Solving Regional Issues through Open Innovation in Hiroshima, an "Innovation-Oriented Prefecture

Why Hiroshima Prefecture has been taking on the challenge of open innovation for 10 years.

-When did you decide to focus on open innovation as a municipality? What were your reasons (aims) and background?

Kanada, Hiroshima Prefecture:Hiroshima Prefecture has been working for about six years to build an innovation ecosystem where new values and services are continuously emerging in order to realize a sustainable economic society.
Co-creation across different industries and business categories is essential to realize an innovation ecosystem, and we believe that we can create new industrial value by leveraging the strengths of the manufacturing industry, including automobiles, which is a key industry in our prefecture, and by collaborating with the knowledge of universities and research institutions and integrating with digital technologies such as AI and big data. We believe that we can create new industrial value.

As a specific initiative, the "KAIZEN" is a place for diverse human resources from within and outside of the prefecture to form networks beyond the framework of their organizations.Innovation Hub Hiroshima Campsopened in March 2017, and has been working to create an environment that generates innovation through the chemical reactions that result from human interaction.
Operated by Hiroshima Prefecture as a place for entrepreneurship and new business creation, there is no fee to use the facility, which is currently being utilized by more than 1,400 current members. There is a workshop space equipped with a library and mini kitchen equipment, an event space that can accommodate up to 80 people, a Fab area where large format printers, laser cutting machines, 3D printers, etc. are available, and a Marché area where marketing and sales tests can be conducted. The staff, including a coordinator, provides support to all members.

A wide range of companies in the prefecture, including those in the manufacturing, food, restaurant, and service industries, as well as sole proprietors (about 30% of the total) who are looking to start their own businesses, use this service.
The "Innovators Hundred Hiroshima Innovators 100 Hiroshima" (Innovators Hundred Hiroshima) is an incubation program to create innovation within companies.http://innovators100.org/The project is called "New Business Development Project (NBDP)," in which young employees from about 20 companies in Hiroshima Prefecture participate in each project and create new business proposals.
A representative example is the case of a young employee of Otafuku Sauce Co., Ltd. famous for its okonomiyaki sauce, who commercialized the "KAKOMU Gohan Series," a "7 major allergen-free" food product, through Innovators 100 Hiroshima.

In October of the same year, the "Hiroshima Digital Innovation Center" was opened, providing an environment and facilities for advanced digital simulations using supercomputers in the product development process for companies in the prefecture, thereby achieving an overwhelming reduction in development time and improving product quality.

."Hiroshima Digital Innovation CenterThe "Hiroshima Monozukuri Digital Innovation Creation Program," which was undertaken by Mazda, Hiroshima University, and others to promote "model-based development" through industry-academia collaboration under the strategy of Hiroshima Prefecture, has also been linked to the "Hiroshima Monozukuri Digital Innovation Creation Program" and is one of the centers for the digitization of the manufacturing process.

The center is mainly used by small and medium-sized companies involved in manufacturing, such as manufacturers of automobiles and other products in the prefecture, to support them in reducing development costs and time in the area of physical product creation. Specifically, small and medium-sized companies often do not have the funds to invest in development on their own. In response to these issues, the "Hiroshima Digital Innovation Center" has created an environment that enables digital product development simulations.

Furthermore, in May 2018, we established the "Hiroshima Sandbox," a place where various players, including companies and universities from within and outside of the prefecture, gather to conduct open demonstration experiments to solve regional issues through trial and error while utilizing digital technology. Under the leadership of Governor Hidehiko Yuzaki, a budget of 1 billion yen has been allocated over three years, and this year marks the third year of the project. The concept of the "Hiroshima Sandbox" is to create an area where innovation is generated by the power of the community through the concentration of AI/IoT human resources and companies by branding the area as a place where "you can do interesting things in Hiroshima. In fact, the initial call for demonstration projects attracted 89 applications, from which nine projects were selected for demonstration.

Various projects are in progress, such as a project to solve labor-saving problems in the primary industry with AI/IoT technology, and a project to solve the problem of stress-free tourism with the power of digital technology by providing a mechanism to avoid traffic jams and enjoy comfortable sightseeing.

As part of the "Hiroshima Sandbox" initiative, a startup challenge project (Hiroshima Open Accelerator) has been launched to generate innovation by matching the resources of existing companies in the prefecture that have built up a track record to date with startups that are continuously creating new projects. The project has been launched as part of the "Hiroshima Open Accelerator.
Companies and local governments in the prefecture are primarily responsible for "developing new services and solutions originating in Hiroshima and cultivating the market.

On the other hand, even if players in the prefecture are working in a closed environment, resources are limited. While the fact that Hiroshima Prefecture specializes in manufacturing is one of its strengths, on the other hand, there are situations where it is a weakness. Legacy areas remain in areas like digital skills, knowledge and mindset. I believe that the strength of start-ups is that they have elements and resources that Hiroshima does not have, such as a mindset, new IT technology, and a sense of speed, so I believe that collaborative efforts between players in the prefecture and start-ups outside the prefecture are also an important element.

In this sense, the "Hiroshima Open Accelerator," jointly implemented by the Hiroshima Bank and Creww, was a program with the hope that "companies in the prefecture with problems will open up their resources to startups, who will use them to solve new problems and create new value through co-creation. The Hiroshima Open Accelerator is a program with hope. The Hiroshima Open Accelerator is connected to Hiroshima Prefecture's goal of "accumulation of startups" in that knowledge and mindsets are accumulated in Hiroshima through the program, and I thought the scheme of the program was a distinctive feature of its content.

What do you expect from the Hiroshima Sandbox, a three-year project, as it reaches its milestone this year?

Kanada, Hiroshima Prefecture:The most significant achievement of the "Hiroshima Sandbox" is the branding of Hiroshima as a place where people can take on challenges they could not take on before. Ideally, businesses that take on new challenges in Hiroshima will use the logo to say, "Let's start a sandbox," and gather friends and innovators.

Why Financial Institutions are Working to Create New Businesses and Open Innovation

Hiroshima Bank Kurisu:The environment surrounding regional banks is becoming more and more challenging every day due to social phenomena such as the declining birthrate, aging population, and concentration in Tokyo, as well as lower lending rates caused by the negative interest rate policy. In addition, with the rise of fintech, financial institutions are also stepping up their efforts to innovate. At our bank, the "New Business Development Promotion Office" launched in August 2016 was reborn as the "Digital Innovation Office" in February 2018, and the "Digital Strategy Department" was established in April 2019. In this department, the creation of new businesses and open innovation, including alliances with other business sectors, is one of the main strategies for digital innovation initiatives.
　
In April 2019, Hiroshima Prefecture, Hiroshima University, Hiroshima Industrial Promotion Organization, Hiroshima Venture Development Fund, and our bank will sign a collaboration agreement to work across the board to create new businesses. In Hiroshima Prefecture, where population decline and lack of successors are challenges,Creating new businesses is critical to halting the contraction of the local economyWe think that this is a good idea.

Fortunately, Hiroshima Prefecture has made the realization of "Innovation-driven Prefecture" a key policy, and is practicing flexible and unconventional approaches based on innovative ideas. The fact that the two prefectures share the same direction to pursue makes it easy for them to cooperate with each other. This trend has led us to conclude a business alliance agreement with Creww to strengthen our support for new business creation, making us the first regional bank to do so.

Challenges of being a backward country in innovation and economic stagnation due to commoditization

-What challenges do you face as a local government and as a financial institution in Japan, a country that is said to be "backward in innovation"?

Kanada, Hiroshima Prefecture:As one indicator for international comparison of corporate innovation capability, an OECD survey (2017) shows that Japan has the lowest rate of new product and service launches among developed countries, with 78 in the manufacturing sector and 65 in the service sector, compared to 100 in the United States. In addition, in the U.S., IT companies that have emerged in the last 20 years are driving economic growth and the size of venture capital funds, while this trend is not seen in Japan. I believe that Japan's experience of successful high economic growth after World War II with heavy industry and a lifetime employment system has created a mindset that is difficult to adapt to change and speed to new cutting-edge technologies and systems such as IT and venture businesses.

Hiroshima Bank Kurisu:It is clear that if "commoditization" becomes widespread in all industries due to stagnant innovation, economic growth itself will stagnateWe are committed to "business potential assessment". We focus on "business potential assessment" to properly understand the "strengths" and "weaknesses" of a company through dialogue with its management, share the management issues that emerge from this dialogue with our clients, and work together with them to resolve these issues. Among them,Must incorporate elements of innovation and contribute to the development of the company and the local economyWe believe that this is a

On the other hand, a major challenge is that financial institutions themselves, which hold a large number of networks and information within the region, are at the opposite end of the innovation spectrum. Being a regulated industry, it is easy to fall into the so-called "innovation trap," and historically, it has been difficult to foster a culture of taking on the challenge of doing something new.
As mentioned above, some initiatives are being implemented to encourage change, but the idea of innovation has not yet permeated the entire organization.If we want companies to innovate, we need to dispel the stereotypes of the past, and financial institutions themselves need to "change" in the true sense of the word.In these cases, it is natural that there is a need to raise the awareness of bank employees. In those cases, it is only natural to raise the awareness of bank employees,It is also necessary to develop the "soil for change" without missing the boat on deregulation, such as by reviewing financial regulations.I feel that this is a good thing.

How to overcome barriers to new business creation...

-Why did you choose "open innovation" as a method for innovation?

Hiroshima Bank Kurisu:Many regional customers also recognize "new business creation" as an issue for their own companies, and there is growing momentum to create departments for new business creation. Regional financial institutions are tasked with responding to the diverse needs of their local customers, and in considering measures to support new business creation, many customers expressed a desire to work on new business creation but lacked the resources to do so with their own limited human resources and ideas, which led us to consider using this method.

In the past, through business matching operations and industry-academia collaboration operations, we have been matching "customer x customer" and "customer x university",External collaboration and open innovation is a shortcut to realizing new business creationWe thought it would be a good idea. In addition, this time we held an acceleration program called the "Hiroshima Open Accelerator" in the form of a publicly solicited project from Hiroshima Prefecture, with which we have a partnership agreement.

The Hiroshima Bank, an indispensable partner for accelerating innovation among local companies

-What were the reasons why Hiroshima Prefecture chose Hiroshima Bank as its partner, and what were your expectations?

Kanada, Hiroshima Prefecture:For the Hiroshima Sandbox Startup Challenge Project, we have invited local firms to participate as partners through an open application process. Hiroshima Bank is a company that is firmly rooted in the community and plays a role not only in financial services but also as a management consultant for local companies. We in the Innovation Promotion Team, who promote industrial policy, rely on their ability to communicate with local companies. With his track record and experience in supporting various companies, we expect that he will continue to provide a wide range of support for this project, not only for the demonstration but also for the commercialization of the project.

Bridging entities with different cultures

- On the other hand, Hiroshima Bank chose Creww as its business partner.

Hiroshima Bank Kurisu:Compared to other companies in the industry, Creww had a wealth of experience in hosting accelerators, had a network of over 4,800 startups, and could expect to acquire Creww's expertise in new business creation.
When I heard about startups, I had the impression that they were assertive and somewhat difficult to approach, but the person in charge of our accelerator said that they were very approachable and responsive.

-What are your impressions of the Hiroshima Sandbox Startup Challenge "Hiroshima Open Accelerator"?

Hiroshima Bank Kurisu:We received applications from startups in a variety of business categories, and eight collaboration proposals were selected. Some of the participating companies that had tried to approach startups on their own said, "Only a program that utilizes a platform can enable us to contact so many startups so efficiently.

Nowadays,Although there are more opportunities for contact with startups, they often end on an ad hoc basis.I hear there is.Programming allows for efficient and effective contact and provides an opportunity for mutual visioning of the future.It has been demonstrated in our
Creww supported us in every aspect of the project, from recruiting participating companies to the demonstration test. Thanks to their support, we were able to operate smoothly and without major problems despite this being our first attempt.

Although the program is a platform-based program, I felt that person-to-person communication was more important than I had expected. I was surprised at the strong analog elements, such as the chemistry between the people in charge of the participating companies and startups, and the persistent discussions to brush up on collaboration ideas.

At the same time, we are keenly aware that creating new businesses is not an easy task, and that it is extremely important to continue our efforts. I believe that the program was also extremely useful from the aspect of human resource development.
From the perspective of a major company, Creww can provide experience in a systematic program for new business creation and human resource development, leading to a sustainable approach. Financial institutions can accumulate know-how by working with Creww in a consultative role regarding the creation of new businesses for their companies.

Kanada, Hiroshima Prefecture: We have heard that all five projects of the five companies have reached the stage of demonstration, and some of them are considering investment with a view to concrete implementation. I believe that development methods based on co-creation that transcend company size and industry are still not widely utilized in the prefecture. I don't think there is a royal road to business models, but I think the greatest feature of working with startups is the "sense of speed" of trying things out first. What was the actual satisfaction level of the companies that participated in the program?By collaborating with players outside the company, "we were able to take on challenges that we had not been able to do before."I feel that this is an evaluation of the

"Hiroshima Open Accelerator" results presentation and online information session.

June 30, 2020

The Future of Innovation Accelerated by Municipalities and Financial Institutions Tackling the Tack

-What are your visions and initiatives for further acceleration of innovation as a municipality and as a financial institution?

Kanada, Hiroshima Prefecture:While there are some who believe that business sentiment is leaning toward stability due to the recent Corona disaster, there are also signs that the social structure is shifting from "dense" to "sparse" and from "concentrated" to "decentralized".Opportunities to establish sustainable local economies at the municipal level by defaulting gaps in infrastructure, transportation, education, information, and other urban functions through digital technologies such as online and remote access.It may also be seen as a way of life. Rather than some flashy growth or innovation, we will continue to redefine our values and explore as a municipality what kind of state of affairs is an environment where innovation can continue to occur.

Hiroshima Bank Kurisu:We are committed to creating a virtuous cycle of innovation for the entire region through the two wheels of "Acceleration of innovation within the bank through the Digital Strategy Department" and "Acceleration of innovation by local customers through the ongoing Hiroshima Open Accelerator". We hope to create a virtuous cycle of innovation in the entire region through both of these efforts. In addition, the promotion of the commercialization of research seeds from local universities is also important for regional innovation, and we are promoting systematic programs to discover seeds for commercialization and establishing a fund to support local university-launched venture companies (already established in April 2020).