Turnaround strategy. Putting Japanese companies back on the fast track

Way back in 1971, Peter Drucker wrote about management practices that struggling Western companies could learn from Japanese firms that ruled the roost in the Golden Sixties. Later, in the 1990s, his book ‘Managing in Turbulent Times’ again touched upon the excellent philosophies that drove Japanese companies. He outlined Japanese concepts like ‘Lifetime Employment’, putting the nation first when producing, and so on.

Today, the boot is on the other foot. After two very challenging decades, Japanese companies have lost their competitive edge and are looking outwards for ideas to reignite the old spirit of innovation and growth. Just look at the analogies emerging out of this eastern nation — one writer likens Japanese companies to frogs in slowly heating water that never jump out of the pan.

Tomoyoshi Noda, Founder and Chair, Graduate School of Leadership and Innovation, Shizenkan University, compares Japanese companies to sailors trapped in a sinking ship that has sprung many leaks. And they have not even noticed that the ship has so many holes, exclaims Noda.

Noda is moderating a panel discussion on “Restoration of Japanese Companies” at the Cross-Value Innovation Forum in Tokyo, a four-day event, organised by electronics giant Panasonic on its 100th anniversary. At the event, Panasonic is showcasing its glorious history, current challenges, as well as looking ahead to the next 100 years, painting a scenario of connected homes, sustainable transport and new ways of living and commuting.

An important part of the event is a series of sessions introspecting on the slow growth of Japanese companies, and the urgent need to catalyse innovations. What needs to change, and how can it change? Though the spends on the 2020 Olympics, which Tokyo is hosting, is expected to buoy the Japanese economy, most companies realise that this can only be a short-term growth and they need to change radically to meet the future.

Crisis of talent

It’s a no-holds-barred discussion between Noda, Yasuyuki Higuchi, CEO of Connected Solutions Company, Panasonic and Takeshi Niinami, President and CEO of Suntory Holdings as they first outline the reasons why Japanese companies have faltered, and the solutions ahead. All three panelists agree that HR and management practices are among the biggest challenges confronting Japanese companies.

“The personnel department and entire management is the problem,” says Panasonic’s Higuchi, pointing out how over the years, the budgets for personnel management have been greatly reduced. “Human development costs need to be restored at once,” he says.

The second challenge is the culture. Suntory’s Niinami admits that Japanese companies suffer from a stuffy, hierarchy laden, over-formal culture and they need to loosen up and open up. Individual voices need to speak up and be heard, he says. There is no denying the crisis of talent that confronts Japanese companies. Though not discussed at the event, the population of working age people in Japan is declining rapidly leading to shrinking talent supply. A Mckinsey report says from 79 million in 2012, the working age group population will be down to 71 million in 2025.

Death by overwork is another peculiar Japanese problem (remember the young advertising executive from Dentsu who died in 2015?) and this year Prime Minister Shinzo Abe has set in motion the hatarak-kata Kaikaku or work-style reform. A new law will come into effect next April to save workers from soul-crushing long hours, for which corporations are preparing a change in policies. Lack of gender diversity at the managerial level is another challenge for Japanese companies.

Meanwhile, the panel also points how leadership styles need to change. Higuchi, who came to Panasonic from Microsoft, describes the software giant’s big turnaround, 90 per cent of which can be attributed to Nadella’s ‘IQ + EQ’ (emotional quotient) style of leadership.

Founder’s philosophy

For Japanese companies grappling with growth, Suntory’s Niianami’s advise is to embrace speed and agility even as they maintain stability. Be calm and majestic but be fast, he says. Also, every corporation should look back on their founder’s philosophy. Very often the message there holds the key to the future.

Indeed, earlier in the event, when Panasonic’s CEO and President Kazuhiro Tsuga delivered his keynote outlining his vision for the next 100 years, he talked about the founder Konosuke Matsuhita’s original philosophy of enhancing quality of life and bringing happiness through its products.

Tsuga also talked about collaborating and partnering more with other companies in the future, giving the example of HotPot in China, with which Panasonic is collaborating to open robot-managed restaurants.

For Japanese companies, it is becoming imperative to look at outside markets for growth. “Our stomachs are shrinking. We have no choice but to look out,” said Niianami, talking about declining consumption in the domestic market.

But the old ways of pursuing organic growth outside won’t work. Japanese companies need to have clear M&A strategies, make overseas purchases and also form partnerships like those that Panasonic has sewn in China.

And they need to rethink the value of their products. For long, Japanese corporations have basked in the glow that their products will always have a market because of their superior quality. But it is time to rethink the value proposition to the customer.

Aim and purpose

An amusing moment during the panel discussion came when Noda wondered at the trend among western corporations to find meaning and purpose in work. “We Japanese have always been driven by purpose,” he wondered bemusedly.

Well, that’s one challenge that the Japanese companies do not have to worry about. Like their football team that won the hearts of the world, by cleaning up their locker room and leaving a thank you note, even after the devastating world cup loss, the Japanese companies have a great legacy of humility and grace.

The writer attended the Cross-Value Innovation Forum in Tokyo at the invitation of Panasonic

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