In Japan, we invested in B2B order and supply solution CO-NECT in June 2022. In Part I of the series, CO-NECT CEO Yusuke Takuchi talks about the story behind how CO-NECT team built up the revolutionary product. In this article, Headline Asia Partner Akihiko Okamoto explores the company’s mission of “upgrade our society with friendly technology” and the team’s next step.

Upgrade our society with friendly technology

Akihiko Okamoto: What is your company’s mission/value?

Yusuke Taguchi: We set up our mission in 2019, which is to upgrade society with friendly technology. Ordering systems themselves have been around for more than 20 years, but still only about 30 percent of the world’s orders are being placed and received digitally.

There are various factors behind this, but we believe that usability and ease of implementation are two things that are definitely lacking. That is why CO-NECT created its mission with the idea of improving society with “friendly technology” that focuses on ease of installation and ease of use, rather than just building another complex system.

AO: “Friendly” is a very great word — your mission is reflected in the product development. What kind of systems are you currently using to realize your mission of “friendly technology”?

YT: We develop in-house. In our development projects, there are functions that we want to create strategically and functions that our clients and potential clients would like to have, so we have a system that can flexibly respond to both.

The former is created in accordance with the direction of the product we are aiming for, from the perspective that such functions would make the ordering and receiving of orders more convenient in the world.

As for the latter, the product itself would become feature-bloated if we implement all the features requested by a single company. Therefore, [before adding features,] we evaluate from whether other companies also want to use this feature, how many clients want it, and whether they’d like to pay to solve the issue with this feature. We then create a system that is convenient and easy for everyone to use.

AO: So it will eventually lead to a product that is user-friendly.

YT: Yes, all the employees love this mission, and I love it too. I really think it is great.

AO: It’s wonderful. Your mission is rare and unique.

YT: I came up with it. (laugh)

When we had the company outing, we discussed various things, such as the thoughts that everyone cherishes, and I decided the mission from keywords in our company discussion.

AO: I forget the name of the movie, but there is a line in a Japanese movie that says, “Righteousness is confrontational, but kindness does not.” In different countries, regions, cultures, religions, values and righteousness are different, so conflicts happen. But kindness does not — and this is exactly what your mission refers to.

YT: One of the reasons why we are doing this horizontally, and the reason why we started our company, is that we want to create a service that will become the new standard in this world.

The digitalization of ordering and receiving has become a hot theme in all industries, and our product is designed to be used by people in all different industries. Although we may narrow our target in terms of marketing, we are aiming for a product that can be used by all companies in their businesses. We believe that this is the new standard format, and we believe that “usability” is the key to achieving this.

Communication brings out customer needs

AO: I read in an old book called “Groundswell: Winning in a World Transformed by Social Technologies” that, in the old days, when Salesforce was used to develop or improve features, people used to create user groups like social networking services where customers could submit ideas for feature improvements or vote on development priorities. How does CO-NECT communicate with customers?

YT: Currently, our customer success members communicate with clients on a regular basis, and the information is stored in our internal Notion. In addition, requests received from clients during business meetings by sales members are also stored in Notion.

We hold weekly meetings to discuss which of these requests should be reflected in the product to make it more useful for a number of people, and then incorporate them into the development schedule.

We have also discussed with the team that we’d like to do things the way Salesforce does.

AO: I see. Are you also conducting customer interviews to improve usability?

YT: Of course. We communicate with our clients to hear their needs, but we also communicate with companies that have not yet signed contracts with us to find out their needs by having them use our trial services.

AO: Are you responsible for putting the soul into the product at the end, such as deciding on this functionality or that function?

YT: I am the one who makes the final decisions, but I do it in conversation with the product manager and CTO. Basically, we talk about whether the client really wants it or not and make a decision based on these facts.

We need to grow

AO: There have been many hardships since HIDEOUT CLUB was founded. What difficulties did you face and how did you overcome them?

YT: In running a business, it is impossible to say that there were no hardships, but had there been any, I did not consider them so..

AO: You mean it was within the scope of things that could be solved?

YT: We have also pivoted once. When we switched to a new business while the previous business stopped growing, we were not sure if it would really work out. I would say that was also a hard thing. We have also experienced difficulties in fundraising. If it didn’t work out, the company would go out of business…

AO: But things have been going well so far.

YT: This is absolutely a Hard Thing!

AO: When you pivoted from HIDEOUT CLUB to CO-NECT, you had to jump into a completely different area of service and devote all of the company’s resources to meet customers’ needs. Is that right?

YT: Yes, that’s right. I believe that there were customer needs and that there was clearly a market. I wasn’t sure if it would work, but I had no hesitation because I thought it would match the idea I had when I started the company. I felt like I was ready to go for it.

AO: Since then, things have been going smoothly and your company has been able to grow as you envisioned?

YT: No, I think we still need to grow more and more. I am not sure if things are going as I had envisioned, but it is not enough for me.

There are lots of things that can be done with our current team. By improving on these things, we can accelerate our business scale, and I believe that we could have done this even faster in the past. I would like to work hard to achieve even more rapid growth in this area.

Earlier in our conversation, I talked about the new standard in the world, but when I try to think about what we can say about having built that standard, I found that we are still far from it.

It is said that about 350 trillion yen of the world’s b2b distribution is now being converted to the e-commerce market(EC), but since it is said that only 30 percent [of b2b market] is converted to EC, so the remaining 60–70% is being done on paper. Looking ahead to market share that CO-NECT can gain and the new standard CO-NECT can be, we would like to quickly increase the amount of distribution to the trillions of yen. From this perspective, we have to do it faster.

What’s the Next? CO-NECT’s Future Prospect

AO: Speaking of the future, ordering and receiving will be the core part, while communication will be the front-end process, and payment the back-end process. Do you have a timeline or milestone for expanding into front-end/back-end processes while keeping ordering and receiving as the core?

YT: We already have payment, communication, and functions designed for business forms, but these are only for facilitating order receipt and placement. As to whether we will expand from there, I think we will consider doing so at a time when the customer needs these functions more.

AO: What kind of payment systems have you implemented?

YT: There are two types of users — those who place orders, and those who receive orders. When someone places an order, he/she can fill in credit card information and pay for the order with the credit card, just like an EC system.

AO: A world where embedded finance and where payment and credit functions are built into ordering itself is just around the corner. As the core order and supply system is strong, embedded finance in the back-end process will be more effective, creating a user-friendly world.

YT: I totally agree with you. The high-speed of receiving and placing orders will definitely increase with an embedded financial system, so I would like to incorporate more and more of these systems and make them more convenient and friendly for clients.

AO: Lastly, is there any particular reason why you decided to receive investment from Headline Asia?

YT: Headline Asia has invested in many startups overseas. They have a lot of overseas information and case studies. You also told me before what it is like overseas, thus I feel that I would have more opportunities to have such inputs from you, and this led me to be very interested in working together with you.

AO: Thank you very much. Do you have any plans for overseas expansion in the future?

YT: The issue differs from country to country. I don’t know if we will be able to expand with the current CO-NECT order and supply system, but we would like to do business with an eye on overseas markets.

The Reason why Headline Asia Decided to Invest in CO-NECT

YT: On the other hand, what points did you appreciate about CO-NECT?

AO: Firstly, it is a business model with self-reproducing network effects. When a user uses CO-NECT, we know that they are using it with their business partners, and we know how convenient it is and that there is a high level of interest. Then it will grow by self-reproduction with minimal marketing costs. We believe that such network effects are necessary for exponential growth, so that was the first major point.

The second thing is that the other services are basically digital services, but in the case of CO-NECT, either company can use faxes: If there is a business partner that will not accept anything but faxes, we can still respond by faxing, so it is not that digital x digital is the only solution, but that the other side can handle analog. It was a major factor that was necessary for us to quickly move forward with digitalization. These two points are significant.

YT: Thank you very much. As a context of gentle technology that is not overly concerned with digital x digital, companies that receive Web orders through CO-NECT can actually use a function that allows them to send the order details to their own fax machines via CO-NECT again. After all, since order placement and receiving operations have been conducted by fax until now, there may be cases where on-site operations may become confused if all faxes are suddenly switched over to the Web. Therefore, we will start with a function that allows order management online, but also allows on-site workers to receive information via fax, like a combined use period. Rather than forcing all operations to be done on the Web, the idea is to have the workers steadily work on what they can do first.

AO: That’s very kind of you (laughs). That’s really wonderful, because it lowers the high hurdle for small and medium-sized companies, which is a barrier to digitization.

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