James Nakagawa never studied medicine, and until 2003, he headed a company that helped financial firms deliver online trading services. But after his friend was diagnosed with diabetes, Nakagawa set his mind to create a new tool for healthcare. He launched Mobile Healthcare Inc., and developed Lifewatcher, a mobile tool that allows one to instantly manage and monitor their health.
The Canadian’s innovations have earned him various accolades. He is a 2009 World Economic Forum Technology Pioneer Award winner in healthcare, the recipient of the Red Herring 100 Asia Award in Hong Kong, and was a finalist for the Asian Wall Street Journal Innovation@Entrepolis Awards. He and his wife also developed and operated Japan’s first comprehensive cancer patient support site.
Speaking to Arabic Knowledge@Wharton at the recent Global Competitiveness Forum in Riyadh, Saudi Arabia, Nakagawa relates his experiences as an entrepreneur in the healthcare industry, the lessons in leadership he learned from launching companies, and the sacrifices one makes to establish a venture.
An edited transcript of the conversation follows.
Arabic Knowledge@Wharton: What has being in healthcare entrepreneurship taught you?
James Nakagawa: The thing about healthcare entrepreneurship is that if you’re in it for the money, you know, "I just want to become rich," and exit, you’re in the wrong field. It doesn’t work. Healthcare and medical, especially Information Technology (IT), is not an easy sell. You need maturity, and a multidiscipline approach, and you can’t do that if you’re in your 20s; you just don’t have the life experience. Well, maybe some people do, but it’s not simply, "Hey, I have an idea, I’ll put into PowerPoint or Excel, and I’m going to create this model…" No.
I got into healthcare because I wanted to help a friend. My doctor friends challenged me, because I didn’t know anything about diabetes. And they were very blunt; they said, "Jamie, you don’t know anything about diabetes, do you?" I said, "Well, no, to be honest." And they said, "It’s the next state of the world. You know, this is how patients and doctors are managing or not managing it. Why don’t you do some research?"
Arabic Knowledge@Wharton: What did you do?
Nakagawa: So I did the research, and put a team together. We spent one month. Then I had an epiphany. I wrote a two-page proposal and I thought, "I gotta send it to someone. I gotta get some sort of validation." So I sent it to the president of Apple Computer Japan. I called up his secretary and I spoke in Japanese and English. I said, "Look, I’m not gonna try and sell you. I have this idea; I can do it. Let me just send you this two-page proposal, and if you have time, show him. And I’d love to get a meeting with some of your people."
He read it. The next day she called us in the morning and said, "Can you come down at 2 p.m.?" I discover that the business development manager there, he’s a diabetic. His grandfather just passed away of diabetic complications, his uncle just entered the hospital with diabetic complications, and he had just developed it. So this whole family understood the importance of what we were doing, and asked us, "This has never been done. How confident are you, that you can do it?" I said I was 95% confident I could do it, and he asks what we want. I told him we want free computers, and he says, no its policy, they don’t give free computers. And I said, "O.K., servers?" Two weeks later, they were flown in from Singapore, fully loaded, with a note: "James, good luck."
Arabic Knowledge@Wharton: Amazing. Was it all that easy?
Nakagawa: One of our early mistakes was that we spent a lot of time doing research and development (R&D). One of our early partners and supporters was the Red Cross Hospital Group in Japan. We thought, "Hey, there is a niche opportunity for national healthcare reimbursement." So I did it in four months, spending a lot of time with these bureaucrats. We thought, "Yes! We’re going to make it; this is it. Wow, big-time. National health. Now the doctors are going prescribe." And what happened? The government changed the reimbursement law. The Red Cross had over 1,000 beds, but the limit was 200 beds, and we couldn’t afford to service the other hospitals. So we had no real business because you had to be tapped into the government.
Another challenge was some of these government doctors created a new physical-checkup system, where everyone over 40 years old gets a free checkup. If you have high blood pressure, high cholesterol, by law, your company provides health insurance. So we thought, "Great, we have a position." And what happened? In Japan they put it in the books as a law, but they called it giri, which is an obligation; it’s not enforced. So we did our R&D, we started commercializing and went through all this trouble, and then what happens? The global economic crisis.
Arabic Knowledge@Wharton: How did you keep going?
Nakagawa: We started to win all the Silicon Valley tech awards, and we got a nice interview in the Wall Street Journal. In Japan we thought, "What are we doing here?" So we looked at where are the biggest needs, and decided it was in emerging markets. We started to travel a lot, and now we’re going into three new countries. It was just really by necessity that we made the change. And also, because emerging markets became trendy, money started to move.
Still, the challenge also in emerging markets is who pays. In healthcare you need to have big partners. This is where every company worldwide, whether you’re big, small, Fortune 1000, all have to go through the same escalator system where you need to have consumer studies, big doctor support, and multimillion-dollar clinical-trial data, preferably conducted by third parties. For venture companies, it’s almost unheard of.
Arabic Knowledge@Wharton: You learned some tough lessons.
Nakagawa: It takes a long time; actually it takes more time than you expect. And if I had to do this over again, I wouldn’t do it. You risk too much. Because as an entrepreneur, I give my wife a lot of credit, we used our life savings to finance this. During the global economic crisis, my friends who lost their jobs, they couldn’t stay alive for three months to even pay their mortgage, which shocked me. They didn’t have a three-month runway. For four years I maintained the same lifestyle and financed everyone!
So you have to be willing to risk. On my mother’s side, we can go back in history to 1152, to this famous samurai who served the emperor. We have a sword in the museum out there. So for me it’s this thing about living life, where you have to be willing to risk it all. It’s not just irrational exuberance; you have to be very calculated (laughing). It’s risk management.
Arabic Knowledge@Wharton: Not everyone is willing to be that daring, though. In the Middle East, there is a cultural stigma attached to failure.
Nakagawa: Well, not just failure. I’m Asian and from what I’ve been learning about Arabic culture, I think it’s not the fear of failure; it’s about what we’re willing to sacrifice. Really, entrepreneurialism is about sacrifice.
I work seven days a week. I travel 60% of the year, 60% of the month. This is not a party, you know; this is not staying in nice hotels. This is 24/7 workdays, and you’re jetlagged, you’re tired. Your health deteriorates. There’s constant stress, and you’re always working. We’re always open, and because you work with different time zones, you work late at night. I get conference calls at 3 a.m. if it’s very a senior person and that’s the only time slot they have. And you have to be willing to do that.
Arabic Knowledge@Wharton: So how did you build your company?
Nakagawa: Coming from financial IT, I’m used to working on project teams, distributive management, and I built good relationships with key engineers and senior management. I have two chief operating officers (COOs). The Japan COO is an American. He was the past president of ING Baron Securities, and he was the operations director for Merrill Lynch Japan. My London global COO, he’s 12 years older than I, and he is just brilliant. He is one of my mentors. He is originally one of the first quant jocks on the Street. This guy creates algorithms for fun. Who does that kind of stuff, right?
Finding quality people, especially when you can’t pay them the salaries that they’re used to commanding, you have to give them a lot of upside, or they have to see the bigger picture. That’s one of the toughest tasks, finding good people who have different skill sets. And, it’s not a yes-person culture. In fact, more often than not, we don’t even fight; they just come up with plans to do things. Bringing those type of high-level people and financial analytics to healthcare is pretty unique. It’s also important for us, because the people we’re dealing with are typically doctors, corporate senior management, and government officials. They’re all in their 50s, 60s and sometimes in their 70s, and they don’t have patience. When you go see them, if you’re wearing the wrong clothes, they’ll just say, "What’s wrong with you? You’re too immature." It’s not right or wrong; it’s just the way it is for them.
But for my senior colleagues joining our teams, coming from big corporate cultures, they had to learn to adjust. We had to compromise, and we have to respect their families and schedules. But they add tremendous value, because there’s a lot to be said for big company management.
Arabic Knowledge@Wharton: Can you explain your product development process?
Nakagawa: You just don’t do a lot of beta testing, you have to really use it and you have to have the mindset of continuous innovation; finding new ways, especially ergonomically, to knock it down so you don’t have to keep clicking. During the economic crisis, we decided to develop food photo recognition. No one’s done that worldwide. I spent maybe three weeks looking at why that hasn’t happened. I didn’t understand most of the stuff I was reading. So I researched it, and I self-taught. I approached it, development-wise, from different viewpoints; and I said, "Well, let’s talk about not a solution, but different ways to approach it." And surprisingly, the approach came from the financial guys, because they’re used to doing this for delivery trading, hedge fund trading. Bits and pieces, not the total; but it was incremental. Because we have your health histories, we have the data, and we can do it. By later this year, it would be nice to have it at 60-70% accuracy.
Arabic Knowledge@Wharton: You’re a very hands-on leader. How does that play out with the team?
Nakagawa: They kind of know my style. What I’ve found is that I’m not an engineer by training, but I’m good with numbers, pattern recognition and seeing different ways of doing things. But also, you have to know every piece of your business, and you have to apply what you’re learning, or know to try and solve it with them, because more often than not, it’s a collaborative process. In other words, my management style is an open door. I think it’s important to have those honest discussions and just say, "Hey, I don’t know everything. So tell me."
Arabic Knowledge@Wharton: Do you see development as a process of creativity through chaos?
Nakagawa: No, and this comes back to if you’re a big company, and let’s say you’re the global R&D department and you have US$1.5 billion allocated. Well, they have all these different products, but the leader is not really leading. Leadership is accountability.
You have to have really good lines of communication with each person. This is maybe very Asian, but you spend excessive amounts of time in lunches, just talking with them and listening to their problems; not even about work, just family, and that you care, because this comes back to healthcare: It’s an integrative process.
Arabic Knowledge@Wharton: What kind of solutions are you looking for to become more successful, and for your product to become more successful?
Nakagawa: Access to capital, especially during the economic crisis. In terms of the venture-capital industry in Japan, it’s almost nonexistent. There’s very little private equity going into early-stage companies in Japan.
Every entrepreneur, I think, should take more money when they can. Take more money and risk more of your own money, or else you’re going be diluted down, and if you don’t have majority control of the board or ownership, then you shouldn’t be an entrepreneur.
This is my third venture, and the second company I’ve started. Because of everything I’ve done and all the mistakes I’ve made, that’s why I’ve accelerated our growth in the last three years. If I didn’t go through what I went through, the hardships, I wouldn’t have made it to this stage. That’s why you should make your mistakes when you’re young.
If you come from wealth, you can continue to just spend your family money. You can waste your life away. But if you have the option of helping, using your family’s money, your education, the opportunities you have, to try and create better ways, I don’t see why you’re not doing it. It doesn’t matter where you start in life. It’s where you finish.
All the people I’ve met worldwide in healthcare, we’re like evangelists. You wake up passionate. I can’t wait to get to the office; I can’t wait to check email. I’m not tired. It’s a lifestyle. Don’t be waiting for a thank you, but it feels good. If you’ve been raised properly, it will feel good to know that your sacrifice is benefiting people.
Arabic Knowledge@Wharton: Did you ever see yourself as innovator?
Nakagawa: No. I didn’t wake up or have an epiphany thinking I’m going to reinvent the wheel. I’m not that arrogant or naïve. But at the same time, I did recognize that I’m very stubborn. And in my previous incarnation working with Wall Street CEOs, you can’t be a yes man. They’re paying you to give them an honest opinion different than their style, and it’s the same thing. It just happened, and it kept happening.
Arabic Knowledge@Wharton: What have you learned being in leadership?
Nakagawa: You have to be tough. One of the things is don’t listen to your own PR. I think too many CEOs kind of get this god complex. I also read three paperbacks a week just to relax. In the bath I read, every night trying to fall asleep, just to take your mind off things. And I’m looking at things for fun. I do my best brainstorming when I’m exercising, when I’m walking, in the bath, or at 3:15 a.m.
Arabic Knowledge@Wharton: What’s the challenge that you haven’t completed yet?
Nakagawa: I would love to win the Nobel Prize in preventative medicine. Not when I’m 70, but in the next five to seven years. Our investors laugh; but I say, "Look, stranger things have happened." I’ll give you an example. I got an invitation to the COP15 [the 15th Conference of the Parties under the United Nations Framework Convention on Climate Change in Amsterdam]. I thought it was junk email, because it was addressed to me. Well, I met Al Gore through that. All these things are surreal, coming from Toronto, from a working, middle-class family. So I’d like to get that Nobel Prize. Secondly, I want to go back to school after I exit. I want my MBA. I want those three initials, and not an honorary degree.