More than 20 years ago, I was involved in founding the Phoenix Fund, one of Japan’s first full-fledged private equity funds. Since then, I have watched Japan’s private equity market grow.
Private equity in Japan has played an important role by helping to address social challenges such as business succession and facilitating business restructuring at large corporations. Today, it has grown into an industry that is indispensable to the Japanese economy.
At the same time, there was something else I had hoped to see.
I hoped that a new form of capital would emerge—one capable of identifying the outstanding technologies held by Japanese companies and multiplying their value by combining them with management resources and access to global markets.
Unfortunately, however, while Japan’s private equity industry has succeeded in refining the techniques of financial leverage—asking, “How much can we borrow from banks?” and “Under what terms can we secure more financing?”—it seems to me that it has paid insufficient attention to technology leverage: determining which technologies should be taken global and how multiple technologies can be combined to create new industries.
I do not reject financial leverage itself. Appropriate financing is essential to corporate growth.
However, increasing a company’s leverage multiple is not the same as increasing its intrinsic value. Financial techniques alone cannot create new products, new markets, or new industries.
What Japan Lacks Is Not Technology, but Management
Japan possesses many technologies with the potential to change the world.
These technologies are not confined to the research laboratories of large corporations. Regional midsize and small companies also possess globally competitive capabilities in materials, manufacturing equipment, precision machining, robotics, environmental technologies, and many other fields.
Partly because Japan has a domestic market of meaningful scale, many of these technologies have unfortunately remained within the country and have not been developed into businesses of sufficient scale.
The problem is not that Japan lacks technology. It lacks the management capability required to take that technology into global markets, connect it with other technologies and companies, and scale it as a business.
Japan has no shortage of “management that avoids failure.” But there is still far too little “management that sets out to win in global markets.”
In corporate cultures where avoiding risk is treated as if it were a management capability, excellent engineers are overlooked, while technologies with the potential to change the world remain dormant within companies.
What Is Technology Leverage?
What I mean by “technology leverage” is not dependence on a single technology.
It means combining technologies, data, talent, sales networks, and capital held by different companies and countries to create business value far greater than any of them could generate on its own.
For example, advanced manufacturing technology can be combined with AI. Image-recognition technology can be combined with robotics. These capabilities can then be connected with real transaction data and sales networks around the world.
The result is the ability to improve quality, pricing, productivity, and sales capabilities simultaneously, while creating industrial models that did not previously exist.
If financial leverage is a mechanism for increasing investment efficiency through financing, technology leverage is a mechanism for increasing a company’s underlying growth potential by combining technology and data.
Going forward, I believe corporate value will be determined not by the size of a company’s borrowings, but by the technologies and data it possesses—and by how effectively it can connect them with technologies and markets around the world.
From a Japan-Centric Model to “Multipolar Globalization”
Many Japanese companies embrace “globalization” as a goal.
In many cases, however, their thinking remains rooted in the conventional model of placing the Japanese company at the center and selling products and services developed in Japan to overseas markets.
I do not believe this approach alone will be sufficient to compete successfully in the global markets ahead.
What will be needed is not globalization with Japan as the sole starting point. It is globalization that treats strengths in different parts of the world as multiple points of origin and connects them across national borders.
AI from the United States, environmental technologies from Europe, cybersecurity from Israel, semiconductor networks centered on Singapore, and materials and manufacturing technologies from Japan. While giving full consideration to economic security, we must combine these strengths in the optimal way and use them to create new industries.
I call this approach “multipolar globalization.”
We no longer live in an era in which either technology or markets can be contained within a single country. Japanese companies must move beyond the mindset of keeping everything in-house and viewing the world with Japan at its center.
Reversing the Hierarchy Between Finance and Technology
Traditionally, private equity has been led by specialists in finance, law, and M&A, while engineers have generally been assigned a supporting role in investment decisions.
Going forward, that hierarchy must change.
Engineers and business leaders who understand global technology trends and customer needs should take the lead, supported by specialists in finance, law, and M&A.
This is not about rejecting finance. It is about returning finance to its proper role: supporting the growth of technology and business.
Japan has a domestic market of considerable scale. This has been a major advantage for Japanese companies, but it has also given them a sense of security—the belief that they can survive without taking on global markets.
As a result, many companies have become more accustomed to defending the domestic market than to pursuing opportunities in global markets.
However, as the population declines and industrial structures undergo major change, management models that depend solely on the domestic market are reaching their limits.
What Eco-Movement Is Working to Achieve
At Eco-Movement, we are not aiming to be merely a reuse company for pre-owned devices or a BPO provider.
We are combining the process of preparing smartphones, PCs, and other devices for resale with technologies such as AI-based grading, image recognition, robotics, data erasure, price analysis, and sales-channel optimization.
We are also accumulating real transaction data for each individual device, including its quality, sale price, time to sale, returns, warranty information, and net profit, and connecting that data to sales networks in Japan and overseas.
This will enable us to build a system that routes large volumes of pre-owned devices more quickly and accurately to the markets where they can generate the greatest returns.
Through collaboration with overseas technology companies, sales partners, financial institutions, logistics providers, and others, we intend to develop this system into a circular distribution platform that can be used not only in Japan but around the world.
This is Eco-Movement’s own practical application of “technology leverage”: connecting AI, robotics, data, logistics, finance, and global sales networks.
Toward the Next Era of Capitalism
What we need going forward is not to reject financial leverage entirely.
We must move beyond enhancing corporate value through financial leverage alone and instead strengthen the competitiveness of the underlying business by combining technology, data, talent, and markets.
- Beyond financial leverage, toward technology leverage
- Beyond Japan-centric thinking, toward multipolar globalization
- Beyond acquiring companies, toward connecting technologies and businesses around the world
I am convinced that these three shifts will fundamentally reshape capitalism in the next era.
Japan still has many technologies capable of leading that transformation.
What is needed is more than capital. It is the resolve to collaborate with outstanding technologies, companies, talent, and markets around the world, bring our respective strengths together, and jointly create new industries.
Eco-Movement aims to put this vision into practice.
