Doing Business with Israeli Startups

3 Things You Should Know When Doing Business with Israeli Startups

I spent all my executive career in the medical industry, and in most cases, Japan was one of our company’s central markets. It was an exciting and educational period, as doing business with the Japanese requires a deep understanding of the decision-making process, distributors’ management knowledge, and product adjustment to Japan’s unique requirements.

The gratitude goes to my Japanese distributors, KOLs, and physicians, who were vital stakeholders in our business and technology. They have spent hours teaching, explaining, and assisting me and my team to excel in Japan and globally. But it was not always easy, as Japanese professionals are usually deeply tied to their organizational policies, working habits, and are bounded to local hierarchies, which makes us Israelis confused and frustrated with the slow decision-making processes. And I guess that our Japanese partners occasionally felt pressured as well.    

I’m often asked by my Japanese colleagues, most of them leaders in major Japanese medical corporations, why it is so difficult to enter into a business relationship with Israeli tech companies. While Israelis share the same frustration when it comes to doing business with the Japanese. 

For Israeli companies’ decision-making is usually done by the CEO, with some advice from the company’s leadership team, and in most cases, the CEO is measured by quick revenue growth. Therefore, products could be launched immaturely, adjustment for specific markets are hardly considered, and the selection of local distributors are done in haste. In comparison, the Japanese need to conduct thorough research before they make a decision, as their goal is to launch a product in its best conditions to assure long-term growth, profitability to the entire distribution chain, and the best possible quality in order to keep their reputation.   

As an Israel-Japan business development boutique, Network in Motion Ltd. serves both Israeli tech companies interested in Japan market entry, as well as Japanese corporates and distributors that search for innovative technologies. Thus usually, we find ourselves acting as a bridge along the entire market entry process and beyond. As for Israelis, the goal is to appoint a distributor and generate quick revenues. For the Japanese it’s all about slowly building market share and users’ confidence, yet it doesn’t always mutually correspond.

As an Israeli, I may have a unique advantage in discussing Israel – Japan business, as fortunately, Japan was a significant market in all the companies I worked for. Moreover, I was lucky to be accepted as a research student at Tokyo University, which allowed me to live and work in Japan, as well as to get a first impression of Japan’s business style by speaking with my colleagues in Japanese.

In this article, I would like to highlight the key differences between the Israeli and the Japanese business approaches, so CEOs and business leaders can have a deeper and mutual understanding that may lead to more business opportunities.

First, let me begin by listing key business characteristics of both countries, and business practices, as they will surely highlight the enormous gaps between Israel and Japan.

Let’s start with Japan – Japanese business practice is known for its long decision-making process, group decision-making, and detailed investigation practice. The business culture in Japan is also known for its perfection, quality, and strong after-sales orientation. And for that reason, foreign companies who are doing business in Japan are evaluated as successful by the global business community. This clearly means that the Japanese need more time to evaluate the benefits of a given technology and assess if it fits the unique needs of the Japanese market.

• The Japan Fit (Gap Analysis)
  Before entering into business relationships, your potential Japanese business partner would like to verify most of the following’s issues: quality level, if your technology is easy to use, what is your pricing model, does it fit Japan, do you have a service model, what are your unique competitive-edge, are you planning for the long-term, are you financially strong, your willingness to conduct changes in the product (not just in software). In the second stage, they would defiantly seek the reassurance of local KOLs. If you were introduced by a trustworthy mediator, your company may enjoy a quicker process. Therefore, we recommend that Japanese companies present their decision-making process and the list of information they would need for their internal evaluation process in the early stages of discussion.   

• The Group Decision-Making Process
  The decision whether or not to sell a product in Japan requires a 360° analysis that will be conducted by the Japanese team and will include the key elements mentioned above. Foreign manufacturers should be ready to answer many questions and prepare written information, such as a decision-making process involving a wide range of people representing various departments, such as R&D, marketing and sales, finance, regulatory, clinical, legal, and operations. Our advice to foreign manufacturers is to “do their homework well” as it shows you are serious about the Japanese market, which will give you initial credit as a good potential partner.

  The involvement of so many people in such an early stage of discussions slows down decision-making. It ends up in a long process of information exchange, or as our clients often complain, “We are receiving endless questions, and sometimes they repeat the same questions, so we are not sure if they are interested or not.” Our advice to our Japanese colleagues is to better explain what kind of information they are missing and what kind of information would help them understand. It is also recommended to obtain the assistance of a 3^rd party that can assist in bridging professional and cultural gaps.

• The exclusivity question
  Israeli business is driven by gaining quick revenues, including a substantial year-over-year growth, or by securing an investment, as Israelis wish to grow fast. This way of thinking leads their decision-making priorities and timeframes to be short and aggressive. In other words, mature Israeli companies are looking to tie up with a business partner that can commit to high YoY growth, while startups and earlier-stage companies aim for a substantial investment or for being acquired. This Israeli way of thinking often drives them to prefer a partner that can make quick decisions, a distributor that can commit to faster growth or an investment that is willing to take high risks. In the case of startups, who are always in need of cash to complete their product development and achieve regulatory approvals, it is often expected that they may choose the first investor that can inject quick cash to support their process. Thus, the Japanese may consider addressing this matter in their decision-making process, as the possibility to invest a small amount in early stages can assist them in securing distribution and a follow-on investment advantage when the company’s valuation is rising.

• Punctuality vs. vague time-frames
  Japanese are very punctual and organized, thus they will do their utmost to meet a time commitment. This is also one of the reasons they work slower, as asking for delays or re-scheduling timelines is not in their repertoire. However, as Israelis are less accurate, and moving quickly is one of their key business practices, they tend to overlook the need to provide accurate and facts-based answers. This long decision-making process challenges them and creates uncertainties in the seriousness of the Japanese side.

  Are you interested in expanding your business horizons and tapping into the potential of Israeli startups or Japanese markets? Contact us at Network in Motion today to discover how we can help you navigate the complexities, bridge the gaps, and create fruitful business relationships. info@network-in-motion.com.