<Mitsubishi Corporation as “Business producers” >
Mitsubishi Corporation, called as business producers, has been developing new businesses globally in almost all industries through investments and organic launch globally since 180 years ago. Having gone through the history, MC nowadays has over 200 offices in 90 countries, and 10 business groups(table 1).
MC has been operating wide variety of businesses such as BtoB, BtoC, Manufacturing, Oil&Gas etc. An example of its BtoC business is Lawson, which is one of the biggest convenience store chain in Asia started by an employee’s, Kenji Niinami(HBS MBA ), idea. An example of BtoB business is Cermaq, 2nd biggest salmon farmer in the world. Each business was started from one of employees idea. Typical business production flow is one employee generate an idea from one’s daily business, write an application, have meetings with corporate department and management of the Group the one belongs to. After having long due diligence process(on average 6 months), the management judge if they approve and finance the idea with the criteria of whether the idea help expand group’s existing businesses.
<Why Open Innovation is important for MC to improve the process of business production?> Regardless of its renowned nick name, business producers, MC is facing a problem as tech giants and startups disrupting the existing businesses all around the world across industries with latest technology and new type of business models. One of the most prospective employees Takato Tsukagoshi just resigned MC and joined a startup mentioning “MC is too big and too inflexible to startup new business. Management only understands obsolete business models and they don’t have any interest if the business idea is outside of their industry.”. There are two problems in the process of business creation in MC: 1)Because of the strong vertical organization structure, management of each group only focuses on business expansion of its group. 2)Almost no one in management has agile and lean startup experience and tech expertise, which makes management difficult to judge new type of ideas.
<What is MC’s management doing?>
1)Create two departments
MC creates two departments which can horizontally work with 10 silos(table2).
Two groups in MC started business pitch contests in 2017 where employees in the group can pitch new business ideas in front of managements of the group, so that management can expedite the evaluation process. However, Yusuke Kayama, one of organizers of the contest, addresses two problem in its procedure: 1)Evaluation criteria is blurry as the lack of tech expertise in evaluator. 2)If the new idea is not largely related to group’s business, the idea won’t be selected even if it is attractive.
<Recommendations for MC>
Overall, I strongly recommend MC to have open innovation taskforce, Joint Venture, and platform to utilize external knowhow and idea to catch up with rapid exponential growth especially in tech industry.
1)Set up a Joint Venture(JV) with Venture Capital to drive innovation
It is important to MC to have someone who has deep knowledge and experience in tech business and startup process in management, and have the one to evaluate the potential of the new type of businesses, as well as to educate employees as to enhance idea generation capabilities. Setting up a JV with a Venture Capital(VC) and organize the pitch contest in this new JV will help solve problems.
2)Business idea sharing platform among all employees
Business idea is developed when the idea is refined through exploration and exploitation. In order to increase the exploration part, having a common communication platform among all employees will be instrumental, as the open innovation team in LEGO mentions “an innovative idea often comes from outside of its department”.
3)Crowd sourcing tech engineering employees
As MC currently does not have internal tech engineer, when one of employees come up with a new business idea using mobile apps or PC software, it will take time to produce Minimum Valuable Product and to start Proof Of Concept. Crowd sourcing of engineering employees will help solve this problem.
1)Crowd sourcing new business ideas for BtoC business
As General Electrics does, sourcing new product ideas for BtoC business(e.g. Lawson) will stimulate new product development, reflecting market demand. Besides, crowd funding for the new product will also a possible way to hedge the risk and check the market demand before judging to launch the product.
2)M&A startups through the JV
As Samsung does in Silicon Valley, investments to startups through the new JV outside of MC will help expand businesses without having a problem of slow due diligence and silo problem in MC and help catch up with growth outside of MC.
<Open questions >
What are merits for VC to work with MC?
What would be the risk of Open Innovation for a traditional conglomerate?
Citations from below sources: