Navigating global challenges: How Taiyo Corporation pioneered medical innovation with OPELAIII

Now is a pivotal time for the Japanese industry. The past three years have seen severe supply chain disruptions due to COVID-19 and the US-China decoupling situation. As a result, many corporate groups are looking to diversify their suppliers for reliability. Known for their reliability, high-quality services and advanced products,  Japanese firms are in an interesting position. Coupled with the weak Japanese yen, many observers argue that this is a unique opportunity. Do you agree with this sentiment? What are the advantages of Japanese suppliers in this current macro environment?

The COVID-19 pandemic posed significant challenges for our trading and manufacturing business. Let's first discuss the impact on our trading operations. We export Canon Medical Systems' products from Japan, and the most severe blow we faced during the pandemic was the substantial increase in transportation costs. The entire logistics system was in disarray, with disruptions at seaports and airports, as well as unavailability of certain services.

One of the initial setbacks was the halt in shipping operations.  The situation deteriorated day by day. Prices for ocean and air cargo rose steadily, and this was particularly detrimental to our long-haul exports to the Middle East and Africa, especially Algeria. At one point, the cost to ship a 20-foot container skyrocketed to 5 times the price prior to the pandemic, which severely squeezed our profit margins, even causing us to incur losses.

In contrast, our European competitors like Philips and Siemens enjoyed a geographical advantage, which translated into lower transportation costs. Japan's distant location from key markets meant we had to contend with long-haul transportation costs. While our products were made in Japan, some components were produced outside the country. At a certain point, we faced a shortage of semiconductors, which significantly affected their availability and spiked their prices. The reason behind this was that Japanese multinational companies had established facilities outside Japan to offset the challenges posed by the country's geographical location.

As a general trend in manufacturing, Japanese companies used to expand production overseas to leverage currency exchange rate advantages. However, the recent depreciation of the yen has prompted a shift in focus, with many companies now aiming to bring their production facilities back to Japan.

In the case of our product, OPELAIII, almost all its parts and components are manufactured in Japan, and it is assembled here as well. Even during the peak of the pandemic, we were not much affected by the supply chain disruptions. In this regard, the pandemic had a relatively minor impact on our OPELAIII business. In fact, the weaker yen is actually working in our favor.

When we look at the Japanese medical equipment market, the majority of the available products are from overseas. I was so surprised that there are few products produced in Japan. This dependence on foreign products became evident during the COVID-19 crisis, as prices of medical equipment from Western countries surged, causing problems for healthcare professionals. On the other hand, we have consistently manufactured our products in Japan, shielding us from the adverse effects of foreign exchange rate fluctuations.  Foreign products were affected by the price inflation overseas, but we never raised the prices of our products since their launch, which is quite rare in the market.

As we navigated through the COVID-19 pandemic, we gained valuable insights into the benefits and drawbacks of producing and exporting Japanese products. Recent trends indicate that Japanese companies are increasingly relocating their facilities from overseas back to Japan, which appears to be a prudent choice.

Japan is the oldest society in the world with a rapidly shrinking population. Within the next 15 years, it is anticipated that one in three people will be over the age of 65. This means it is difficult to hire new graduates and from a medical perspective, it does put a strain on public finances. What are some of the challenges this demographic shift has presented to your firm, and how have you been reacting to it?

The demographic shift has a significant impact on our ability to secure a skilled workforce. Ensuring a positive and supportive working environment for our employees is crucial. We are proud to have a team of 15 employees, each hailing from diverse backgrounds. Notably, our oldest team member, who is over 70 years old, continues to contribute the extensive skills he has accumulated throughout the years to our sales activities.  

Within our team, we have individuals from various backgrounds, including an elderly member, several working mothers and Mr. Rawaf Radjaie, who, though originally from the Philippines, holds permanent resident status in Japan. It is vital for companies to create an inclusive and nurturing workplace that accommodates individuals from diverse backgrounds. Furthermore, our partner companies, instrumental in developing our products, employ engineers primarily in their 50s and 60s. It is crucial for Japan to have older professionals who built Japanese technologies and fueled the post-war economy to continue to provide support.

While I may be among the younger generation, the wealth of experience, expertise and knowledge possessed by these partner engineers complement my youthful energy, resulting in innovation. Providing a platform for experienced engineers to utilize their skills is essential. This emphasis on collaboration extends not only to our employees but also to our partner companies. We need to work together to combine the experience, expertise and knowledge of the older generation with the energy and enthusiasm of the younger generation.

I firmly believe that the knowledge and expertise of the elderly represent valuable assets for Japan, many of which remain untapped and underutilized. In the 1970s and ‘80s, Japan was a medical powerhouse. However, the front-runners of that era are now in their 60s or past the normal retirement age. Today's younger generation has seen that product development and manufacturing facilities are outside Japan. While they have experience in the manufacturing sector, their roles tend to be more compartmentalized. Like a silo, they lack a holistic understanding of product manufacturing. In contrast, those who were active in the 1970s and '80s possess firsthand experience in end-to-end product development and production within Japan. They hold a comprehensive view and deep engineering knowledge, which is currently missing among young professionals.

With the advent of IoT, AI and other emerging technologies, combining these new developments with the existing wealth of engineering expertise can propel Japan’s multilayered technology to new heights. Many individuals in their 60s and 70s are still active and energetic. By offering flexible employment contracts, companies can fully leverage their knowledge. The synergy between their mindset and that of younger professionals can help transform our aging society into a more dynamic and affluent one.

In 2017, you began manufacturing and selling your OPELAIII, which is a wearable surgical light with a brightness of about 145,000 lux and can be used in a wide variety of fields, from general hospitals and city clinics to more specialized medical environments. Why did you decide to develop your own medical product, and how are you ensuring the growth of the OPELAIII?

In 2014, I assumed leadership of the company from my father. At the time, our company was primarily engaged in the trading business. Even prior to taking over, I had observed a gradual decline in the role trading companies played due to the rise of e-commerce and other technological advancements that made direct transactions between manufacturers and local distributors easier. 

Recognizing the diminishing role of trading companies, I felt a sense of urgency to diversify our business beyond trading. I wanted to establish two additional pillars for our company: a manufacturing division, exemplified by OPELAIII and an Organic LED business.

This expansion into manufacturing gives me greater power and autonomy with regard to selecting strategic partners, expanding into new domains and exploring different geographic areas. I wanted to produce other products on our own to make that happen, which was stepping away from the traditional trading model focused mainly on transferring products from one place to another.

When developing OPELAIII, I envisioned it to revolutionize the concept of surgical light by bringing together the powerful illumination of ceiling-mounted OR light and the mobility of a headlight in order to enhance visibility, comfort and safety for both surgeons and patients. With 3 LED lights installed, it provides superior brightness while minimizing shadows from forming. Its patented heat management technology allows it to be powerful yet safe, making it truly a one-of-a-kind medical device.

Left: The innovative design of OPELAIII will change the way surgery is performed.

Right: With support from NPO Rocinantes, we donated OPELAIII to Ibn Sina Hospital in Sudan. Photo shows the device being used during the nation’s first liver transplant.

Are you also looking to develop more products in the future in addition to the OPELAIII?

Following the release of the initial OPELAIII model, we received valuable feedback from medical professionals. Taking their input into account, we have begun the development of the next generation OPELAIII, which incorporates new features and improvements. We are hoping to release it next year.

Are you looking for new partners, especially overseas companies, in order to cater a service or develop new products?

We are looking to partner with Japanese or foreign companies. Currently, we have eight distributor partners in Japan, each serving specific geographical areas. The flexibility to choose our partners is important, particularly because OPELAIII is a niche product that is not easy to sell. Since it requires a special approach to sales, we seek partners who understand the value of OPELAIII and are willing to collaboratively promote it to medical professionals. Our partners’ reliability is a crucial factor.  

While we are eager to expand internationally, we face challenges in finding reliable overseas partners, mainly because accessing foreign markets is considerably harder than the domestic Japanese market. It is common for overseas businessmen to express enthusiasm upon seeing OPELAIII for the first time, only to quickly lose interest when they encounter challenges in the sales process. This makes finding dedicated and effective sales partners overseas quite challenging. Mr. Radjaie, who oversees our international sales efforts, has been facing the same difficulty.  Finding a good partner is the key to success in overseas business.

The height of the COVID-19 pandemic made it exceptionally difficult to establish and cultivate international partnerships due to movement restrictions. However, we leveraged online trade exhibition services to mitigate these challenges. Some potential partners and clients discovered us through our website. With global travel significantly interrupted, businesses worldwide turned to the Internet as a means of connecting with partners and customers. The acceleration of online services emerged as a positive outcome of the pandemic.

Large global corporations may have the means to establish physical offices and branches across the world, but our smaller size and limited resources do not permit such an approach. Nevertheless, online meeting and exhibition tools have allowed us to connect with overseas customers and partners more easily than in the past. Due to COVID-19, everyone in the world got used to online communication or business discussions. In addition to the favorable impact of the yen's depreciation, online communication has proven to be another tailwind for our business.

Many Japanese firms, while having a large international network, rarely have locations in the Middle East or North Africa. You are a trading firm that has specialized in these regions for over 40 years. What motivated you to cater to these parts of the world?

We conduct a trading business with partners in Africa and the Middle East, although we do not maintain our own offices in these regions. Our primary partner company is based in Egypt, which is owned and managed by a local family, and has a longstanding relationship with our company dating back to my father's tenure. Our shared status as family businesses has cultivated strong ties between us over the years. One of the initial challenges I faced when taking over from my father was earning recognition and acceptance from our Egyptian partner. The other one we have in Jordan is serving as the accounting and finance department of this Egyptian company.

Our Egyptian partner typically enters into subcontracting agreements with companies in Africa and the Middle East, which means we do not have direct contact with businesses in these regions. In Africa and the Middle East, a significant proportion of companies, aside from large global corporations, are family-owned enterprises. Therefore, it is important to build good relations with those family business owners.

I learned that finding reliable partners is crucial in doing business in the Middle East and Africa. We have to leave it all to them because the business custom is different. They have their own way of running a business, which is different from the Japanese style. Imposing Japanese style on them never works. I have built a solid relationship with our Egyptian partner.

I am investing my time and energy in finding dependable partners to expand our OPELAIII business in other parts of the world. Our approach to business expansion revolves around securing a reliable partner first, and subsequently initiating marketing activities in our partner's country, whether it is in Asia, the Middle East, Africa or Latin America. We need to identify a partner who is genuinely motivated to sell our products and is willing to take calculated risks in handling our unique niche product.

Our strategy is to locate partners before selecting a specific country or market. This approach differs from the conventional MBA-style strategy for global expansion, which typically begins with extensive market research and an emphasis on larger markets.

Which regions do you believe holds the most potential for your firm and OPELAIII?

I can see potential in the Middle Eastern market due to its reliance on imports, as the region lacks significant manufacturing capabilities and expertise. The local culture there is open to accepting niche and premium products, even at higher price points. Additionally, there is a strong confidence in Japanese technology, making it a favorable environment for our products.

I thought Asia was a promising market because of its geographical proximity and market size. However, many Asian countries have developed their manufacturing capabilities because Japan and other advanced countries have trained them as production centers. They can produce reasonably good products at a lower price, thereby posing a challenge to us in terms of price competitiveness. However, if we can establish a niche market within Asia where premium products are valued, even at a higher price, it could prove to be a lucrative opportunity.

The United States, despite its size and potential, presents significant challenges. We are eager to penetrate this market, as it serves as a hub for surgeons worldwide, providing an excellent platform for gaining global recognition. We believe that endorsements from influential surgeons in the US can serve as a valuable marketing tool when they return to their respective countries. With this in mind, we prioritized obtaining FDA certification as a means of market entry instead of CE marking. However, similar to the experiences of other small Japanese companies, achieving success in the US market without a well-established brand presence proved to be very challenging.

There are some examples of small companies entering the market as OEMs in the United States but without their brand. Observing the strategies employed by some Japanese global corporations such as Olympus, Canon, Nipro and Terumo, it becomes evident that successful market entry often involves the acquisition of local partners to establish efficient distribution channels. Otherwise, it is really difficult for small companies. I tried to enter the market, but I faced a lot of difficulties.

If we come back in 2029 on your 15th anniversary as a President, what goals would you like to achieve?

I would like to ensure the profitability of the OPELAIII business by securing reliable overseas partners for the distribution of OPELAIII outside of Japan. Relying solely on the Japanese market is not sufficient to achieve profitability. Currently, we are in the upfront investment period, focusing on the expansion and development of OPELAIII. Looking ahead to 2029, our objective is to establish OPELAIII as a recognized and sought-after product in international markets, including regions such as Africa and beyond.

Interview conducted by Karune Walker & Jaime De Andrés Gracia