Tomotaka Hosokawa, LL.M. Class of 2026
The Strategy
The “Open & Close Strategy” refers to a business and intellectual property strategy where a Japanese technology company intentionally “opens” specific technologies to expand the market while simultaneously “closing” other technologies to secure its competitive advantage. This approach clarifies how firms can design a coherent framework that leverages openness for market creation while preserving exclusivity where it matters most. In practical terms, the “open” side typically covers outward-facing elements that benefit from being shared across the ecosystem—such as basic product form factors, user-facing specifications and interfaces, or performance and quality standards for finished products—whereas the “close” side focuses on inward-facing capabilities that drive differentiation, such as underlying algorithms and manufacturing or quality-control know-how. When such a company possesses valuable technology, keeping it entirely proprietary may allow it to dominate a small niche, but this will not expand the overall market. Even with a strong share within that niche, its business cannot grow without broader market expansion. Conversely, if the company freely disseminates its valuable technology without safeguards, the market may indeed expand—but the company will lose control over competition and be unable to preserve its unique advantage. This strategic balance cannot be determined automatically; it requires deliberate design based on each company’s market position, technological advantages, and control over intellectual property. In particular, setting the close domain is critical—it directly affects investment recovery and the long-term maintenance of technological leadership.
What the QR Code and Quartz Devices Teach Us
As some Japanese firms have already begun to implement this approach with notable success, Japan’s Ministry of Economy, Trade and Industry (METI) has sought to codify and disseminate the Open & Close Strategy more broadly across industries in Japan. METI therefore introduces several practical examples illustrating how the strategy operates in various industrial contexts.
One prominent example is the QR Code, developed by DENSO. The QR Code’s basic specifications were standardized and made publicly available as part of the open domain, allowing free use across industries. In contrast, the reading and decoding technologies were kept within the close domain—black-boxed and commercialized as proprietary software and hardware products. This dual approach enabled the QR Code to spread globally and eventually become a de facto international standard. At the same time, DENSO did not capture all of the economic value generated by that standard. Once the QR Code specification was opened, many other companies were able to build a wide range of devices and services on top of it. This dynamic highlights the central trade-off inherent in the Open & Close Strategy: openness promotes standardization and ecosystem growth, but it also requires firms to accept that part of the resulting value will inevitably accrue to others.
Another case concerns quartz devices—such as crystal oscillators used in watches, smartphones, and other electronic equipment—which demonstrate the openness of performance standards and evaluation methods. In this case, the high-end quality assessment criteria were internationally standardized and shared across the industry as part of the open domain. At the same time, Japanese manufacturers black-boxed their production know-how, maintaining technological leadership and sustained competitiveness in the global market. This example shows how firms can keep their manufacturing and quality-control capabilities firmly on the “close” side while still using open, industry-wide performance benchmarks to expand and upgrade the overall market.
Global Relevance of Japan’s “Open & Close” Strategy
Building on these Japanese case studies, the Open & Close Strategy can be understood as part of a broader global shift in how firms use intellectual property and standards to shape markets. This concept may therefore sound entirely natural—perhaps even self-evident—to leading technology companies in the United States, where similar approaches have long been integrated into corporate strategy as exemplified by companies such as Qualcomm, Intel, and Adobe. In contrast, Japanese companies, even those with valuable proprietary technologies, have historically been less proactive in incorporating intellectual property strategy into their broader management strategy. At the same time, many Japanese technology firms have continued to maintain strong positions in niche markets worldwide, supported by their unique technologies and craftsmanship. As technological innovation and global competition intensify, the practical implementation of the Open & Close Strategy will become increasingly essential for sustaining Japan’s international competitiveness. If Japanese firms fail to adapt, they risk seeing their proprietary technologies commoditized and being pushed into low-margin roles within ecosystems designed by others. Conversely, by deliberately adopting this strategy, they can turn their niche technological strengths into standard-setting influence and more durable profit pools in global markets.