What is the "Buddy Principle" that Japanese SMEs need?

In 2017, Forbes JAPAN—the Japanese edition of the globally beloved business magazine—and Dentsu Inc. launched a project called the "Small Giants Award" to discover promising small and medium-sized enterprises (SMEs) across Japan.

To mark the project's fourth year, we are launching a series of columns featuring Masaharu Fujiyoshi, Editor-in-Chief of Forbes JAPAN, and Makoto Sasagawa of Dentsu Inc. Solution Development Center, who also served as a judge for the Small Giants Award. This first installment features a contribution by Mr. Fujiyoshi.

Planning = Makoto Sasagawa (Dentsu Inc.)

"We don't have money" and "We don't have enough people" are heartfelt complaints heard everywhere, regardless of an organization's size (and they often escalate into dissatisfaction and grumbling directed at superiors). To make matters worse, the COVID-19 pandemic has added the worst possible element: "uncertainty about the future," plunging the world into hardship.

Yet, precisely because of these adversities, I want to introduce the concept of "Small Giants."

Even with limited money and manpower, some people make a huge leap and succeed. The environment may be terrible, but it's still possible to create work that impacts the world.

Take the classic story of the underdog organization defeating the giant. From the ancient tale of "David and Goliath" to the low-budget MLB powerhouse built in 'Moneyball'. These aren't miracles; there are "reasons and processes" leading to victory. In the military world, this is called "strategy".

Ever since reading Moneyball in 2004, I've kept wondering: Couldn't we create a corporate version of this "team that wins without money"? In other words, a corporate "strategy of war."

Ten years later, I became involved in the launch of Forbes JAPAN. Three years ago, we started an award event called "Small Giants" in the magazine. This idea came to me while discussing the "problem of untapped potential" with Makoto Sasagawa, Creative Director at Dentsu Inc. Solution Development Center.

Japan has many companies that are unknown and ignored by the media, yet possess hidden potential that could compete globally. To elevate Japan's overall standing, shouldn't we shine a spotlight on precisely these companies? As we continued this conversation, a joint project between Forbes JAPAN and Dentsu Inc. began.

Its name: The Small Giants Discovery Initiative

Companies that are small in size but have the value of giants.
The goal is to find companies tackling work that shapes the future. The criteria: SMEs founded over 10 years ago with annual sales under ¥10 billion. We called on discerning experts nationwide to recommend "future-oriented companies," then rigorously selected the best.

This January, in its third year, the national finals were held at Marunouchi Building Hall. Coverage of this event is featured in the Forbes JAPAN Small Giants special edition, released on March 25. While proofreading the galley proofs during final editing, I couldn't help but feel:

"Japan isn't so bad after all."
It struck me that now, amidst the adversity of the COVID-19 pandemic, is precisely when the Small Giants must step up.

In this series, I want to introduce the "Small Giants' Strategy" – how the Small Giants featured in Forbes JAPAN over the past three years have spread their wings globally.

The Man Who Transformed an Industry Everyone Said Was "Unprofitable"

Yanaka, Tokyo. Walking down a narrow alley through the old residential streets of downtown, you'll find a small, unassuming company. That's Takayama Medical Instrument Co., Ltd., with 30 employees. The company manufactures surgical instruments favored by top neurosurgeons worldwide. Specializing in blades like scissors, it also sells about 70 types of surgical instruments, including titanium spinal implants, in 35 countries.

Founded in 1905, President Takayama Takashi is the fourth-generation leader. Presented this way, it might seem like a sentimental story of "down-to-earth, hardworking downtown craftsmanship."

But that's not the point. The strategy that propelled the company to global expansion under Mr. Takayama's leadership is "standardization."

Takayama explains:
"When I entered this field 30 years ago, everyone in the industry said it wasn't profitable. But I wondered if that was really true."

Thirty years ago, the company had three employees and annual sales of 30 million yen. Incidentally, when Takayama entered high school, he chose the Tokyo Institute of Technology's affiliated school because "my sister was at a Tokyo Metropolitan high school, and I thought the national university's fees would be cheaper than the metropolitan school." This illustrates how challenging the environment was back then.

"When I was 18, finishing one small pair of forceps brought in 5,000 yen in sales. I thought, 'That's 1.5 million yen a month in sales – that's pretty profitable, isn't it?' I figured if we mass-produced these using machine tools, we could make even more profit. And for the demand issue, we could expand overseas. Western medicine isn't just in Japan, so we should be able to compete globally. That's what I thought."

The reason it was considered unprofitable was that "no one had the awareness that a market existed there." There was no concept of differentiating materials or products; the thinking only went as far as making something rust-proof. In other words, the mindset of incorporating customer needs was lacking.

The reason Takayama Medical Machinery Manufacturing's products later saw explosive sales growth was because they underwent the following two processes.

One was mechanization. Metalworking was considered a complex, manual craft, and mechanization was deemed impossible. At age 23, he traveled to a town in Germany bordering Switzerland with the mindset, "I'll tour factories in Germany, the heartland of this craft, and if any will hire me, I'll work there." Seeing manufacturers mechanized even with small teams there made him think, "If they can do this, I can do it myself in Japan." After returning to Japan, he purchased a computer and machine tools. Night after night, he worked on creating programs for automated machining, enduring hundreds of failures.

This enabled him to build his own jigs for securing complex-shaped materials. By assigning tasks—what machines could do to machines, and what required craftsmanship to humans—he succeeded in mass production.

Another crucial process was prototyping.
In 1999, around the time Mr. Takayama became president at age 35, he heard doctors express concerns: "Scissors that lose their sharpness quickly are unacceptable," and "We need them to last longer."

"Then let's provide products with proper heat treatment," Mr. Takayama proposed to the doctor.

He recalls:
"Most instruments used by surgeons were German-made and sold at high prices. So, how could we create instruments surgeons would actually use? I concluded prototyping was the only way forward and publicly announced we would undertake it."

At the time, no manufacturer was doing prototyping. The reason was cost. Surgical instruments are a world of small volumes and many varieties. Listening to each doctor's requests individually would be time-consuming and inefficient, and above all, it wouldn't be profitable.

When Mr. Takayama solicited prototypes, he received far more requests from doctors than anticipated. And he set about solving the problem of inefficiency.

Three factors that overturned industry norms

First was accelerated production speed through mechanization. Prototype development and small-batch, high-variety production were conducted without halting the production line. Mechanization enabled computers to organize information beyond human capacity, making mass production possible.

Second, by constantly prototyping, he could release new products annually. This gained a reputation among doctors, drawing massive crowds to his booth at every trade show. This, in turn, generated even more requests from physicians. For Takayama, who believed medicine was becoming increasingly sophisticated, this meant cutting-edge technology was constantly integrated. Prototyping ensured his company's own technology remained at the top level.

The most significant factor, however, was his initial encounter with Dr. Hiroyasu Kamiyama, a true master of his craft, known as the "Master Craftsman's Hand" in neurosurgery. Takayama collaborated with Dr. Kamiyama on development, studied medical texts himself, observed surgeries, and conducted prototyping. Thus, he developed one "tool to save lives by reducing the burden on doctors" after another. Particularly, the "Ueyama-style Microsurgical Scissors MURAMASA Special," featuring a naginata-shaped blade, became his signature product, capturing 90% of the domestic market share.

In other words, by developing alongside the top practitioners, the tools became the model, rapidly spreading among followers. This enabled "standardization through top models."

"As a way to compete globally, I vaguely thought that if I could achieve mass production, a doctor with outstanding clinical skills would take me overseas," says Takayama. That person appeared: Dr. Midori Tanigawa, a neurosurgeon and disciple of Ueyama.

Dr. Tanigawa was invited to perform surgery at the University of Helsinki. The instruments he used during that surgery were developed by Dr. Takayama. Upon seeing them, world-renowned physicians expressed a desire to use his instruments. This led to a rapid expansion of market share across North America, South America, Europe, and Asia. Partnering with top-tier surgeons created the ultimate standardization.

"Requests come in like this," Mr. Takayama said, showing his smartphone. A leading figure from the University of Chile had sent a photo and message via messenger. Sometimes requests come from the University of Paris, other times from renowned American hospitals. "I can reach out myself, and world-class surgeons contact me—it's become so convenient," he smiled. These requests are turned into blueprints and processed on machine tools.

"What I was doing caught up with the 21st century. Starting with mechanization using machine tools, if I'd been even a little late, I don't think it would have turned out like this."

In fact, this kind of standardization with top-tier partners exists among other small giants. Eryonics in Hachioji, a manufacturer of microfabrication equipment and measurement/analysis devices, partners with world-class universities like Harvard and the University of Tokyo, as well as Sony's research institutes. By building equal relationships with top-level researchers, they continue to evolve together, leading universities and companies to adopt their products.

──Who you partner with. Every hit depends on the combination. Who is your buddy? Can you standardize what you create with your buddy? That's where the key to world domination lies.

Read the article on Takayama Medical Equipment Manufacturing Co., Ltd., winner of the Small Giants Global Award.