SME Management Innovation Program and Cases in Japan

Tsukasa Tsutsui

27 June 2006

The Organization for Small and Medium Enterprisesand Regional Innovation, JAPAN

2

$884billion

(100.0%)

$384billion

(43.4%)

$500billion

(56.6%)

Added Value(2004)

(manufacturing industry)

$90billion

(100.0%)

$57 billion

(62.9%)

$33 billion

(37.1%)

Equipment Investments(2004)

(manufacturing industry)

$2,471 billion

(100.0%)

39.６ million

(100.0%)

4.3 million

(100.0%)

Total

$1,218 billion

(49.3%)

$1,253 billion

(50.7%)

Value of Shipments(2004)

(manufacturing industry)

11.５ million

(29.0%)

28.１ million

(71.0%)

Employees(2004)

(except agriculture, forestry

and fisheries industry)

0.012 million

(0.3%)

4.3 million

(99.7%)

Enterprises(2004)

(except agriculture, forestry

and fisheries industry)

Large-scale

enterprisesSMEs

SMEs in Japan

[The Situation of SMEs in Japan ] $=\115

Table1

3

4

1999: Amendment of

“SME BASIC LAW”

SMEs: create new industries and employment opportunities,promote market competition and regional revitalization

To foster the diverse and vigorous growth of independent SMEs- With the view to support self-help efforts of SMEs -

Policy ConceptPolicy Concept

1. Supporting SMEs’ Efforts for Start-ups and Business Innovation

(Support for Ambitious Enterprises)

2. Strengthening of Management Base

(Enhancement of Management Resources)

3. Facilitating Apt Responses by Enterprise to Abrupt Environmental

Change (Providing Necessary Safety Net)

Policy MeasuresPolicy Measures

Stable Growth Period in Japan,Diversifying needs of consumers,

Globalization of economy

5

Definition of SME

100 or lessServices

50 or less50 or less

Retail

100 or less100 or lessWholesale

300 or less300 or lessMining and

manufacturing

Number of

Employees

Capital Size

(million yen)

Small and Medium Enterprises Basic Law (Amended in 1999)

Table2

6

Implementing System of Japan’ s SME Policies

Administration Local Regional Bureaus of Economic

Trade and Industry

Organization for Small & Medium Enterprises

and Regional Innovation, JAPAN (SMRJ)

Managing

Support

① Japan Finance Corporation for Small and Medium Enterprises

Investment

- Japan Chamber of Commerce and Industry

- Central Federation of Boards of Commerce and Industry

- National Federation of Small Business Corporations

- National Federation of Shopping District Promotion

Cooperatives

- Chamber of Commerce and Industry（526）

- Societies of Commerce and Industry（2,808）

- Prefectural Federation of Small Business Associations

- Prefectural Federation of Shopping District Promotion

Cooperatives

Sm

all a

nd

Me

diu

m E

nte

rpri

se

Ag

en

cy,

ME

TI

Prefecture, City, Town, Village

Small and Medium Business Investment and Consultation Co.Ltd. (Tokyo, Osaka, Nagoya)

Prefectural SME

Support Center (57)

Regional SME

Support Center (261)

Business

Support System

Supporting

Organizations

② Shoko Chukin Bank

③ National Life Finance Corporation

Branch(9)(Hokkaido, Tohoku, Kanto, Chubu, Hokuriku,

Kinki,Chugoku, Shikoku, Kyushu)

Credit Guarantee Corporation (52)

Financing

SME University(9)

(Tokyo, Kansai, Nogata, Asahikawa,

Hiroshima, Seto,Sendai, Sanjo, Hitoyoshi)

SME / Venture Business

Support Center (9)

SM

Es

/

As

so

cia

tio

ns

7

(Establishment and Enterprise Census of Japan)

Trends in Entry and Exit Rates(Non-primary Industries)

Start-up and Closure rate

5.9 5.9

4.3

3.5

2.7

3.63.1

3.53.8 3.8 4.0 4.0

3.2

5.6

4.5

6.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

75～78 78

～81 81

～86 86

～91 91

～96 96

～99 99

～01 01

～04

Entry

rate(％)

Exit

rate(％)

Figure １

8

Foundation The start of

support

The end

of

support

Support result

≪Hands-on support model≫

（1-2 years）

Goal（Going public, business expansion）

Consultation of SMRJ experts

Subsidies

Business matching

Incubation

facilities

Investments in

venture capital

9

Organizational Structure(National Support Center for SMEs & VB)

1. Support center organism system

Head quarter：

Project manager (4), Coordinator & Chief

Advisor

Each support center (9 places)：

The personnel (1~2), Temporary employee

(2~4)

Project manager (1~4), specialist (30~50)

2. Specialist group

(1) Project Manager (30)

(2) Coordinator & Chief advisor

(3) Specialist (840) （Management consultant, Accountant, Lawyer, Patent attorney, Consulting engineer, The person experienced in a corporate management person)

(4) Retirement age talented people (300)

10

Cases of Management Innovation

１.Process innovation

２.Product innovation

３.Innovation in system capacity

11

Corporate Start-ups and New Business Development

Small and Medium Enterprise (SME) support center and support network

Small and medium enterprise-related

organizations

National

support center

for SMEs(9 locations)

Regional SMEs

support center

(263 locations)

Small and medium

enterprises

Prefectural

SMEs support

center

(57 locations)

Most familiar and accessible to SMEs

Chamber of commerce and industry

Commerce and

industry association

Local government and private sector joint ventures

Public-service corporation

Support for solving managerial problems of local SMEs

SMRJ

Application

Application Application

Dispatch experts

Dispatchexperts

Dispatch experts

Supports venture firms and handles high level management issues

12

The Support Menu for the National Support Center

(1) Management Consultations：At the Support Center,

event exhibitions, by mail, and telephone

consultations :21,781 times in 2005FY

(2) Expert Deployment: Long-term deployments（Three

months ~ two years）: Deployments to 400 enterprises in 2005FY

(3) Semi-Retired Professional Advisors：No longer than

three months up to 10 times: Dispatch to 167 enterprises in

2005FY

(4) Market Research (developing new ideas)

(5) Deployment of an Incubator Manager

(6) Holding seminars

(7) Business matching（the bringing together of investors,

companies, and locations)

13

(+)2,678

(+)2,068

(+)1,652

(+)1,239

(+)826

Increase in Sales Volume after support (Total)

（25％up achieved)

9,913

8,261

6,608

4,957

3,304

Sales volume before support (Total)

12,59110201702008

10,3298501702007

6,1965101702005

8,2606801702006

4,130340-2004

Current total

Number of

enterprises under

the Center’s

support

NewYear

Target Image

Million $

Table 3

142005

Otis Co.

The type of business

： light electric appliances part

production

Capital ：87 thousand $

Register：1987,June

Sales volume ：26 million $

Employee：128

15

16

17

Summary of Activities(Product Review)

Structural reinforcement and human resource development towards the plant profit plan

1. Analysis of the difference between monthly results and goals and discussion of

improvement activities (materials cost ratio analysis: determine the relationship

with the sales composition)

2. Review and reinforcement of inventory management structures

(review of stocktaking, stocktaking rules, re-setting of stocktaking implementation

burdens)

3. Specific consideration to reduce materials costs

(consideration of measures to reduce costs of separators and adhesive tapes)

4. Creation of management structures for individual teams

5. Make workloads visible and make excess man hours visible

6. Make problem areas in the workplace apparent

- Have all employee submit their opinions, conduct a questionnaire survey

- Use “improvements, reports, and consultation sheets”

7. Implement training for specific positions

(deepen awareness of separate division management and of leadership roles)

18

Fixed Quantity

20million (2003) � 26million (2005) � 43.5millon (2008)

(3) 45% reduction in work in process

(2) 3.5-day reduction in production lead times

(1) 30% increase in sales with the same personal

19

Step 1: Integration of Work Flows

Press 1

Work in

progress

Sheet cutting Inspection

Work in

progress Work in

progress

Press 2

Step 2: Adoption of a single press and rectification of sheet cutting and inspection

Step 3: Continuous operation of a single press

Line A

Line B

Line C

20

The Meaning of New Collaboration

New collaboration refers to new business activities arising through

collaboration among different fields (creative collaboration).

* Legal definition of “New Collaboration”

1. Businesses in different fields

2. Dynamic collaboration (core companies, the presence of agreements, etc.)

3. Effective combinations of the management resources of each party

4. New business activities

5. As a result of the above, development of new business areas

21

Flow of New Collaboration Support

Support Measures

Non-Material Support Follow-Ups

New Collaboration Support Regional Strategy Conference

Development of

Collaboration

Preparation of Business

Plan

Application to and

Approval by Bureaus of

Economy, Trade and

Industry

Implementation of

Business Plan

Commercialization

22

Total27

Diagonal Weave Looms

Collaboration Model

Hyogo Prefectural Institute of Technology

（Technical Support Center for Textile Industries）

Bando Chemical Industries, Ltd.

Synthetic Textile Manufacturers

Technical Advice

Sales

Core Companies

Kuwamura Co., Ltd.

Fabric manufacturing

using diagonal weave

looms

Collaborating Company

Katayama Co., Ltd.・General technology

concerning textiles,

performance testing equipment,

joint research, information

collection

・Rubber and textile linings,

processing technology, belt

commercialization

・Cutting-edge textile

materials (carbon fibers,

etc.)

・Trading companies specializing in machinery・Provision of information on diagonal weave looms, research, and information gathering

24

Aromatic polyamide Glass fiber Carbon fiber

25

• K.co. Recent sales, Operating Income ,Net Income

1,4433,4099702

1,1913,62610203

7571,6968304

791

In thousands of $

net income

757

In thousands of $

Operating

Income

82

In millions of $

sales

05

year