TAKAYUKI NAKATANI | PRESIDENT & GROUP CEO OF FUNAI SOKEN HOLDINGS, INC.
Japan is facing profound structural shifts, particularly around demographics. We’re seeing a declining population, and estimates suggest that by 2040, Japan may lose around 10 million working-age individuals. In this context, there’s growing attention on how small- and medium-sized enterprises (SMEs) can collaborate, embrace technology, and adapt. How do you view the role of consulting firms like Funai Soken Group in supporting businesses through this demographic transition?
Japan is facing the prospect of losing about 10 million people from the workforce, which is an enormous structural challenge. In such an environment, the role of consulting firms—particularly those focused on small and mid-sized enterprises—will become increasingly important.
From a macro perspective, one of Japan’s challenges is that we have too many small companies relative to our shrinking population. So, the pressing question becomes: how do we elevate more SMEs into mid-sized enterprises that can act as core players in their respective regions and industries? Creating and nurturing these mid-sized companies is essential not only for economic vitality but also for raising Japan’s overall productivity—which, as David Atkinson and others have noted, has historically been low.
Improved productivity also means higher wages, which in turn makes it possible to attract and retain talent in a sustainable way. That’s the big picture.
Now, looking at it from a micro perspective, we still need to address the challenges our clients are facing right now. We consult with approximately 6,600 companies annually, so we are deeply engaged in addressing immediate, on-the-ground issues.
While our core strengths have traditionally been in industry-specific performance support and marketing, coupled with shifting market needs, we now see a critical demand to support business entering a phase of stagnation or decline. This could involve helping them tap into government subsidies they hadn’t previously used, guiding them through M&A—whether buying or selling—or implementing digital transformation (DX) solutions to boost productivity despite having fewer people.
All of this requires practical, hands-on consulting support. Our consultants are embedded in the field, working daily with companies to help them navigate these issues in real time.
Many Japanese SMEs are exploring new financial models and external funding options beyond traditional internal capital. What specific support does Funai Soken Group provide to help clients manage financial pressures or expansion needs?
Indeed, many SMEs are now looking beyond self-financing. They’re increasingly seeking strategic guidance on how to raise external capital, pursue M&A opportunities—both acquisitions and divestitures—and apply for subsidies that align with their business growth.
We provide tailored advisory services that guide our clients through these decisions. Whether it’s evaluating potential deals, leveraging subsidies effectively, or introducing cloud-based operational tools, our consultants are there to help navigate the path toward higher productivity and sustainable growth. In a labor-constrained environment like Japan, efficiency gains through smart financing and DX are more critical than ever.
There’s a growing narrative that Japan lags behind in DX, especially in comparison to Western markets. What’s your assessment of this, and how do you incorporate digital transformation into your consulting work with clients?
Yes, you’re absolutely right. While cloud adoption has progressed significantly in areas like accounting and marketing, when it comes to core business operations—such as CRM or ERP systems—many Japanese companies, particularly SMEs, still rely on analog or on-premises solutions. There is a critical need for further cloud-based integration.
The SMEs we support tend to be particularly behind in digital adoption. Many vendors approach these companies individually, each offering their own digital solutions. But what SMEs often lack is someone to take a holistic view—someone to help them determine what solutions to implement, how to integrate them, and how to maximize their impact.
This is where we come in. Our consultants provide strategic guidance across a company’s entire digital transformation journey. For example, we may recommend Google Ads for marketing or specific platforms for recruitment efforts. We don’t just advise; we actively help clients make informed choices and implement those solutions effectively.
We also foster deep relationships with key platform providers—those whose solutions we believe are most beneficial for SMEs. By doing so, we generate economies of scale, build mutual trust with tech partners, gain early access to cutting-edge information, and receive support for technical implementation—all of which we then channel back to our clients.
Many Japanese companies are SME-based and succession challenges are common. M&A is increasingly seen as a solution. How has your firm approached M&A, and are you focusing solely on domestic deals or also exploring cross-border opportunities?
In recent years, we’ve significantly expanded our focus on M&A. While there are many M&A boutiques in the market, we take a broader view. We see M&A not just as a financial transaction, but as one of several strategic tools for sustainable business growth.
That said, we entered the M&A space later than some, but we’ve carved out a unique position. Japanese government policy is also shifting—from broadly supporting all SMEs to more selectively empowering robust mid-sized enterprises. These thriving mid-sized firms are increasingly incorporating M&A into their standard growth strategies.
Among our clients, we already have many strong buyers—mid-sized companies seeking strategic acquisitions. Our role is to support them comprehensively, not just by sourcing deals, but by helping them think through their long-term strategies and integration plans.
Traditionally in Japan, M&A was viewed as a sign of failure—a last resort. How is that perception changing, and what role are you playing in driving that shift?
I couldn't agree more. M&A was once perceived as a fallback option when businesses failed. But that mindset is evolving. These days, M&A is being normalized through greater visibility. We’re seeing TV commercials and widespread outreach by M&A boutiques, which has demystified the process.
Moreover, many business owners are receiving regular inquiries from M&A firms. That constant exposure is changing perceptions—owners who were once hesitant are now open to seriously considering M&A as a strategic move. In that environment, we’re stepping in with a consultative, rather than aggressive, approach.
Rather than relying on cold calls, we incorporate M&A into broader strategic discussions during our regular consulting engagements. That allows us to have authentic, forward-looking conversations with company leaders, and it’s made this part of the business much more constructive and impactful.
As Japan’s domestic market shrinks, overseas markets are becoming increasingly important. How is Funai Soken Group helping SMEs explore international opportunities, and what global regions do you see as particularly strategic?
Historically, globalization among Japanese firms has been led primarily by large manufacturers and trading companies. SMEs, in contrast, have mostly focused inward—trying to survive in a shrinking domestic market.
But that paradigm is shifting. We believe that supporting overseas expansion for SMEs is an area we need to emphasize more going forward.
To that end, we’re establishing a new development base in India this year. In Southeast Asia, we see that as countries reach a certain GDP per capita threshold, their value as consumer markets increases significantly. So we’re helping SMEs not only enter these markets but also explore digital and e-commerce opportunities abroad.
In some cases, we act as a first mover—testing markets, establishing models, and gaining insights that we can feed back to our clients. For example, in China, we’ve already started launching industry-specific executive study groups, similar to what we offer in Japan. These initiatives are gaining traction.
India, on the other hand, presents a different opportunity—particularly in software development. There are limitations to what can be achieved domestically in Japan, so leveraging offshore capabilities is becoming increasingly relevant. Our India base will play a role in addressing those needs.
All of this contributes to expanding our capabilities and enhancing the support we provide to clients looking to expand globally.
Consulting is a people-driven business. What are you doing to train and cultivate consultants who understand SME clients and can deliver both technical and interpersonal excellence?
We operate under a holding company structure, and from that level, we focus heavily on instilling our purpose and culture across the entire group. We train our consultants not only in technical skills but also in human skills—how to be respectful, professional, and, frankly, likable to our SME clients.
For example, every morning, even our executives participate in our daily greeting campaign as they arrive at the office. It may sound basic, but these kinds of rituals reinforce humility, discipline, and client-first thinking.
We also place great emphasis on our founding business philosophy, which is built on three core tenets:
- Business is ultimately about people.
- You cannot resist the tides of change—adaptability is key.
- Aim to be the best, no matter how small the niche.
We consider this our “operating system”—the foundational mindset we instill in every consultant.
Meanwhile, at the business unit level, we focus on applied, up-to-date professional skills: AI literacy, data analysis, digital marketing, client engagement strategies, and more. There’s a clear division of labor between our holding company, which provides the philosophical and cultural foundation, and our operating units, which develop professional capabilities.
One final question. Many consulting firms struggle to clearly differentiate themselves. What is Funai Soken Group’s core value proposition, and what makes your consulting model unique in the Japanese and global landscape?
At the heart of our model is a holistic, end-to-end approach. We are not just strategy consultants, nor are we purely implementers. We do both, and more.
We act as strategy creators, execution partners, and what we call “account partners”—partners who stay engaged throughout the journey, helping clients refine and adapt as circumstances evolve.
Our clients see us not as one-time consultants, but as long-term, indispensable partners. That’s what we aspire to be, and that’s the value we aim to deliver—comprehensive support tailored to the unique challenges and aspirations of SMEs in Japan and beyond.