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Global Japan
JAN 15, 2018

Beyond the Paradox: Understanding the Secrets of Japanese Business

By GLOBIS Insights Staff, With Tomoya Nakamura, Reiji Yamanaka, Cristian Vlad, Tadahiro Wakasugi
iStock photo/tora-nosuke

Understanding how to do business in Japan can be a challenge, particularly for people new to the country. Many practices and concepts seem paradoxical, at best. And yet, it’s often said that if you can do business in Japan, you can do it anywhere. For a little insight into how to accomplish this, GLOBIS faculty shared some hints on the local business culture.

Japanese leaders: more parent than boss

One piece of conventional (or rather, Western) business knowledge that students around the world take for granted is that top business leaders motivate their employees with financial incentives. However, expectations of general managers in Japan can be different. A good general manager in Japan does not give orders based on operation manuals. Rather, he or she will roll up their sleeves and work together with their staff to get things done. This has the added benefit of building personal, human relationships with team members. Companies are considered places of business, but also social communities. A manager is almost like a parent to the staff.

Dean Nakamura walks MBA students through the Tessei case study

GLOBIS Dean Tomoya Nakamura demonstrates this idea using the HBS case “Trouble at Tessei,” an example of how a change in leadership style can help revive a company. The now-famous custodians of the “seven-minute miracle” who clean the Shinkansen bullet trains did not always take pride in their work, nor was the public image of that work a positive one. Morale was low.

Then Teruo Yabe took over and revitalized the company. His incentives went beyond the financial. As a Japanese leader, his goal was to draw out the best from his people. He reasoned that if he, as a leader, could logically and emotionally understand the work, recognize and evaluate good work, and, most importantly, instill a sense of pride in those doing the work, everything would get better. The sensitivity and maturity of great leaders in Japan are extremely high.

Responsibilities to stakeholders: social entrepreneurs and the 2011 disaster

After the Great East Japan Earthquake and tsunami in March 2011, the world was inspired by how local survivors helped each other out, managing organization despite the widespread destruction of infrastructure. Meanwhile, business leaders in these communities who wanted to help the region recover faced challenges balancing the needs of stakeholders.

Reiji Yamanaka, who teaches social entrepreneurship at GLOBIS, shares the case of Ishinomaki Kobo and Herman Miller to demonstrate the challenges leaders face when satisfying various stakeholders. Ishinomaki was a region devastated by the Great East Japan Earthquake and subsequent tsunami.

Keiji Ashizawa, an entrepreneur, with the help of Herman Miller, started a furniture manufacturing business to create local jobs and assist residents in rebuilding their homes. The case highlights the management’s conflict between international expansion (financial growth) and local contribution to the recovery.

Reiji Yamanaka speaks to MBA students about social entrepreneurship

Historically, Japan has experienced many earthquakes which have reinforced a communitarian mindset in local communities. Companies in these regions are expected to harmonize with locals. The question is how management should prioritize business when the local community’s expectations conflict with other management goals. 

This is an important challenge for social entrepreneurs everywhere, not only those in disaster-affected areas. Social-purpose companies have to manage expectations from various stakeholders: funders, beneficiaries, volunteer staff, paid staff, and other founders and partners. Through this lesson, Yamanaka hopes that students can practice how to manage this tension and think about their own management priorities.

Toyota: diversity + kaizen = exponential innovation

Students of Japanese business may know of the Toyota Business Principles and the Toyota Way. Perhaps the most famous part of this is known as kaizen: gradual, incremental improvement or innovation. Cristian Vlad, a Romanian who has lived and worked in Japan for more than twenty years (some of that time at Toyota), shared with his students some of the most frequently encountered procedures in the kaizen process: 

– saki-yomi, reading the future, being ahead of the game
– koma-yomi, reading the game, being able to predict the moves of each individual player
– soi-kufuu, ingenuity

Cristian Vlad’s lesson on innovation

Sometimes, however, a company is faced with a situation where innovation cannot be done incrementally. New start-from-scratch ideas may be required (the Toyota Prius being a good example). In cases like this, diversity (of thought, experience, aspirations, etc.) can be a great resource to stimulate new ideas and innovation, especially exponential innovation and leadership.

Furthermore, ecosystems of open innovation—where customers and thought leaders are invited to co-create products and services together with the developers—can create a process for continuous innovation. Innovating something one time may be attributed to luck. Repetitive innovation is often the result of thinking about and developing a process for continued growth.

As examples, Vlad uses the case of the Sheraton Marina Bay in Okinawa and Toyota’s Window to the World project. Advanced analytics and the reverse engineering of the customer experience are giving birth the world over to new applications with functions relevant to the global market.

Paradoxical thinking: accepting the existence of opposites

Japan tends to befuddle outsiders—even economists. For decades, the country has had a weak economy, yet low unemployment; almost zero interest rates, yet weak investment. All of these go against conventional theory. Perhaps the idea of convention needs to be challenged and updated.

Tadahiro Wakasugi explains that culturally as well, one can often find in Japan an “appreciation of wholeness”—an acceptance of dichotomy in embracing yin and yang, good and bad, A and B.

In other countries, many people are uncomfortable with such paradoxes. Japan has historically been accepting of traits incorporated into society, such as the effort to combine two different religions—the country is said to be both 70-80% Buddhist and 80% Shinto. Another example is the concept of “KY,” or “reading the air.” In a group discussion, Japanese people tend to listen to all viewpoints and respond in ways that do not upset the group dynamic.

Tad Wakasugi’s MBA students discuss the unique elements of Japanese culture

What does this mean for business leaders coming to and working in Japan? It may mean opening up to new ways of thinking, some of which may be uncomfortable or even illogical. Taking an attitude of appreciation of wholeness, however, could lead to new forms of innovation (such as a new combination of A and B). On the other hand, it could also lead to maintaining the status quo (embracing the bad), so every leader should stay on guard to make his or her own positive contributions, as well.

As with any cross-cultural encounter, the key lies in first understanding oneself, then understanding the other, and finally looking for ways to create something new and beneficial. In this way, the value of every side can be maximized to its potential.