Cinnamon AI's Successful Expansion to the US
10X Innovation Lab partners with NEDO to support entrepreneurial growth in Japan
According to Forbes, a staggering 9 out of 10 startups fail. And on top of that, even fewer are able to take their operations to an international level. Helping companies expand has been at the heart of 10X’s work for years. We have witnessed with our own eyes the challenges that are presented when companies pursue foreign development. Working through a variety of markets including LATAM, Asia, and others, we have come to understand that there are certain fundamental underlying reasons that cause most startups to fail. We help businesses avoid these roadblocks and successfully expand. One such example is Cinnamon AI, a Japanese startup that recently launched internationally after the help of 10X Innovation Lab. They raised over 15M USD, and generated increasing sales in the United States, and was consequently able to expand its team to Austin, Texas. This past week we sat down with Yoshiaki Ieda, Co-founder & COO of Cinnamon AI. Yoshiaki led us through some of his challenges and how he overcame them when pursuing foreign expansion.
Undoubtedly, one of the hardest things to do when developing your business is identifying and understanding your customer. We have all heard of the infamous Jeff Bezos business principle “the customer is always right”, but when applying this in the context of multiple customers from multiple backgrounds, things can get tricky quickly. This, layered on top of an entirely different culture only makes it tougher for the expansion of your business. In the case of Cinnamon AI, going from Japan to the United States was a daunting task, something that had even steered away large Japanese corporations in the past.
Back To The Basics: Customer Validation
In the context of Cinnamon AI, their goal was to expand into the US market and provide their digital artificial intelligence solutions to new customers in the financial services sector. Before they could do this, they had to create a road map of where they had been in terms of customer discovery and validation, and how this would help them get to where they needed to be. When joining the 10X program, it was clear that Cinnamon AI was already largely successful in their home market of Japan and saw an opportunity to take what they had started and implement it on a global level.
Yoshiaki, being the thoughtful entrepreneur that he is, was thinking a lot about how he could translate their success in Japan to the US market. Immediately, he recognized that he had to understand his place in the basic principles of customer development coined by Steve Blank. In Japan, they were in the customer creation phase of the business (as represented in the graphic). Customer creation represents Cinnamon AI's ability to provide solutions to businesses that were not initially part of their target market. However, in the United States they had only just begun to understand their customer. With this in mind, Yoshiaki decided to take a step back and focus on customer discovery to better understand what value Cinnamon AI would provide to customers overseas. Doing business in new markets requires a specific mindset and interest in digging deep into understanding your customer. A product that is doing well in Japan may not have the same results in a market that has a different culture, language, and methods of operation.
One of the first things that Yoshiaki noted when we first started exploring his journey is the tremendous amount of time he focused on really getting to know the customer. “This is a tough and time-consuming process [...] it took us over six months to even validate the market” (Yoshiaki). When expanding a business, whether it be to an international market, or even just one that you don't have much experience with, reading and understanding the people that will use your product/service is going to determine your success in the long run. And in order to be able to truly understand your customer, you have to be willing to devote in time and energy.
Acknowledging Culture Is Key For Successful Expansion
Often times, understanding the customer can be difficult if you practice business in a place where the culture, the method of communication, and even the general business environment is different. This was another major hurdle that Yoshiaki faced when tasked with developing an interest for Cinnamon AI’s products in the United States. He understood what his unique value proposition was, and he knew there were customers that could be helped. Everything else he needed to do to get from point A to point B was something that was- literally and metaphorically - foreign territory.
As a tested entrepreneur, Yoshiaki took advantage of the various opportunities that technology provided and created metrics for measured testing and growth. He created targeted email lists that were sent to potential customers and ran A/B testing campaigns to measure response rates. In doing so, his team was able to reach a larger audience and analyze how potential customers reacted to various action items and marketing tools. Yoshiaki came early on to realize that successful entrepreneurs don't make decisions based on gut feelings but rather data-proven and data-driven solutions.
Another important aspect in the overall success of Cinnamon AI was Yoshiaki’s willingness to listen. As you are building your product, you need to listen to your customer and understand what problems or difficulties they have. Using this approach, you are able to identify unique challenges that your customers have and opportunities to create value from your product that will directly solve their problem. As you conduct meetings with customers, it is not always the best approach to dive directly into your slides. Rather, spend time listening and asking questions. Once you have a better understanding of what the consumer needs, you can tailor your proposition to fit their needs.
Founder Alert: Step Out Of Your Comfort Zone!
It can be challenging for founders to come into a completely new ecosystem, and many shy away from stepping outside their comfort zone. In other words, those that choose to expand internationally only build a small network of faces and people that are very similar to the ones back home. This can be counterproductive! Go out there and advocate for your product to a diverse range of people. The results will almost certainly be better. At the same time, start thinking about how to narrow down specific target markets that you want to be involved in. This means moving from the customer discovery to the customer validation stage in the model above. With Cinnamon AI, after meeting various people, Yoshiaki decided that the financial services sector would be ideal. Once he came to this conclusion, he relentlessly pursued it with his team.
Keep HQ Informed Of Your Progress
Often overlooked, transparent communication within the business is a key indicator of success down the road. It is important that everyone understands the importance and opportunities that international expansion presents. It is also important to recognize that “Rome wasn't built in a day”, there are going to be times of trial and error and periods where sales are going to be slow. Having everyone on the same page in terms of where the business is in relation to customer discovery/validation in a foreign market ensures that everyone is cognizant and working towards the same goal. Oftentimes, reaching back into an organization can help spur ideas and move forward altogether. Yoshiaki talks about his weekly management meeting where he would relay the outlook on international expansion.
10X Can Help Increase Expansion Success-rate
This is where the 10X Innovation Lab came in. Working in partnership with startup accelerators all across Japan and the globe, 10X provides foundational knowledge in making sure you have the right connections and mentorship to hit the ground running. Yoshiaki recalls one small incident that was particularly memorable to him: “I didn’t know that it wasn't common practice to have punctuation in your powerpoint slides”, he says that this detail, small as it may seem, helped him come across as more professional. 10X helps prepare founders to expand into new markets, coaches them on relevant business practices, helps prepare their material, demonstrates the value in understanding cultural differences, and connects you to relevant industries across the globe. With Cinnamon AI, we helped establish connections with firms like Wells Fargo, Citi Bank, and many more. Connections that Yoshiaki admits he would have had trouble making without the support of 10X.
After working with 10X Innovation Lab, Yoshiaki secured over 15M USD in funding, and Cinnamon AI was able to open its offices in the US. At 10X Innovation Lab, we create the bridge and help you cross over. If you are interested in learning more about 10X Innovation Lab and the work that we do with startups, governments, and universities you can check out our Market Expansion Program or reach out to us directly at klaus@10Xinnovationlab.com.