisco. This victory not only showcased the potential of Japanese startups but also underscored the importance of a supportive environment for them to thrive internationally. In addition, two Japanese companies, TBM and Tier IV, have recently joined the World Economic Forum’s unicorn community.

As argued by Mariana Mazzucato in her book Mission Economy: A Moonshot Guide to Changing Capitalism, innovation is not only for business. The key is to apply innovation to societal goals and structure government policies (including the budget), mobilize and engage universities and civil society more explicitly for the long-term, as NASA’s moon programme did so that we can create a new ecosystem for innovations and turn failures and learnings into opportunities for growth and prosperity.

Addressing these challenges requires trust-based coordination and collaboration between the public and private sectors and other society stakeholders. A collective effort on a large scale is necessary to transform the mechanism that governs value distribution.

Innovation comes with failures and the failures are the sources for the next success. Japan stands at a pivotal juncture in its innovation journey. The ability to transform its societal attitude towards failure and cultivate a culture that encourages risk-taking and adaptation will determine its future success on the global stage.

The country has an opportunity to create a new ecosystem for innovations and turn failures and learning into opportunities for growth and prosperity. It is crucial to establish trust-based coordination and collaboration between the public and private sectors as well as other stakeholders in society.

First, it must also structure government policies – including the budget – to support innovation necessary to address societal issues. Second, a collective effort on a large scale is needed to transform the mechanism that governs value distribution. Third, it must seek to mobilize and engage universities and civil society more explicitly in the long term, just as NASA’s moon programme did.

By learning from setbacks, fostering a supportive environment for innovation and providing avenues for individuals and enterprises to rebound from failures, Japan can unlock its full potential and secure its place as a critical force in the global innovation arena.