Thinking Different: How Mitsui Is Innovating the Innovation Process
Karugamo Works, Mitsui's in-house innovation laboratory program, brings together people from the company's different business units to collaborate on creating next-generation businesses with scale.
The business environment is subject to more rapid and unpredictable change than ever before. A "business as usual" attitude is no longer good enough—in order to survive, companies have to be alert, pragmatic and willing to experiment.
Mitsui's response to the age of disruption began with the launch of its Business Innovation Committee in April 2012. Chaired by the company's executive vice president and staffed by the managing officers of the company's business units, the committee is charged with providing a framework for the creation of bold, innovative next-generation businesses in line with the company's Mid-Term Management Plan.
To be considered for investment, candidate businesses must meet three criteria. First, they must have significant business value, defined as long-term strategic significance and the potential to generate substantial profits. Second, they must address important needs (i.e. serve a large market and be of genuine benefit to society). Third and finally, they must involve uncertainty, requiring a long time horizon and having no guarantee of ultimate commercial success.
Special incentives are provided to the businesses that pass the screening to be selected as Business Innovation Projects: the main company absorbs downside risk, the permissible period for generating losses is lengthened, and progress is assessed according to positive, qualitative factors.
Ten of these Business Innovation projects have come to fruition (as of April 2016). A $50 million investment in Afrimax Group, an LTE operator bringing high-speed mobile data communications to 14 countries in Sub-Saharan Africa, is the most high profile example.
Thinking laterally: Company-spanning innovation
Over time, however, it became clear that a second, parallel system was needed: one that tapped into the ideas and passions of individual employees to develop new businesses spanning several of the company's verticals. The Business Innovation Department took a leaf from the Silicon Valley playbook and, in August 2014, set up the Karugamo Works ("Spot-billed Duck Works") program in a former day care center at the head office, a space deliberately designed to evoke a California garage start-up. Participants drawn from all Mitsui's business units were allowed to devote 20% of their work time to develop and then pitch their new business ideas with like-minded teammates. The idea was to create an intra-company open innovation laboratory, sparking creativity by pulling together people from different business units who wouldn't normally get the chance to interact.
The first year of the Karugamo Works program, which ran from August 2014 to August 2015, brought together 44 people-70% volunteers, 30% nominees-from the company's various business units. Ranging in age from their early twenties to their mid-fifties, they formed 10 teams based around themes ranging from agriculture and fisheries to innovative traffic systems. In its first year, the program produced two concrete investments, one in a food science company and one in a satellite manufacturer.
Thinking green: Hampton Creek reinvents food
With world population growing and people opting for richer diets, demand for animal protein in the form of meat, eggs and dairy products is rising relentlessly. At some point, the demand for land and water resources for livestock will reach unsustainable levels. San Francisco-based Hampton Creek., Inc., a food technology venture founded in November 2012, is looking to solve the problem by reimagining the whole food supply paradigm.
Hampton Creek started out by compiling a database categorizing thousands of plant proteins according to their molecular and functional properties. Do they dissolve in water? Do they mix with other liquids? Using this data, Hampton Creek discovered that protein from the Canadian yellow pea, among other plants, possessed similar properties to chicken eggs. This led it to develop a plant-based egg substitute. The company released Beyond Eggs, a plant-based egg powder, and Just Mayo, an egg-free mayonnaise, in 2013, followed by Just Cookie Dough, egg-free cookie dough, in 2015.
As well as putting less of a burden on the environment, Hampton Creek's products also contain lower levels of cholesterol, sodium and saturated fat than their real egg equivalents, providing a healthier option to consumers. The response in the United States has been enthusiastic: Hampton Creek's products can now be found on the shelves of major US retailers including Whole Foods, Target and Walmart.
All this makes Hampton Creek a perfect Business Innovation Project for Mitsui. Firstly, since the company is supplying an innovative form of a very basic food (1.8 trillion eggs are laid every year!), the potential to deliver serious business value is clearly there. Secondly, by contributing to solve environmental and health problems, the company is addressing important needs. (Meanwhile the uncertainty comes from not knowing whether consumers are prepared to switch en masse to plant-based versions of familiar foods.)
Convinced of the product's potential, Mitsui entered into a new share subscription agreement with Hampton Creek, making a $15 million equity investment in the company in September 2015.
Thinking Small: Big potential in microsatellites
The second project that came to fruition via the Karugamo Works program saw Mitsui invest in Axelspace, a Tokyo-based manufacturer of microsatellites, in September 2015.
Founded in 2008 as a spin off from Tokyo University and Tokyo Institute of Technology, Axelspace is a specialist builder of microsatellites (satellites of under 100 kilograms). It launched its first satellite, WNISAT-1, for the world's largest weather information company, in 2013, followed by Hodoyoshi-1, an Earth observation satellite, in 2014.
Axelspace has two distinct strengths. The first of these is unrivalled experience, built up over more than a decade, in the construction and launching of microsatellites. The second is low cost. Weighing between 10 and 100 kg, and with dimensions as small as 50 cubic centimeters, Axelspace's microsatellites cost under 1 billion yen (around US$10 million)—as little as one-hundredth the cost of a conventional satellite. This cost advantage makes it feasible to send a large number into low Earth orbit to create a powerful Earth observation platform producing image data of the whole world at an unprecedented rate of once per day.
This was what appealed to Mitsui. The Karugamo Works team realized that the remote sensing capabilities of a network of microsatellites could have applications in fields like traffic information, solar power output prediction, soil analysis and crop ripeness measurement, and for infrastructure and pipeline monitoring—all areas where Mitsui has a presence. If Axelspace could make the step up from being a satellite maker to becoming a broad-based information and data provider, it would be meeting the "important customer needs" and have the "significant business value" that Mitsui looks for in its Business Innovation projects.
In 2017, Axelspace will launch the first three satellites for its new AxelGlobe platform, and hopes to launch a further 50 by 2022, eventually providing coverage of 45% of the dry land area of the Earth.
Thinking 360°: Innovation everywhere
In 2014, Mitsui adopted "360° business innovation." as its corporate slogan. And "360° business innovation." is exactly what the Karugamo Works program is all about—connecting different businesses, people and areas of knowledge to build next-generation businesses to benefit the world. The second year of the Karugamo Works program got under way in August 2015, with tweaks to further boost its effectiveness. We can expect some more exciting announcements in fall 2016.
Posted in June 2016