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“What value can you offer to the society that raised you?” – Innovation Insights from H.E.R.O. Innovator Anicom’s Nobuaki Komori | H.E.R.O. HeartWare | 6 August

“What value can you offer to the society that raised you?” – Innovation Insights from H.E.R.O. Innovator Anicom’s Nobuaki Komori | H.E.R.O. HeartWare | 6 August

The uplifting entrepreneurial story of Anicom’s Nobuaki Komori is for anyone who has ever felt overwhelmed by challenges and struggles and is keen to develop the capacity to rebuild forward. One of our society’s deepest secret is that many of the most successful entrepreneurs suffer misfortunes from time to time. Struggles and sufferings do not fit our theory about what it takes to succeed in life and so we fail to conceded that pain is inevitable in our lives. Your pain and tears will wash away the illusion of what you once believe to be true. We aim to stand on the firmer ground of experience hard won through hearing and distilling the essence of the stories of our H.E.R.O. in overcoming their struggles who opened their hearts to us that resilience is an art that can be learned to light up our soul to accept and burn away the darkness and emerge from the experience transformed.

When taking a pet to a hospital, you have anxiety that you do not know how much money you need. Nobuaki Komori is the founder of Anicom Holdings, the largest online-to-offline pet insurance company in Japan commanding a 57.7% domestic share of the growing pet insurance market with over 699,000 policies in force generating sticky recurring revenue income & cashflow and with tie-ups with over half of all, or 6,200, animal hospitals nationwide to reduce the financial burden of the owner for treatment, and to help the veterinarian provide the best medical care. Japanese households own 18.4m pets and only 1.5m or 8% were insured vs 25% of the 15m pets were insured in UK. Founded in 2000, Anicom is the first company to establish an over-the-counter (OTC) settlement system for animals in Japan, allowing policyholders to pay only uncovered amounts out of pocket simply by presenting their insurance card at the hospital and is a tech innovator with services that include allowing insurance claims to be made via LINE in just three minutes, an industry first, enabled by its powerful database & analytical prowess of more than 15 million insurance claims tied to illnesses and accident and treatment data (Anicom Receptor) that allow the company to propose preventive measures by examining how animals become sick and how accidents occur. Anicom’s cloud-based pet medical records management system Anirese Cloud is used at around 2,000 animal hospitals which has become the de facto standard in Japan and Anicom plans to export the system overseas. By leveraging the data and knowledge gained in the pet insurance business, Anicom aims to become an infrastructure company which touches all aspects of pets’ lives, handling everything from upstream (hereditary disease eradication) to midstream (animal hospital management, health exams, prevention), to downstream (provision of medical care guidelines, advanced medical technology).

We admire and respect CEO Komori for his down-to-earth personality and values in expressing gratitude, curiosity and taking on challenges. Komori said thoughtfully, “Anicom receives monthly premiums from insurance members. I am paying salaries for employees, and I also invest in new businesses. When thinking about what money is, I feel that it is an additive of ‘thank you’ energy. There are interesting social experiments carried out in which children from any country are asked to ‘draw money’. They usually draw a circle or a square. And write a number in the center. Apparently, the average image of money is figures. Next, when you urge them ‘Please exchange this money for something that someone has’, everyone adds the word ‘thank you’ after the exchange. There is no one who will exchange money by saying ‘you are foolish’. In this way, I feel that money is an additive of ‘Thank you’. The amount of 10,000 yen, 100,000 yen, 1 million yen is the result of countless ‘Thank you’ accumulated. The money in your wallet may be a positive energy entrusted by someone. As you usually do when you exchange money, if you take a perspective like this, your consciousness may change. Anicom’s premium income exceeded 31.3 billion yen. This money is also the addition of ‘Thank you’ received from our subscribers. You cannot waste this energy. What value can you offer to the society that raised you?”

How did CEO Komori come to conceive of the idea of a pet insurance business? Especially when it is a business that even giant insurers shun because of the high operational costs in loss ratio and customer acquisition which many setups (and investors) have underestimated? After all, Anicom is probably the only animal insurance company in the world generating significant profitability, as compared to its VC/PE-owned domestic rival ipet (TSE: 7323) with 20.7% market share, or to Darryl Rawling’s Trupanion Inc (NASDAQ: TRUP) with slightly lower revenue than Anicom but is still loss-making and commands a US$1.3bn market value. Komori shared, “My turning point in life is the Great Hanshin-Awaji Earthquake. Until then, I thought that yesterday’s efforts would be reflected in ourselves today, but such ideas blew away in the violence of the great nature. I felt that human beings would die in an instant. Among the activities of great nature, human troubles are tiny things. If you can seriously do what you want to do, do not waste your time not trying it. From that time I was confronted with a sense of life and death, I kept holding such thoughts: Let’s raise our own business. Compared to automobile insurance and fire insurance, pet insurance has a lower unit price, and about half of the number of subscribers uses insurance at least once a year. If it is fire or car insurance, accidents do not occur so frequently over their lifetime. In that sense, pet insurance can be said to be the most difficult among non-life property & casualty insurance, as the operation cost will be huge compared to other types. Digitizing complex receipt processing can reduce network cost burden on animal hospital. Help pet owners to set up accurate insurance premiums and those who become members can pay half the cost of medical treatment at the reception desk after receiving consultation at the animal hospital. The desire for entrepreneurship grew day by day. I firmly conceive the idea, I make a business plan on my own and leave Tokio Marine in May 2000.”

However, like in Joseph Campbell’s Hero’s Journey which inspired people from Steve Jobs to all Pixar movies, the protagonist must go through the road of the trials paved with challenges and sufferings. Komori displayed extraordinary moral courage and authenticity as both a human and leader in sharing his vulnerabilities, “Two friends gathered at the beginning. The capital is self-funded, 40 million yen. I thought that I could sell it if it was a good one, but that was a mistake. In the Tokio Maritime era, I was only doing business with a company sign. For goods without the physical shape such as insurance, nobody will buy it unless there is a sense of security for the brand. I lost confidence and motivation in parallel with the drastically decreasing funds. Soon, the capital of 40 million yen is gone. The number of staff has increased to 10 people, but I do not think I can pay salary. Then I fell into a neurosis, and I was seriously thinking about suicide. I remember buying a rope and tried its strength, whether it could endure my weight. But I did not have the courage to commit suicide. So, I declared to the staff ‘This company is already ‘no way.’ Let’s rebound from here. Let’s do our best.’”

How did Komori overcome the grave challenges at that time? Komori shared, “Initially, I was confident about the pet insurance system that I designed and developed and I did not notice that the system did not have enough ‘heart’. I saw insurance as mechanical. However, pet owners do not consider pets as things but as a member of the family. We redefined the insurance system again after ‘anthropology-ing’ the pet. We thought that we should review everything up to the expression of fine words. We revised advertisement expressions and document descriptions all at once to clarify the company’s attitude. As we continued to explain each item with integrity and sincerity, it turned out that the pet owners who empathized with us gradually joined the insurance system of Anicom and became a strong partner. The pet owner also asked animal hospitals to request that they respond to Anicom. The results began to appear, and partner animals hospitals and members gradually increased. And in April 2001, an article with the headline ‘New pet insurance appears!’ was posted on national newspapers and acceleration is added to the growth speed. In July 2001, a major pet chain shop offered to partner with us to sell their pets with an animal health insurance attached. From this point, the number of members began to grow sharply and Anicom climb to become the industry’s largest. Without the cooperation of many people, the business cannot be continued.

Komori reflected, “When a person tries something new, it is might be a trial brought by others. However, the bigger one is when you are stepping on yourself that ‘It is not possible’ or ‘It may not be good’. It is difficult to get out of this. However, it is worth challenging because it is difficult. That is because I think that it is proof that a person is alive.” Komori added that one of the biggest lessons learnt was this: “Do not lose sight of yourself! There are two kinds of crisis. One is due to accident as a result of change in external environment and another is our own mistake due to ‘internal collapse’. Actually, crisis is mostly caused by ‘internal collapse’. I had been affected by the ‘internal collapse’. I may have responded flexibly if it is in normal condition. However, for entrepreneurs who gathered large amounts of funds, my sensor was haywire. We need to make efforts to prevent it. For example, carry out a plan to utilize tools such as having friends who can speak frankly, checking errors regularly occurring to you with a system of data, diaries and customs.”

Komori’s vision to create Anicom to redefine the industry as a prevention-oriented insurance company to improve society is unusual and uplifting: “18 years ago in 2000, I left the major insurance company Tokio Marine, and I started Anicom. The reason is simple, because I wanted to do an unprecedented insurance company. I wanted to create a preventive insurance company. If you know the timing and probability that someone will become sick in advance, you as an insurance company can tell insurance members in advance. Do you not think that person is kind? Although the role of insurance company was only insurance payment, the original role is to reduce social risk. For example, taking car insurance as an example, if I know which car intersection happens frequently for accidents, I can change the intersection and prevent the accident from the root. In other words, after understanding the probability that a subscriber will become sick, rather than feeling apprehensive after becoming ill, an insurance company that can reduce that risk as much as possible. I thought about this when I was in the previous insurance company. This is the ‘prevention-oriented’ insurance company, and the current insurance industry is waiting for this metamorphosis transformation. In short, Anicom wants to redefine insurance. If you keep dreaming without giving up, you can change the history of the industry. The market size of the pet industry is said to be 1,214.5 billion yen based on the ‘Pet Business Handbook’ (animal sales: JPY100bn; pet food: JPY400-500bn; animal hospitals: JPY300-400bn; consumables: JPY100-200bn) and is one of the growing industries in the future. Since we have built our own ecosystem, enormous data from cooperating animal hospitals are fed back. From accumulated data, you can prevent illness. We set up medical examination and health guidance. We are promoting product development aiming at being able to share a longer time with both pets and human beings to be healthy.”

Komori has deeper thoughts on the relationship between us and our pets in a modern technological society: “The connection between pets and people is quite different. People do not have to eat them, they live together. They are connected with the lives of people. Now, how valuable is this kind of existence for a person? Science and technology has developed and it has become a useful society. People are now able to do most things by themselves. Because I can live by myself, unmarried people are increasing, and even those who are married do not have children. Since the declining birthrate will continue in the future, pets will surely become part of their families. Neighborhood association has also decreased. Under these circumstances, the number of people who have lingering solitude has increased. It is lonely to be alone. But living with parents and brothers is troublesome. You may have a bad relationship sometimes even with close friends. In that respect, pets may be the best friends for modern people. For modern people who live in a society that has become more developed, pets provide a means to connect with another life, rather than merely filling up gaps in their minds. It is important how living organisms can connect with different lives, the richer and stronger they become. Through pet insurance company management, I cannot help thinking ‘What is a pet?’ I think that thinking of life as a pet is also to think about people. The pet industry is useful for nurturing and healing love, and is responsible for ‘anti-solitude’. The most severe punishment in this world is not death penalty, but it is said to be loneliness in being imprisoned indefinitely into a cell. Pets eliminate loneliness, extend human capabilities, enrich immunity and ideas. Pets are the world’s most beautiful power for the soul that lights our hearts. I would like to continue creating a mechanism that makes pets give bigger happier energy.”

The power of continuation in accumulating small things every day is the engine driving Komori and his Anicom team: “I think that it will be a big deal if you accumulate small things every day. No matter how weak a person is, if you continue your efforts, it will become a power in reality. So if you run it little by little every day, any dream will definitely come true. Successfully realizing 20% improvement suddenly is difficult, but continuing while enjoying 1% improvement every day has led to great growth later on. I wanted to create such a corporate culture. Since starting this effort, many staff seem to feel it is becoming fun to make small improvements and they feel proud. Everyone who is aiming for entrepreneurship, please take this ‘1% improvement’ into daily activity guidelines. Continuation is power.”

Intrigued and want to read more? Download this week’s H.E.R.O. HeartWare: Weekly Asia Tech News with brief highlights of the inspiring entrepreneurial stories of tech leaders in Asia whom we have been monitoring over the past decade in our broader watchlist of over 200 listed Asian tech companies and our focused portfolio of 40 HERO Innovators who reveal their problems and successes behind building the company. Inspired by Brandon Stanton’s photo-journalistic project Humans of New York which collects and highlights the street portraits and moving stories of people on the streets around us who were doing things that changed lives and made a difference in the city but often went unnoticed, we have curated a collection of Hear the Heart of the H.E.R.O. stories on our website which we aim to update with refreshing and uplifting new stories weekly. Please check them out and give us your valuable feedback so that we can improve to make them better for you. In Issue 12, we have:

(1) Nobuaki Komori 小森伸昭, founder & CEO of Anicom Holdings アニコム (TSE: 8715, market cap US$697m), the largest online-to-offline pet insurance company in Japan with over 57.7% domestic share of the growing pet insurance market (vs. 20.7% for second-placed ipet [TSE: 7323]) with over 699,000 policies in force generating sticky recurring revenue income & cashflow. Japanese households own 18.4m pets and only 1.5m or 8% were insured vs 25% of the 15m pets were insured in UK. Anicom is the first company to establish an over-the-counter (OTC) settlement system for animals in Japan, allowing policyholders to pay only uncovered amounts out of pocket simply by presenting their insurance card at the hospital and is a tech innovator with services that include allowing insurance claims to be made via LINE in just three minutes, an industry first, enabled by its powerful database & analytical prowess of more than 15 million insurance claims tied to illnesses and accident and treatment data (Anicom Receptor) that allow the company to propose preventive measures by examining how animals become sick and how accidents occur. Anicom’s cloud-based pet medical records management system Anirese Cloud is used at around 2,000 animal hospitals which has become the de facto standard in Japan and Anicom plans to export the system overseas. By leveraging the knowledge gained in the pet insurance business, Anicom aims to become an infrastructure company which touches all aspects of pets’ lives, handling everything from upstream (hereditary disease eradication) to midstream (animal hospital management, health exams, prevention), to downstream (provision of medical care guidelines, advanced medical technology). Anicom was founded in 2000 by Nobuaki Komori and is headquartered in Tokyo;

(2) Takahiro Arimoto 有本隆浩, founder & CEO of Matching Service Japan エムエス ジャパ (TSE: 6539, market cap US$385m), the online recruitment platform leader in the specialized fields of certified public accountants, tax accountants, financial professionals, lawyers and experienced professionals in the ‘management department’ that include personnel affairs, general corporate affairs and business planning. It is also involved in the provision of M&A brokering services to companies and accounting firms. J-ing (www.j-ing.com) is the search site of accounting and law offices, and tax accountants; J-ing Concierge is for specialized organizations that include accounting offices; KAIKEI FAN (www.kaikeinet.com) is a career change and industry trends portal site for certified public accountants, legal affairs, lawyers, and law office job search; LEGAL NET (www.legalnet-ms.jp) is a change job information site. Due to its focus in these specialized areas with higher barriers to entry, MS-Japan enjoys significantly higher operating profit margin (37.6%) that most online recruitment portals. MS-Japan launched the innovative Manegy online communication and information platform (www.manegy.com) in Mar 2017 for these professionals in the specialized fields which now has over 100,000 registered users. MS-Japan was founded in 1990 by Takahiro Arimoto and is headquartered in Tokyo.

We now live in an exponential world, and as the Baupost chief and super value investor Seth Klarman warns, disruption is accelerating “exponentially” and value investing has evolved. The paradigm shift to avoid the cheap-gets-cheaper “value traps” investment mistakes, to keep staying curious & humble, and to keep learning & adapting, has never been more critical for value investors. We believe tech-focused innovators with non-linear exponential growth potential are the most relevant multi-year investment trend and opportunity. There is a structural break in data in the market’s multi-year appraisal of the type of business models, the “exponential innovators”, that can compete and thrive in an exponential world.

Yet we do not want to chase the highly popular megacap tech stocks, or fall for the “Next-Big-Thing” trap by overpaying for “growth”, or by chasing to invest in fads, me-too imitators, or even in seemingly cutting-edge technologies without the ability to monetize and generate recurring revenue with a sustainable and scalable business model, and we want to know how to distinguish between the true innovators and the swarming imitators. We see a distinct opportunity in under-the-radar Asian SMID-cap tech stocks with unique scalable business models run by high-integrity entrepreneurs with a higher purpose in solving high-value problems.

As the only Asian SMID-cap tech-focused listed equities fund in the industry, we believe we are uniquely positioned as a distinctive and alternative investment strategy for both institutional and individual investors who seek to capture long-term investment returns created by disruptive forces and innovation without herding or crowding to invest in the highly popular megacap tech stocks, and also provide capital allocation benefit to investors in building optionality in their overall investment portfolio.

H.E.R.O. stands for “Honorable. Exponential. Resilient. Organization.” and is operationalized into a unique, systematic 4-step investment process to separate the winners and losers. The H.E.R.O. HeartWare Weekly highlights interesting tech news and listed Asian emerging tech innovators with unique and scalable wide-moat business models to keep yourself well-informed about disruptive forces and innovation, new technologies and new business models coming up, and the companies that ride on and benefit from them in some of the most promising areas of the economy in Asia as part of our thought leadership for our ARCHEA Asia HERO Innovators Fund to add value to our clients and the community.

Hope you find the weekly report to be useful and insightful. Please give us your candid feedback and harshest criticisms so that we can improve further to serve you better. Besides the BATTSS (Baidu, Alibaba, Tencent, TSMC, Softbank, Samsung), do also tell us which Asian tech entrepreneurs & CEOs whom you admire and respect and why – we will endeavor to do up profiles of them for sharing with the community. Thank you very much and have a beautiful week ahead.

Warm regards,

KB | kb@heroinnovator.com | WhatsApp +65 9695 1860

www.heroinnovator.com

BrightTALK Webinar: Finding Value in Asia: Discovering Tech Innovators in an Exponential World (12 July 2018)

Thank you so much to everyone who had participated in our presentation at the BrightTALK webinar “Finding Value in Asia: Discovering Tech Innovators in an Exponential World” on 12 July.

We had received positive feedback from the participants who include institutional investors, professional & individual investors and lifelong learners in value investing, including comments on our Catapult analytical framework to complement and rejuvenate the economic moat analysis to view the value creation process afresh and continually discover innovators creating, enabling and capturing new demand (vs exploiting existing demand) with exponential non-linear growth potential and value creation. The Catapult exponential projectile of the 4Cs are systematic observations and leading-indicator questions you can ask to analyze and assess the business models of exponential innovators. We are encouraged to persevere in our efforts to build a warm community of resilience, learning and exponential growth where entrepreneurs and investors support and encourage one another to navigate and thrive in this challenging exponential world and we are grateful to have your support.

We look forward to open up a meaningful conversation with you to explore the H.E.R.O.’s journey together.

Archive: Download Past Issues of H.E.R.O. HeartWare

Based on requests from institutional and professional investors, we include the printer-friendly PDF version of our archive of past H.E.R.O. HeartWare issues. Alternatively, you can download them on our website: http://www.heroinnovator.com/heartware. Thank you so much for reading and giving us your feedback.

  • 30 July: “We walked our whole life.” – Innovation Insights from H.E.R.O. Innovator Koh Young Technology’s Dr. Koh Kwangill (PDF)
  • 23 July: “About 95% of winning is more about enduring.” – Innovation Insights from H.E.R.O. Innovator CyberAgent’s Susumu Fujita (PDF)
  • 16 July: The Circumspection Edge to Exponential Value Creation: Innovation Insights from H.E.R.O. Innovators MonotaRO and oRo (PDF)
  • 9 July: “The Internet Costco In Services”: Innovation Insights from a 10X H.E.R.O, Benefit One’s Norio Shiraishi (PDF)
  • 2 July: Innovation Insights from H.E.R.O. Innovator MISUMI Group’s Ryusei Ono (PDF)
  • 25 June: Creating “Compellingness” for Exponential Growth – Innovation Insights from H.E.R.O. Innovators Synchro Food, AS ONE Corp, Prestige Intl, CTM (PDF)
  • 18 June: “Everything is a commodity unless it contains ‘commitment’.” – Innovation Insights from H.E.R.O. Innovator Syuppin’s Kei Suzuki (PDF)
  • 11 June: How H.E.R.O. Innovators en-Japan, Chroma ATE, Innodisk, and Bravura cultivate “sapere vedere” to develop the deep insights required to solving customers’ problems (PDF)
  • 4 June: How Kyocera’s Kazuo Inamori Inspired Tech Innovators to Build TATERU and e-Guardian Into Successful, Purpose-Driven H.E.R.O. Businesses (PDF)
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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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