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Mitsubishi Electric's Approach to Startup Co-creation

Adapted from INITIAL - a news and information platform for happenings in the Japanese Startup Ecosystem

Below is a translation of the article:

"CVC cheat sheet" reveals the difficult-to-see Corporate Venture Capitalist (CVC) practices. In this article, we will explain how to practice startups and collaboration from interviews with Mr. Yamanaka and Mr. Minedo, who are in charge of open innovation at Mitsubishi Electric.

At Mitsubishi Electric, departments under the research and development department play the role of open innovation. In a company with more than 100,000 consolidated employees, only three people are in charge of collaborating with startups, bridging with business divisions and creating collaboration cases. How do you involve the internal divisions?

Strictly speaking, their business is different from CVC, but they have something in common with CVC in that they are executing with the aim of creating business synergies. Why didn't you take the option of investing by CVC? Clarify the practice of startup collaboration.

80% inbound and 20% outbound open innovation led by R&D department

Interviewer: Please tell us about Mitsubishi Electric's open innovation organizational structure and initiatives with startups.

Mitsubishi Electric Kenji Minefuji (hereinafter referred to as Minefuji): At Mitsubishi Electric, the Future Innovation Center is the main body of open innovation and cooperates with startups.

Mirai Innovation Center is an organization founded in July 2015,and belongs tothe Research & Development Division, Design Research Center, of theDevelopment Division.

As the first LP (Limited Partner) to invest in an external venture capital (VC). we started to work with startups in April 2017.

The organization currently has three members. In addition to collaborating with startups, we are also promoting projects through discussions with each business division.

Kenji Minefuji/Manager. Future Innovation Center, Design Research Center, Mitsubishi Electric Corporation. Joined Mitsubishi Electric Corporation in 2011. Engaged in research and development of optical communication technology at Information Technology Research Institute. After that, he was in charge of R&D strategy formulation, resource allocation and execution support at the same office. Current;y he is responsible for promoting new business development and strengthening existing businesses, starting from open innovation with start ups. He has been in his current position since 2017.

Mitsubishi Electric Satoshi Yamanaka (hereinafter referred to as Yamanaka):

Mitsubishi Electric has two types of open innovation: Inbound type and outbound type.

The purpose of the inbound type is to speed up product development for existing businesses and optimise internal R&D resources.

By incorporating the technology of the already established start-up side in the company, the existing business can be made efficient and the speed f the whole company can be accelerated.

The purpose of the outbound type is to discover new themes and issues that are difficult to produce only by researching the business fields within the company.

The Development Division allocates resources to R&D for "short-term, medium-term, long-term and infrastructure" at a ratio of "5:3:1:1".

The Future Innovation Center allocates 80% of resources to short-term inbound types that are promoted together with business divisions, and 20% to outbound types that are pursued over the medium to long term.

Satoshi Yamanaka, Exploring Group Manager, Future Innovation Center, Design Research Center, Mitsubishi Electric Corporation. Joined Mitsubishi Electric Corporation in 1998. After joining the company, engaged in the development of image processing LSIs for LCD TVs and Aurora Vision, which represents Mitsubishi Electric. Since 2015, he has promoted open innovation with current positions and startups. As a communicator, we will focus on strengthening existing businesses through matching with venture companies and creating business opportunities by utilizing the intellectual property of the companies.

Minefuji: Also, the concept of time axis is different between startups and large companies.

We are focusing on short- and medium-term projects, while being aware of startup exit strategies. Short term is within 2 years, medium term is 3-5 years and long term is 10 years or more.

In the social infrastructure business, which is one of Mitsubishi Electric's main businesses, product development tends to take longer. It is not aligned with our development cycle, but with the timeline of the startup. On the other hand, R&D start-ups such as heavy electric power and infrastructure technology are set on a relatively long time axis.

Practical application of research and development is an issue. Outbound type collaboration with bio-venture.

Interviewer: It's rare for the R&D department to lead open innovation. What is the purpose of researchers to collaborate with startups and carry out joint research?

Yamanaka: In the R&D department. approximately 2,000 researchers work on a wide range of research topics. The number of people is large, but the number of people working on one theme is limited.

By introducing startup technology, you can focus on your area of expertise and optimise development resources.

Minefuji: Optimisation is not the only benefit of working with startups. it gives researchers a new perspective.

Both Yamanaka and I are researchers and our challenge is how research and development will proceed in-house and whether it will lead to practical application.

Although researchers have given technology presentations at academic conferences. there is little communication from a business perspective. such as "What kind if business will be created?" and in many cases only technology is presented.

The opportunity to discuss needs, applications, and practical applications with startups is invaluable for researchers.

Interviewer: Please give us some specific examples of collaboration with startups. How did you meet them and how did you come to provide the technology?

Minefuji: Introducing an example of collaboration with a Singaporean Biotech company "StratifiCare":

We met the startup at the TECH PUSH program, program co-sponsored by Mitsubishi Electric and Revanes in 2018. Leave a Next is a GP that invests in R&D startups and manages out LP investee, "Real Tech Fund".

The program, which aims at social implementation and practical application of technology, is one such initiative, and we held it in Singapore as a partner company.

For a long time, I has a problem wit the fact that some of the technologies developed by researchers would never be used.

Partly because I was feeling the challenges and thoughts of researchers, I was thinking about a new way to use intellectual property rights in collaboration with Revanes as part of oubound open innovation.

Researchers also participate in the accelerator program. The engineers themselves explain to the participants on how to use the technology, such as : This technology can be used in this way,: for local companies in Singapore.

Participants listen to the explanations from the researchers, consider how to use them, and incorporate them into their business plans. Of the approximately 30 people form the 6 teams that participated in 2018, StratifiCare has advanced to the phase of the joint demonstration experiment (Proof of Concept).

Biotechnology is a field that Mitsubishi is not familiar with. However, there is a problem that the startup wants to solve, and the company's provision of technology has created new knowledge and research themes.

Demonstration test with StratifiCare (Photo: Provdided by Mitsubishi Electric)

Active vertical and horizontal reports within the company to raise awareness

Interviewer: What did you do to raise awareness within the business headquarters?

Yamanaka: The first thing we did was to create a shared awareness that included a wide range of members and was tailored to the culture of Mitsubishi Electric.

Once every two weeks, a wide range of members from business divisions. technicians, and sales gathered for a meeting to build a shared awareness over a three-month period. I got involved with the business department members, who had been very generous when I was a researcher, asking them to join us together.

After that, we worked with startups to create the first project in a total of half a year.

Once you have made a track record, you will feel a sense of security, change your view of the company that "you can do open innovation," and you will have more opportunities to receive suggestions from business departments, such as "Can you do this with your startup?". In order to gain the trust and recognition of the company, it is important to first make a track record. Over the three to four years since its establishment in 2015, the awareness of the business headquarters has finally risen.

Interviewer: Is there anything you were careful of when reporting or persuading the Development Division Manager and management?

Minefuji: I am always aware of the "vertical report" called the "report line" and the "horizontal report" for working with business divisions, and report voluntarily.

For vertical reports, in addition to voluntarily reporting to the General Manager of the Development Division, special meetings are held for executives once each in the first half and second half.

We always put problems and issues together as a set, and work with startups to report on the needs of business units.

Yamanaka: At the beginning of the report, we will explain the purpose of establishment the Future Innovation Center, the purpose of cooperation with startups, and the current location.

I put it on the first page of the document and explain it every time so that even if the executives change, they will understand their work and position.

Interviewer: What are you specifically doing in the "horizontal report" in collaboration with the business division?

Yamanaka: The Future Innovation Center is the main organisation that operates as in-house lecture for 100 people once a year. It has been held 3 times so far.

Personal motivation is important to start something new in a large company. We are focusing on laterally expanding our know-how throughout the company.

At the in-house lecture, we invite outside experts and startups to talk about the theme of "Collaboration with Mitsubishi Electric"

We are doing this to raise awareness, but we dare not introduce the activities of the Future Innovation Center for about 15 minutes *laugh*.

This in-house lecture will lead to accidental conversations regardless of work interests, such as "I want to hear more" or "I want to solve problems I have."

Minefuji: Follow-up is also important to keep the energy of the participants in the lecture.

Many of the people who participated in the in-house lectures are highly enthusiastic about new initiatives. After the lecture, I always contact all participants by email.

It can take a couple of interactions, but it can lead to a long-running project or business development involving young employees with their boss involved. Some of you may wish to move to the Future Innovation Center.

It is designed with the consideration of how to involve members in the company.

Business synergy is that "everyone has a common ruler"

Interviewer: Why should we conduct collaborative joint research and demonstration experiments instead of investing by CVC?

Yamanaka: This is because we prioritise the realisation of business synergies over financial returns.

There is also the reason that the Future Innovation Center is in the R&D department, but in order to create business synergies, which is the purpose of Mitsubishi Electric's startup collaboration, we first begin by unraveling the definition of "business synergies".

Minefuji: It is important in the process of creating business synergies to have a "common ruler" that can be quantitatively evaluated by all parties involved.

For example, researchers consider business synergies as "affinity, technological effectiveness, and scientific superiority", but members of business divisions see synergies from different perspectives.

What is business synergy? It is important that all parties have the same definition.

I think it is difficult to generate business synergies by suddenly investing in a start-up without having to say anything about it.

Interviewer: What did you see after performing open innovation for about three years?

Minefuji: By trial and error of open innovation with startups and business divisions, we are able to gradually unravel business synergies.

In addition, we are now in a state where we can hold discussions with specific examples.

We have discussion from both a business perspective and a technical perspective, such as how to expand the business in the future based on the latest sales trends, changes in the market environment, and core values.

When the problem materialises, you can find the tricks of the problem such as "Let's collect service ideas for startups", "This technology has died a little, Let's adopt new startup technology".

The Future Innovation Center will continue to face the proposition of "how to commercialise R&D technology," and promote open innovation.


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