The New Wave of Startups Pioneered by Cerevo, a Connected Hardware Company: Interview with Takuma Iwasa, Cerevo (Part 2)

Continuing from last time, we hear from Cerevo's Takuma Iwasa alongside Tomonori Kagaya. Iwasa shares his thoughts on the environmental and technological shifts enabling the success of lean hardware manufacturers, the talent needed going forward and how to cultivate it, and collaboration with large corporations.

The Speed of Hardware Startups That Major Appliance Makers Lack

Kagaya: How many people are at Cerevo now?

Iwasa: We've grown significantly. When I came to work today, there were about five unfamiliar faces—new hires from yesterday (laughs). We expect to reach 54 employees by April 2015. We have four core roles: electrical design, embedded software, design/mechanical engineering, and front-end application development. Typically, we form units of four people to develop a single hardware product. Currently, the company is simultaneously developing six to seven hardware products.

　Separately, we've started a startup support unit. We assist hardware startups moving into DMM.make AKIBA with design support and help launch their products into mass production. Startups often lack the know-how for mass production and struggle to take that final step. We introduce them to components we've already used successfully and coordinate connections with various people.

Nakajima: Major manufacturers are interested in this approach to manufacturing. Dentsu Inc. gets inquiries almost daily from new business divisions of global manufacturers. But it feels like they're struggling with how to take on new challenges in the era of connected hardware.

Kagaya: For large companies, the order of magnitude of production runs is different. Targeting a global niche market with just a few thousand units is probably impossible and difficult for them.

Iwasa: For most of our products, we recoup the costs from the day we decide to produce 3,000 to 5,000 units until the launch date. With 5,000 units, we can fully recover costs, and for some products, 3,000 units is enough. Having come from a major manufacturer myself, I understand painfully well why they struggle. The time from deciding to act to actually starting is long, and labor costs are high. Simply put, if five people spend a year on planning and review, that's tens of millions in labor costs, plus further expenses for development. To recoup that, you'd need to produce at least tens of thousands of units.

Kagaya: The manufacturing process has evolved significantly, enabling things that were impossible with small teams before.

Iwasa: That's definitely true, and I think other factors play a role too. Technological innovations that reduce development time—what used to take a year can now be done in half—significantly help control labor costs. Factories adapted to this new manufacturing approach are also increasing. In logistics and distribution, we've moved from an era where retailers would say, "We don't stock products from companies like Cerevo because we've never heard of them," to one where consumers now seek choices beyond major manufacturers. Interesting products from lesser-known makers are increasingly being stocked. For mass retailers, selling distinctive products rather than standardized ones offers the advantage of avoiding price wars.

Nakajima: That's where Cerevo's value lies, right?

Iwasa: Customers have transformed—they'll buy products even without a brand name if they have the desired functions or form factor. Retailers, too, have shifted their mindset: they're now willing to stock unique items from unknown manufacturers without discounting, anticipating customer demand. Elements like the ability to create products quickly and easily, coupled with the emergence of factories that assemble them, have all developed almost simultaneously, forming an ecosystem.

Nakajima: So the manufacturing side and the consumer side have meshed well.

Iwasa: Global logistics and payment systems have integrated into this mix, and I feel the entire system is now moving at full speed. I also believe international media relations are supporting this ecosystem. For instance, at CES, Gizmodo US covers the event, and within 24 hours, a translated article appears on Gizmodo Japan, spreading globally. People from various countries who see the article then rush to cover the story themselves – this cycle is accelerating dramatically.

Kagaya: So the changes happening in the world of internet information are now rapidly extending to physical products and hardware too.

Nakajima: And the recipients are also discovering interesting products through websites and media that cover them, making them topics of conversation.

Kagaya: But I think we're still just at the beginning of this ecosystem shift, and it's going to change even more dramatically from here.

How to Cultivate Young Talent Who Understand the Entire Business

Nakajima: I think the qualities we seek in teams and members are also changing. In startups, being multi-skilled is extremely important; you can't function without it. What kind of people do you think will be needed going forward, Iwasa-san?

Iwasa: For Cerevo, and indeed for Japan as a whole, the talent we need to cultivate early on are people who understand everything. And they need to be young. For example, someone who worked in design, software, and production at an appliance manufacturer, was then sent overseas for sales, returned to become the head of a product division, and is now an executive officer – that person understands everything and also has a network with the media. It's entirely possible to cultivate people in their late 20s to 30s who can see the whole picture, not just those in their 60s nearing retirement. If we create many such people quickly and organize them, Japan's competitiveness will rise.

Kagaya: It feels like things are becoming more specialized these days.

Iwasa: Specialized professionals will develop on their own if left to their own devices. Japanese people, by national character, tend toward being specialists or craftsmen focused on specific tasks. But relying solely on that means we'll just be used, resulting in Japan becoming merely a major development hub for companies like Dyson or Apple. We need to produce second and third generations of figures like Konosuke Matsushita and Akio Morita. I believe the key to rapidly building major manufacturers from scratch lies in young people who understand everything.

Kagaya: How should we cultivate such talent?

Iwasa: Get them to start hardware startups as quickly as possible and provide them with funding. Starting early means they'll immediately face challenges like how to handle procurement and sales.

Everyone will definitely fail, and I believe failure is the best teacher.

Nakajima: Since funds and capital providing that environment are increasing, if they become more active, many opportunities will be created.

Iwasa: For example, if 100 hardware startups in Japan raise over 50 million yen each, we'll definitely see at least 100 young people emerge who truly understand the field. If we persistently build this, it could become quite significant. Not all 100 will succeed. Even if only 5 succeed, about half of the remaining 95 will likely try starting another venture. The remaining 40 or so become the talent we desperately want, ready to work with us immediately.

　Even when talking with executives at major manufacturers, they express a need for such talent. Large companies lack career paths that promote individuals approaching 30 to become division heads, and their existing HR systems cannot cultivate young talent with comprehensive expertise. Internal incubation departments are one option, but I always suggest creating a special forces unit. For example, the military has career paths, but special forces units exist beyond those established paths. Their training, equipment, the toughness of their missions, and their compensation are entirely different. Even young members gain incredible experience in no time. I believe we should create a system to identify outstanding individuals and place them on this special career path.

Kagaya: If people who gain experience there move back and forth, it would also build depth across the organization.

Iwasa: I think it would also help rejuvenate the management ranks. Even if a young person is promoted, if everyone knows what kind of track record they achieved in the special forces, others will accept it. It would be interesting to create a system where people who are asked, "You're up for the challenge, but are you motivated?" and say yes, deliver results, get recognized, and climb the career ladder at an incredibly fast pace.

Collaboration Between Large Corporations and Startups

Nakajima: Cerevo has launched the cloud-based listening device "Listnr" in collaboration with Panasonic. I often hear people say they want to create many examples where collaboration between large companies and startups happens naturally and actively. Do you have any advice?

Iwasa: What I always ask of large corporations is to send their elite teams to Cerevo to work on development together. My logic is this: top-tier talent from large corporations is exceptionally capable. If you free them from writing reports and proposals, they'll naturally produce great products on their own. All you need to do is periodically say things like "This is good enough," "Let's move forward quickly," or "Let's stop deliberating now." By swiftly separating top talent from the large corporation's decision-making and deliberation processes, I believe truly collaborative results between large corporations and startups can emerge.

Nakajima: In a project I previously assisted with, a large corporation took on the challenge of compressing the review, development, verification processes, and release decision meetings. This resulted in significant time savings and successful productization. Increasing such cases where outstanding startup members are added to projects to work together, detached from existing processes, is crucial.

Iwasa: Since employees at large corporations tend to work based on their superiors' expectations, removing those superiors is crucial. If someone is seconded to Cerevo, it's essential to assign someone who isn't from the large corporation to handle reporting and evaluations. This approach allows them to learn the speed and methods of startups.