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Japans Business Renaissance

How the Worlds Greatest Economy Revived, Renewed, and Reinvented Itself

by Mark Fuller and John C. Beck


McGraw-Hill 2005
240 pages

Focus Take-Aways
Leadership & Mgt. The image of Japan as a failed economy is out of date. Japan reinvented itself again.
Strategy
Japan's martial and literary tradition of bushido has made it easier for the Japanese
Sales & Marketing
to embrace change, even extreme change, and to accept reversals with equanimity.
Corporate Finance
Western heroes stem from politics or business; Japans tend to be warlords.
Human Resources
Technology & Production
The samurai spirit guided the post-World War II reconstruction of Japan and
Small Business
established Japanese corporations as world-beating organizations.
Economics & Politics Good organizations will learn from the samurai and be hierarchical enough for
Industries & Regions leaders to execute, but decentralized enough to encourage creativity and innovation.
Career Development Business leaders must tell hard truths, outline clear goals and metrics, and follow
Personal Finance up frequently. Make tacit knowledge explicit and always emphasize learning.
Concepts & Trends Listen to the young. They may see something important that the old miss.
Do not waste time developing grandiose mission statements. Crisp, concise, well-
crafted mission statements are important management and motivation tools.
Be open to new and different ways of thinking. Multilingual Japanese are more
numerous than multilingual Americans. Learn the important lesson in this fact.
Belief in its cause is a company's most powerful advantage and its leaders'
strongest raison dtre.

Rating (10 is best)

Overall Applicability Innovation Style

6 6 7 7

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Relevance

What You Will Learn


In this Abstract, you will learn: 1) How Japan has regenerated its business fortunes; and
2) What lessons venerable Japanese principles illuminate about management today.

Recommendation
Do you remember the 1980s cascade of management tomes extolling the ancient
principles of Japanese management? Welcome back. At that time, Japanese corporations
were asserting themselves globally and seemed invincible in almost every industry. Then,
everyone wanted to learn from Japan (to the prot of many authors and consultants).
However, the collapse of the Japanese stock market in 1989 precipitated a new way
of thinking about Japan. Instead of being a global exemplar, Japan became a global
disgrace as news emerged of nancial corruption, of inexible bureaucracy, of agency
risk gone amok, of self-serving and incestuous dealings between banks and companies,
and, above all, of the insane overvaluation of Japanese stocks and real estate. Now, 15
years after the collapse, in the wake of a few years of apparent Japanese recovery, though
not a rebound to 1980s levels, authors Mark Fuller and John C. Beck dust off the myth
of ancient Japanese magic. They offer a skillfully retailored hand-me-down of a familiar,
somewhat imperial suit. The emperor may still lack a full wardrobe, but not everything
is old. The book includes some novel ndings from recent attitudinal surveys of Japanese
managers, and observations from a handful of Japanese companies that have managed
a turnaround. getAbstract.com suggests this as an interesting ride on the swinging
pendulum of the Japanese economy, with a look at what makes it tick.

Abstract

Japan is moving Japans Remarkable History of Rebirth


into a period of
openness and
Japan has reinvented itself numerous times. Perhaps no country or culture has proven as
tremendous deft at the miracle of rebirth. Japans example holds profound lessons for corporations
change. today, primarily that renewal must be the business of every organization. Although
business fads of the recent past such as transformation, growth and core competence
seem to have built-in elements of renewal, on closer examination, much of the business
thinking of the past decade actually rejects renewal, or claims that it is not possible.
Yet, consider Japan. Stagnant since its great 1989 market crash, the growth of the
countrys gross domestic product (GDP) is once again positive and sustainable. The
To understand currency is strong and foreign direct investment has doubled since 2000. Japan has
Japanese
attitudes and returned to the world stage most unexpectedly. The publicity about Japan since 1989
behaviors around has mostly been negative. The birthrate was falling, the population graying, a social
change, we need security crisis loomed, bureaucratic rigidities seemed to rule out exible adjustments,
to understand
Japanese history.
the lifetime employment system had broken down. What was left, quite simply, was
To understand renewal. Japans reformers have regained the high ground. Consumer condence has
Japanese history, returned. Wages and stock prices are rising. Moreover, Japanese automakers are clearly
it is important to
in better shape than GM and Ford.
understand the
notion of bushido, Japans rebirth is no uke. Japan has been reinventing itself for centuries and has a unique
or the Way of
the Samurai. cultural model for renaissance. A recent survey of Japanese business people found that
they are even more likely than Americans to:
Japans Business Renaissance Copyright 2006 getAbstract 2 of 5
Stress strategy instead of efciency, and break norms.
Were already
starting to see
Learn new ways from other countries and cultures.
some attitudes Emphasize the value of uniqueness and distinctiveness.
that y in the Stress the importance of protability.
face of the Blame senior management for a worker malpractice.
usual stereotype
about Japanese Compete instead of collaborate.
belief systems. Criticize authority and claim to be participating in an organizational revolution.
On a survey
ofbusiness The Catalytic Event
people, we found
that Japanese Organizations do not change easily. Most change only in response to some catalytic event
were more likely that changes the framework for doing business, such as a takeover, new competition, eco-
to respond in nomic slowdown or the death of a CEO. Such events have a way of catching any company
ways one might
have thought were or society off guard. None of us are really looking for them. After cataclysmic events,
more traditionally companies must renew themselves. They typically pass through a four-phase process in a
American. cycle of renewal that may take as few as seven or as many as 20 years. The phases are:
1. Gaming After a catalytic event, the company must gather information, and engage
in scenario thinking and war game planning to develop choices of ways to change.
2. Framing After the gaming, leaders can get a bearing on their new circumstances and
There is a greater frame them in the context of an organizational action plan. At this stage, corporate
willingness in positioning is essential, and leaders begin to set goals, identify targets and objectives,
Japan to accept
setbacks simply
and develop execution capability. Japanese organizations tend to spend much more
as part of life... time framing than do their Western counterparts, since the Japanese decision-making
as temporary and system aims at consensus and seeks the support of every member of the company.
not necessarily 3. Claiming In this phase, the organization must look internally and execute necessary
as signs of a
permanent change. Japanese corporations, having lingered in the framing phase, move rapidly
downward trend. through the claiming process. Western companies frame very quickly and hope to
get the organization aligned with the necessary changes during the claiming phase.
4. Taming The taming phase is much less traumatic than the rst three phases, and
involves small, ongoing adjustments. Companies stay in this phase as long as they
can, but new catalytic events are inevitable, sooner or later. Therefore, even during
When the status
the taming phase really successful companies watch for new potential threats, and
quo is disrupted
in any society, keep their gaming mindset somewhat engaged.
everyone begins
to look for ways As a nation, Japan mastered the art of renewal by alternating between being closed to
that they can take the world and then opening up again. The Tokogawa era brought military government
advantage of the to Japan and cloistered the island nation. The mid-nineteenth century Meiji restoration
new emerging
world order.
launched a cultural revolution, making Japan an active member of the modern community
of nations. In the twentieth century, the Taisho and early Showa periods brought closure
again, as Japan pushed out foreigners, curtailed democracy, controlled its media and
built a massive, highly successful military machine.
Japan conquered East Asia in merely three months and one week almost precisely
The Japanese
are known for
on the schedule that General Tojo and senior military leaders outlined for Emperor
having a long-term Hirohito. After WWII, in the later Showa period, the American occupation swept away
sense of time, but or neutralized Japans militaristic institutions. The country restored democracy and built
now they have to a powerful economic engine geared to exports. Japan was a global success story through
pay more attention
to more immediate the 1980s, but then faltered. Now it is rising again.
matters. Shorter-
term protability is
How does Japan keep remaking itself? Asked to name their heroes, most Japanese choose
paramount. warlords, while most Americans list politicians and executives. The Japanese esteem for

Japans Business Renaissance Copyright 2006 getAbstract 3 of 5


warlords derives from the ancient tradition of bushido, the samurai code, similar to
If we are going to Europes old code of chivalry. The samurai were men of war and men of letters. They
use the samurai
metaphor to think saw themselves as protectors of the less fortunate, but over time, their military status
about modern became less practically valuable. When the fth Tokogawa shogun came to power though
business practice, he had no military experience, a new notion of samurai was inevitable. The Black Ships
the implications
are quite clear: to
and the ensuing modernization drew on the samurai code and spirit, but subsumed it
get your people into industry and commerce. During the Meiji period, Japan eliminated the samurai
in top mental as a class. Yet, such Japanese companies as Toyota and Sony have substantial bushido
condition, they
elements in their philosophies. Modern samurai:
need more than
just brute force at Are faithful to and respectful of their national culture.
their disposal.
Believe that military strategy and tactics are useful in business.
Believe that weakness or the appearance of weakness is a serious error in business.
Believe that soldierly virtues are effective in business.
Interestingly, by this denition, a modern day samurai spirit prevails in America
and Japan. However, in America, this spirit is concentrated at the top of the company,
Companies
rarely get through while in Japan it is concentrated at the bottom. The Japanese need to push it up in their
a crisis without organizations, while the Americans need to push it down.
a strong leader.
Usually, that... Recent surveys of Japanese and American business attitudes show that the salary men
cannot be the (mid-managers who stay with one company for their entire careers) model seems to be
same person who on the wane in Japan. Nowadays, Japanese employees are less loyal to their companies
led the company
into crisis in the than Americans are to theirs. They are also more interested in entrepreneurship and
rst place a living abroad, less respectful of hierarchy and corporate leadership, less concerned with
completely new team membership and more disposed to organizational revolution than Americans.
leader is needed
to wash away
associations with Turnaround
the old regime. One of the most striking Japanese renewals was CEO Carlos Ghosns reversal of Nissans
decline. Nissans turnaround was a massive domestic and international lesson. The auto-
cratic Ghosn arrived with the nickname the destroyer and initially lived up to it. He was
monomaniacal about his goals. He did not waver, though his objectives required consider-
able nancial and human sacrice. However, Ghosn made Nissan more open and stressed
the importance of sharing information. His efforts resulted in a striking renaissance. Rein-
Your people are
looking to you for vigorated, Nissan became Japans second largest domestic company, overtaking Honda.
guidance thats
only natural. If Nissan reminded Japan of its gutsy samurai heritage, which esteems hierarchy and clout,
youre the boss, command and control. This goes very much against the tone of many contemporary
they want to management books that extol at organizations, free agents and corporate democracy.
know whats on
your mind.
But authority is part of bushido: the military code that depends on loyalty, power and
initiative.
Other companies also renewed themselves by applying bushido, demonstrating that
businesses need to be honest with their workforce. They have to be staunchly supportive
of their employees if they expect employees to be faithful during tough times. At Japans
Even the
Shinsei Bank, CEO Masamoto Yashiro brought in Western management practices and
most ercely foreign managers. He shook up the corporate culture with performance-based hiring and
independent ronin compensation, and instituted a new model for bank-customer relationships. When his
will gladly submit ideas met resistance, he red the resisters. He paid high performers exorbitant amounts
to corporate
membership if by traditional Japanese standards, but he rescued Shinsei from the threshold of death.
[they support] How? Why could Shinsei renew itself, while Enron, for example, could not? Unlike
the moral purpose Enron, Shinsei could draw on cultural inclinations toward loyalty.
of the rm.
Japans Business Renaissance Copyright 2006 getAbstract 4 of 5
The old samurai code of paternalism, looking out for those with less power or status,
gives Japanese companies reserves of loyalty, even during a time period when employees
Dont give the are less loyal overall. Toyota, for instance, demands performance from its employees,
youngsters the but builds commitment by maintaining their pensions and health coverage while other
keys to the place
companies cut back. Toray Industries, a synthetic ber manufacturer, offers another
just yet, but try
and tap their example of samurai paternalism. Despite strong pressure from imports, Toray has
thinking whenever preserved a lot of its employees job security. Its philosophy says it will provide stable
possiblelisten employment for as many people as it can. So, instead of laying people off, it shifts
youll maybe
glean some employees to a so-called Encouragement Company where people carry out lighter
intelligence that duties for less pay. Their salaries drop, but Toray provides a benet package that almost
your competitors equals the pay cut. Toray is one of many Japanese companies that plan to expand domestic
are overlooking.
production a stark contrast with U.S. outsourcing.

The Pen is Mighty, Too


The samurai were warriors and philosophers. In corporate life, philosophers ponder the
purpose and character of business. For instance, they write mission statements. Many
A powerful spirit such statements are a waste of time, but the best ones can provide short, pithy summaries
can be the best of a companys underlying philosophy. So, for that matter, can great slogans. Mission
thing ever to
statements and slogans are important in Japanese management. Coca-Cola is a striking
happen to an
organization the Western example of a company that has mastered this communication technique. In
lack of one can be Japan, Kyocera exemplies this approach. The entrepreneur who founded this electronics
its undoing. company in 1959 looked deliberately to the Meiji period for inspiration. Kyoceras
philosophy depends on 12 key principles:
1. Set high but fair objectives.
2. Set clear goals and make sure employees know them.
3. Want success and persevere in its pursuit.
We can see a
real benet to 4. Try harder than anyone else.
inspiring loyalty 5. Increase sales, decrease cost and trust that prots will come.
modeled on the
samurai who went 6. Remember that good pricing is a cornerstone of good management.
selessly into 7. Good management demands will power.
battle on behalf of
their daimyo. But
8. Do not let your ghting spirit ag.
the samurai did 9. Dont be a coward.
not blindly charge 10. Be creative in your work.
ahead without
giving their actions 11. Be honest and compassionate.
serious thought 12. Think positively.
they wouldnt
have been These Japanese companies thought carefully about renewal and managed it with a tight
samurai for long if guiding hand. The samurai spirit, which still lives in Japan, knows that hardship itself
they did that!
can be an asset. The ancient samurai believed that hardship builds character. Successful
companies and people respond to hardship by nding new, re-energizing sources of will
and knowledge.

About The Authors


Mark Fuller is co-founder, chairman and CEO of a strategy consultancy rm. John
C. Beck is the co-author of The Attention Economy and Got Game, president of a
management consulting rm and former director of international research for an
international consultancy.
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