Leadership and Innovation

Leadership and Innovation was the sixth seminar in our 2012 series Leadership: People and Power in the UK and Japan, chaired by Rosa Wilkinson, Director of Innovation at the Intellectual Property Office. Hiroyuki Itoh, CEO of Crypton Future Media, creator of the globally popular ‘vocaloid’ Hatsune Miku, and Dr Jaideep Prabhu, co-author of the book Jugaad Innovation discussed leadership and innovation from their different perspectives.

The two speakers, from Japan and Cambridge, both discussed non-Western approaches to innovation. Mr Itoh talked about how he built an innovative consumer-generated media business against the backdrop of traditional Japanese business culture. Dr Prabhu argued that the West must look to places like India, Brazil and China for a new, frugal and flexible approach to innovation. He showed how, in these emerging markets, jugaad (a Hindi word meaning an improvised solution using limited resources) is leading to dramatic growth, and how Western companies can adopt Jugaad innovation to succeed in today’s hyper-competitive world.

Rosa Wilkinson began by wondering why the audience had thought it worth their time to attend this seminar. Perhaps it had to do with the lure of the speakers but also because the audience understood that innovation represents a good route through these hardened economic times and because innovation really matters. Innovative economies are more successful and faster growing, generating wealth and rising living standards. They are the ones more likely to find real solutions to problems including ageing populations, climate change and hunger.

The first speaker, Hiroyuki Itoh, was born in 1965 in Hokkaido, Japan’s northern-most island. There was no music shop in his home town, he said, so he relied on the radio to listen to new music. He loved British rock bands, such as Led Zeppelin and Deep Purple, and in the 1980s was drawn to British electro-music by the likes of Thomas Dolby and Depeche Mode.

Itoh modestly claimed to be honoured to be speaking in the country which produced much of the music which led him to start composing his own computer-generated music.

Crypton was established as a computer music software company in 1995. It is the largest distributor of music production software in Japan and developed virtual singer software powered by Yamaha’s ‘Vocaloid’ technology. More than 100,000 music creators have now bought Crypton software, said Itoh.

Itoh then spoke about the characteristics of Japanese pop culture. Japanese people love manga and animation, he explained, so many comic magazines are published and many anime programs are aired. Not only children but also adults read manga and watch anime.

The Japanese love virtual cities, virtual gods and falling in love with virtual people. The concept of being virtual is linked to technology, and robots, artificial intelligence and computer science are all very popular subjects at universities in Japan. The Japanese also have a high regard for engineers.

Itoh introduced the concept of ‘doujin’ culture, or fan-based activity in which fans create derivative works based on their favourite manga and anime. Some people organise events where creators exhibit and sell their derivative work. These activities infringe on copyright, but the rights holders rarely sue, because the number of derivative works made becomes a barometer of the original works’ popularity and can multiply the original fan base.

Itoh introduced the virtual pop singer Hatsune Miku. Hatsune means ‘first sound’ and Miku means ‘future’. She was made with singing synthesiser software for Windows PC, using Yamaha’s ‘Vocaloid2’ technology. Vocaloid is a form of software that records the voice of a person and synthesises the singing voice with the person’s voice quality.

The voice actress for Hatsune Miku, Saki Fujita, was chosen from a large number of candidates. A relatively unknown illustrator called Kei was found over the internet and asked to create Miku’s image.

Itoh said that as Crypton blogged the process of making Hatsune Miku, she became popular prior to her release, and Crypton received many pre-orders. Once she was launched in 2007, a large number of songs and films including her singing were released on the internet. Now there are over 250,000 Hatsune Miku film clips on Youtube.

Some illustrations of Hatsune Miku were used in videos without Crypton’s knowledge, and Itoh decided that co-creation could be an important concept. Rather than using ‘all rights reserved’ he changed it to ‘some rights reserved’ and launched a website called Piapro (http://piapro.jp) three months after the release of the Hatsune Miku software.

Users can upload their music, illustrations and lyrics onto Piapro. The works must be for non-commercial use and users are encouraged to show their gratitude to the original creators by sending them messages on Piapro. More than 600,000 works have been posted on Piapro.

Crypton created a special licence for Hatsune Miku called ‘Piapro Character Licence’. Under this licence, everyone is allowed to tweak the character images for non-commercial purposes. Itoh also introduced fan-made software by the name of ‘MikuMikuDance’ or ‘MMD’ which allows users to animate and create 3-D animated films of Hatsune Miku.

In addition to MMD, Hatsune Miku has been much in demand to market CDs, books, games, goods, a car racing team, and toys, and has even appeared in Toyota’s TV commercials. Profits made by selling these products is shared with the creators. Crypton uses some of the profit for developing services such as Piapro and sustaining non-commercial projects as well.

Itoh said that virtual singer Hatsune Miku has performed on stage with real bands as well and showed footage of her concerts. These have been held not only in Japan, but also in Los Angeles, Singapore, Hong Kong and Taiwan. Some of these have been sell-outs.

The Hatsune Miku movement has been expanding internationally as well, even reaching the UK. Crypton is now developing an English-language version of MIKUBOOK, whose aim is to list up-to-date news about Hatsune Miku for overseas fans.

With the growing rate of internet use around the world, business models relying entirely on copyright are disappearing, said Itoh. As with Hatsune Miku, there are ways of increasing the value of content by allowing users some rights for free. This is similar to the idea of ‘open innovation’ and ‘peer production’, said Itoh. Piapro is, in fact, an abbreviation of ‘peer production’.

Crypton has been sharing its vision with various communities through social media. Social media is now an essential way for companies such as Crypton to build confidential relationships with hundreds and thousands of creators and several millions of fans. It is an essential tool, said Itoh, for companies that aspire to lead.

Wilkinson thanked Itoh for his talk and in introducing Jaideep Prabhu, said he would probably be able to shed light on how businesses can navigate through choppy waters.

Prabhu described the term ‘jugaad’ as being the ‘art of overcoming harsh constraints by improvising an effective solution using limited resources’. It is not limited to India and is known as ‘gambiarra’ or ‘jeitinho’ in Brazil, as ‘jua kali’ in Kenya, as ‘zhizhu changxin’ in China, as ‘DIY’ in the United States and as ‘Systeme D’ in France.

The unique features of Indian innovators and innovations, suggested Prabhu, is that they are frugal, flexible and inclusive.

Prabhu explained that India needs jugaad because upward of 40% of Indians are unbanked and off the electricity grid, and have limited opportunities and access to education and healthcare. These conditions can be regarded either as a challenge or an opportunity.

Prabhu went on to give examples of entrepreneurs who use jugaad. Mansukh Bhai from Gujurat, for example, left school with a high school education at most. Following the Gujurat earthquake of 2001 he saw a photo in the newspaper of a clay pot, jokingly labelled as a ‘poor man’s fridge’. Seeing this photo, Bhai went on to develop the Mitti Cool Fridge, essentially a clay fridge with a water cooling system. It can keep fruit and vegetables cool for up to five days.

Prabha then spoke about Dr Mohan from Chennai. Mohan, aware that India is the diabetes capital of the work, and that doctors cannot go to villages and villagers find it hard to visit the city hospitals, has developed a mobile diabetes clinic with sophisticated equipment and equipped with a laboratory with auto analysers for fast diagnosis. The International Diabetes Foundation has donated equipment, and Mohan has recruited and trained local people to help.

Another entrepreneur introduced by Prabhu is Harish Hande and his Solar Electric Company (SELCO). This has been established for those outside the electricity grid. Hande knew that his challenge was to make solar power affordable in order to encourage people to buy into the service. It had to be reasonably priced in the way that people buy replacements. Prabhu said that while 300 rupees a month is too expensive, 10 rupees a day is not. Hande also employs local entrepreneurs. He sets them up with bank accounts so that they can then buy solar panels and then rent them out to customers.

According to Prabhu, large firms and entrepreneurs are also taking note of jugaad. The key of the successful Nano car by Tata, the world’s cheapest car, is its affordability. Tata came up with the price of the Nano car – at 100,000 rupees or some £1,000 – out of a hat and had to work backwards. Tata was successful in creating an engineering masterpiece.

While the engineering is often miraculous, the marketing can be a real challenge, especially as new firms or entrepreneurs will be competing against more established companies. Moreover, people are aspirational, Prabhu pointed out, suggesting that they won’t want to necessarily buy the cheapest car.

Multinationals in India are also buying into jugaad. GE has developed a portable ECG machine, especially for the rural market in India. It is portable, light, battery-operated, cheap and reliable. It is so handy, it can fit into a doctor’s bag and is 1/10 the price of a regular ECG machine. GE looked at existing off-the-shelf products and with some repackaging, produced something good enough. It was launched in India and is now available in China and the United States, having got Food and Drug Administration approval.

Prabhu said that Carlos Ghosn (Renault-Nissan) has been an advocate of frugal engineering for a long time. This was probably born of his experience of living in India where he was surprised at how good and cheap goods in India were.

The Nokia 1100 is an example of a product made specifically for the emerging markets, particularly for the urban poor in Bombay, Ghana and Brazil. The designers had noticed that mobile phone users in places like Bombay would put them in plastic cases to keep them clean and would tend to use them as a torch at night. The Nokia 1100 has a dustproof keypad and flashlight to suit these needs.

Another mobile phone innovation has been the introduction of an application which allows people in emerging markets who have no bank accounts to send money to each other via text. M-Pesa (M for mobile, pesa is Swahili for money) is a mobile phone-based money transfer and microfinancing service which allows users to withdraw (from ATMs) and transfer money easily with a mobile device. It is a great innovation for those without bank accounts. The growth of this service in Kenya has been phenomenal. Over 5 million customers have registered for this service, with about 10,000 new registrations taking place each day.

Jugaad has also taken root in the West. In the USA, a group of four young students set up ‘Design for America’. They put their mind to solving problems in health care, education and energy in the USA. They noticed that two million people a year fall prey to hospital-acquired infections in the USA, resulting in 100,000 deaths a year. They observed hospital staff and saw that though they regularly wash their hands before operating, they often then wiped them on their uniforms, picking up germs again. The students designed ‘swipe sense’, a disinfectant gel dispenser which can be clipped on to a nurse’s or doctor’s uniform. The dispensers also show how well the wearer has performed compared with others. They cost $2 to $3 each.

In another example, a student at Cambridge devised the Raspberry Pi, which allows schoolchildren and adults to programme the computer themselves. The Raspberry Pi is credit-card sized and plugs into a TV and keyboard. It sells for £22 and the manufacturer cannot meet the demand.

Cambridge, UK-based Eight19 combines an innovative technology (organic solar PV) and an innovative business model (pay-as-you-go solar electricity system) to provide a low-cost solution for clean energy access to rural off-grid communities. Customers can buy solar panels and pay for them in instalments. This is all done by a code sent to a mobile phone. The idea is for people to go up the energy escalator as customers can go on to the next rung to buy electricity not just for lights but for a computer and then for a TV, for example.

A final example of jugaad presented by Prabhu was Barclay’s PingIT application which allows money transfers to be made by mobile phones.

In conclusion, Prabhu said that India and the world need frugal, flexible and inclusive innovation. The UK and Japan can gain through engaging with their counterparts in India and emerging countries. Together, said Prabhu, we can improve lives everywhere.

The lively questions and comments which followed the talks included the fact that Crypton has made most of its money from selling software to companies using Hatsune Miku, that 5% of all global trade is in Intellectual Property licences, the observation that in the developed world technology is being improved for the sake of innovation itself and that it has become increasingly distanced from market needs, and that the relationship between small and large players is very important and that it seems that we are moving away from the arrogance of large firms. When asked how he felt about Chinese and Mexican-made vocaloids, Itoh said that innovation and new technology should be welcomed and that others trying to create vocaloids, for example, shouldn’t be blocked.

The chair, Rosa Wilkinson, thanked the audience for their rapt attention during Itoh’s and Prabhu’s sparkling presentations and the audience for their cracking questions.

This event is supported by Japan Airlines.

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