Rudlin Consulting provides expert analysis and consulting to people working in or with Japanese companies in Europe.
Whether you want to approach Japan headquarters (the ‘honsha‘) as a supplier, subsidiary or partner, we can help you understand its corporate culture and strategy, and identify the people and processes necessary for success.
We can also provide cultural awareness training for your employees, as the exclusive representative in Europe of Japan Intercultural Consulting.
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Honda is not in the Boston Consulting Group’s World’s 50 Most Innovative Companies of 2014, having reached #12 in previous years. Other Japanese companies include Toyota at #8, Sony, Softbank, Hitachi and Fast Retailing (Uniqlo). Other automotive companies in the Top 50 are Tesla, BMW, Ford, Volkswagen, Daimler, Audi and Fiat. “It’s becoming a mini Toyota” says Nikkei Business Magazine, “consumers will soon be saying ‘we don’t need a Honda like this'”.
Takanobu Ito became President of Honda in June 2009 and is stepping down in June 2015. This has been portrayed in the Western media as being a consequence of the Takata airbag scandal, but this was not mentioned by Honda as a reason, and 6 years is a standard stint for many Japanese company presidents.
Ito does apologise, however, in a Nikkei Business Magazine interview, for setting the numerical target of 6 million vehicle sales by 2016. “It was just a dream” he says now. Honda had fallen into the trap which many Japanese companies find themselves in, of stretch goals and visions being taken at face value by employees, particularly outside Japan. Honda was selling around 2.5 million vehicles a year when the “dream” was announced in 2012, as part of the 2016 Mid Term Plan. Honda in the US decided to boost sales of the Accord and Civic by offering even better incentives than Hyundai.
Previously, Honda’s brand had been so strong, it had not had to discount at all. And then followed the recalls of the Fit hybrid and the Takata airbag problems.
Ito had also restructured the company away from its previous bipolar Japan and North America organisations into 6 regions – Japan, North America, Latin America, China, Asia, Europe. He has reorganised the R&D side, cutting the number of new models in development by 20%. Honda used to sell itself as a pioneer, but is now behind Toyota in hybrid car and fuel cell vehicle development.
Ito believes Honda must learn from smaller manufacturers like Subaru and Mazda and focus on its brand image. “We have structured the company to be global, but now we need the system to make sure this bears fruit”. The relatively young (55) Takahiro Hachigo (former VP and Director of Honda Motor Europe) will become the 8th President of Honda, with four out of the 6 board directors also changing.
Honda is still making profits, but Nikkei Business concludes that it may be facing the same issues as Sony, another formerly innovative Japanese company, if it does not “rip up the unwritten rules”, and stop replying on past successes. Both Honda and Sony had become too focused on playing it safe and lost the ability to respond to customer needs. Honda is harshly judged because it was so innovative in the past. But it should not look to the past, says the Nikkei, but to the future, and not just to innovative products but innovative management.
This is a comment we have received frequently over the past 12 years of working with Japanese companies in Europe. I hoped the situation would have improved, as Japanese affiliates localise, and more Europeans are in senior positions, but what seems to have happened is that the communication gap between the senior Europeans and the remaining Japanese expatriates has actually widened, and the senior Europeans feel very cut off from any decision making that happens in Japan headquarters.
I recommend to the European managers a three step plan to improve relations and communications: 1. People, 2. Process and 3. Particulars. For ‘People’, they need to build relationships with Japanese colleagues, in Europe and in Japan headquarters. There are obstacles to this – travel expense and rapid rotation of Japanese expatriates. But mutual trust is necessary if Europeans are to be including in the nemawashi process.
By ‘Process’, I mean the nemawashi (decision making) process needs to be made more explicit and transparent and the purpose of meetings (information exchange or discussion or decisions) needs to be clarified. And for ‘Particulars’, the European managers need understand the kind of detail and data needed to reassure risk averse executives in Japan.
But this is only half the picture. The Japanese expatriates must accept that their job is not simply to report back to Japan headquarters what is happening in the European subsidiaries. They need to communicate the Japan headquarters’ corporate culture, decisions and strategy, and find ways to get European staff feel involved and have a sense of belonging to the wider company.
For Japanese expatriate staff I recommend 1. Debate, 2.Distil and 3.Disseminate. Europeans love to debate – it makes them feel valued, and it is an opportunity to convince them of the direction the company must take, by explaining the background and logic to what is coming out of Japan.
‘Distil’ means to be clear, precise and concise about what the strategy, corporate culture or decision is. It must be “actionable” – so it can be the touchstone for deciding how to act in a business situation.
‘Disseminate’ means to take practical steps to make sure that the strategy, corporate culture or decision is communicated to all parts of the European network. This may need to be through cascading information through the correct chains of command if the company is a traditional hierarchical Continental European organisation. Or it could be through workshops, to enable people to have a sense of ownership, and understand how the strategy or corporate culture applies to their daily work. Or it could be through more meetings – but hopefully this time, if ‘debate’ and ‘distillation’ have already happened, the meeting attendees will feel more involved and accepting of the outcomes.
This article originally appeared in Japanese in the Teikoku Databank News
Toyota’s appointment of not one but two non-Japanese to executive ranks (and one of them a woman!) plus a Japanese veteran who left school at 16 is evidence of President Akio Toyoda’s commitment to diversity in its widest sense. The reason he gives for this commitment is not the usual vague nod to the need for diversity for good governance or globalization but because he wants to build a company which will last for ever. “I think constantly about what kind of condition this company should be in when it passes on not just to the next President but two Presidents after that” he said in a recent comment. “Unlike human beings, if a company continues to grow, it can have eternal life”. Toyota’s concern, as the archetypal traditional Japanese ‘company as family’, for legacy and longevity shines through.
Julie Hamp will be Toyota’s first female senior executive, heading up global communications, and is moving to Toyota City to carry out her role, which should give her a better chance of success if she can survive the culture shock, than those foreign senior executives who tried to straddle bases in their home country and Japan. It sounds like she gets what Japanese companies are about, as she was first impressed, when she was at GM, by the amount of community work Toyota dealers did. She also says she’s looking to do more “visual story telling” which definitely should suit visualisation oriented, family myth style Toyota well. Here’s hoping she’s successfully adopted into the heart of the family.
The biggest date on the Japanese corporate calendar is about to hit us. Naturally, it is April 1. Not only it is the start of the new financial year for almost every Japanese company, but it is also when all the major announcements of promotions and restructurings happen, as well as the first day of “proper” work as a bona fide salaryman or salarywoman for thousands of shiny faced graduates.
This means that March is a month of great paranoia, as speculation mounts and information is leaked about who is up and who is down, what will please the new president and which faction is winning which battle.
I try not to be too cynical when Europeans in my training sessions tell me how refreshing it is that Japanese companies seem to have far less politics than European companies. It is of course very easy to be blissfully unaware of the undercurrents ebbing and flowing in March (and indeed other times of the year) but veterans of Japanese companies know well that the undertow may pull you under in April, if you are not paying attention.
I thought I had taken my “Kremlinology” a little too far in the Japanese company I used to work for. I kept a spreadsheet of all the people I had met, what year they entered the company, their current position and grade, and any remarks. I updated carefully every April 1, sending congratulatory emails to those who had done well.
But when I shared this secret with another British veteran of a Japanese firm, he revealed that the spreadsheet of contacts that he had compiled during the 20 years he had worked at his company had become so large, he had pinned it up on his garage wall at home!
When another senior British executive in a Japanese company asked me for my advice on who he should choose as his second-in-command, I’m afraid I went straight into Japanese political mode and immediately asked how old the various candidates were, whether they had been at the company all their career, who were their sponsors and mentors and what business groups they came from originally. He was unable to answer most of these questions, and indeed was not that interested in these aspects. His main criterion was whether they had performed well in the team.
Actually, this is quite refreshing. Too often in Japanese companies, if you come from the wrong department, or ally yourself with the wrong faction, or made a mistake, however well intentioned, you find there is no redemption. At least Western managers, ruthless though they are about firing people who underperform, reward those who do perform, often – but alas not always – regardless of their past career.
When Japanese companies truly globalise, allowing non-Japanese to make personnel decisions, life will become a lot less comfortable for the well connected but underperforming and a new lease of life may energise those who thought their careers were over.
This article originally appeared in The Nikkei Weekly
Four of the nine business units of Terumo, the Japanese healthcare company, have their headquarters outside Japan. Yutaro Shintaku, the President of Terumo, believes his company has been successful in globalizing by thoroughly integrating global acquisitions, so that the headquarters itself has changed. “As the Japanese domestic market is stagnating, overseas markets should not be seen as ’foreign’ but the platform for developing a market”.
Terumo is the 14th largest medical equipment manufacturer globally and is in the top 5 for certain devices, but “successful globalization is not about scale. What is important is to be able to motivate the acquisition, to bring into Japan their strengths and change the Japanese headquarters accordingly, and then further develop as a result of that integration.”
Terumo struggled when it first began to acquire overseas businesses, in the 1990s. They built a factory in Belgium and bought a business from 3M in the USA. Prices dropped radically in the EU however, so Japanese style high quality high cost manufacturing did not work. “We learnt we needed people who really could manage” but Terumo did not have many managers in Japan who could manage overseas business. “Nor is it a good idea to just leave everything up to the managers overseas. You cannot really develop products, execute your marketing and grow profits the way you want if you do that”.
In 2002 Terumo acquired the UK company Vascutek and initially left management up to the incumbent. When the incumbent executive retired in 2009, Terumo decided to get more involved. “But it was not in order to impose our way upon Vascutek. Rather, we sent one expatriate to the UK in order to work alongside the management”.
“Overseas management will tend to interpret what Japan headquarters say in the way it suits them. Also Japanese expatriates have a tendency to keep quiet, if the premise is that management should be left up to the local executives. So what is important is to find a ‘win/win’ – if we reform together, we will improve together.”
The example Shintaku gives of a ‘win/win’ was the introduction of the 5S methodology to the Vascutek factory. There was resistance at first, but when they saw how it made their jobs easier, and at the same time that it enabled a highly efficient but high quality production, then the mutual benefit was clear. The Japanese expatriate met with the new MD every morning for an hour so that there was joint ownership of all management issues.
Speed of decision making, particularly with regard to customer requests, in the US operations was one improvement that was brought back to the Japan headquarters.
If imposing your way is the first step in globalization, and leaving it up to the local management is the second step, then the third step is making the best of each others’ strengths. Terumo is now on the 4th stage, according to Shintaku, which is to change the Japan headquarters itself. A 3 company system was introduced in 2011 – Cardiac and Vascular, General Hospital and Blood Management. This is to provide the necessary management structure for further acquisitions.
I proposed last August that “a charm offensive on the Nikkei group of publications might be advisable” to help new Takeda’s first ever non-Japanese President Christophe Weber gain support, and The Nikkei Business’s recent voluminous special features on Takeda Pharmaceuticals’ globalization in its online and print editions shows I was not the only one thinking this.
The Nikkei’s stance seems broadly favourable, and can be summed up as “this might happen to you too – so you might as well be positive about it”. There will be plenty more cases where a globalizing Japanese company realizes that to expand overseas, they will need executives who have produced results in doing business in other cultures, rather than executives who are well versed on the internal workings of the company but know nothing of the world outside, says the Nikkei.
The key point here is not just “overseas experience” but actually having produced results. And this is going to be a difficult requirement to fulfil for the current upcoming generation of Japanese executives in major Japanese corporations, many of whom, even if they have overseas experience, have mainly been in caretaker and liaison roles, rather than growing new businesses.
The special feature articles go into some interesting detail on the key personalities and what has actually happened at Takeda over the past few years. At the heart of it is Tachi Yamada, brought in by President Hasegawa in 2009 as a member of one of the executive committees and then to head up the R&D function. Tachi Yamada has dual US Japan citizenship and is a well known name in the pharmaceutical industry, latterly heading up the Global Health Program at the Bill & Melinda Gates Foundation. He has also been a board member at GlaxoSmithKline, and it is his network that led Hasegawa to Weber and others.
Yamada saw the need to find new drugs as the Takeda pipeline was thin and many of its drugs were going off patent. So he completely overhauled the structure of the organisation and embarked on some acquisitions. Another key person brought in by Hasegawa was Paul Chapman, also ex GSK, who has taken Japanese citizenship (and has a Japanese wife) and changed his name to Tetsuyuki Maruyama.
Maruyama interviewed each of the Japanese executives asking them why they thought they were suited to the role. As a result of this, 35 younger researchers were promoted to management, including 10 women where previously there had been none. 60 managers left the research function including one of the founding Takeda family members. Of the 6 Drug Discovery Units, 5 are headed by non-Japanese.
Yamada will retire this year at the age of 70 and his successor as Chief Scientific and Medical Officer will also be a non-Japanese outsider – Andrew Plump from Sanofi. Of course, this is causing disquiet amongst the Japanese staff – “Japanese can’t get promoted, if more and more foreigners are appointed. And they are earning many times our salary. It seems like just being Japanese is a minus in Takeda now”.
To counter this, one of the Japanese executives, Shinji Honda, who had been seen as a candidate for next president instead of Weber is now heading up a global leader programme for Japanese employees. “I want them to experience overseas business 5 or 10 years earlier than I did”, says Honda, “then they can be the next leader or the next leader after that, to succeed Weber. This is my last big job.”
But as Akie Iriyama of Waseda Business School points out, another area that will need to be addressed is for non-Japanese to join the company at middle management or lower levels too, and to bring more of the employees of overseas acquisitions to come and work in Japan, otherwise there will be too big a gulf between the non-Japanese executives and other levels of the organisation.
NTT Data had an extensive write up of their Vatican digital library project in the Financial Times recently, which must have pleased President Toshio Iwamoto. As he admitted in a recent interview in the Nikkei Business, despite the Vatican project, and also winning a global ERP support contract from Daimler, NTT Data’s brand is still not strong enough globally. Although the US represents the highest proportion of business for NTT Data overseas, they are still only #40 in the US systems market. Consequently, they do not get any approaches from major customers. “It’s not a problem of our technical strength, simply the challenge of getting them to knock on our door” says Iwamoto.
It takes time to build brand recognition “so we have to buy time”. By acquiring companies in Asia and Europe, NTT Data now has operations in 175 cities in 41 countries. Iwamoto wants the overseas to domestic turnover ratio of the company to be 50/50 by 2020. In 2014, overseas business was around Y400bn compared to Y1trn domestically. He expects to further increase overseas sales through acquisitions to around Y800bn in 5 years, and attain the remainder through organic growth.
“We have no intention of becoming a mini IBM or even a mini Google. We have to differentiate ourselves from them through creating our own value. This will be based on our experience in the Japanese domestic market of ‘a quality which satisfies the customer’ – a very Japanese aspect. Usually when IT systems companies say ‘quality’ they mean there are not many bugs in the software but we mean a total management of quality from sales through to the system management. Talking to our overseas employees, they say this quality will be recognised globally and that we should promote our ‘Japanese quality’. Previously, Japanese quality meant cars or consumer electronics, but now Japanese quality of service is becoming known around the world, in beauty or education, so we should be able to provide a service which cannot be replicated by local suppliers in the IT industry too.”
The interviewer asks whether the many parts of the NTT group (NTT Communications as well as NTT Data) all doing different things make it confusing for customers overseas. Iwamoto says there are historical reasons (presumably to do with government ownership) why this has happened, and that it can’t be helped. In fact it is often the case that NTT group companies even team up with other companies such as KDDI or Softbank to provide the customer with what they want. The trend is towards more open systems in the IT industry, he believes.
I am quite surprised that as few as 50% of Japanese men surveyed by Nikkei Business magazine recently think that women should focus solely on looking after their children when they are young. Considering this together with 75% of the men saying that women should continue to work even if they have children, it does seem to me that Japanese men are more supportive of women in the workplace than you might imagine.
In fact according to the survey, the men too feel they have to make sacrifices for their children (60% agree that sacrificing your own lifestyle is unavoidable if you have children whereas only 40% of women agreed) and 60% say that one of the three main reasons they work is to support their family.
The reason most chosen by men and women for working is “to earn money” (85% and 95% respectively), but for men the third most chosen reason is “to do something useful for society” (25%), whereas the women chose “to develop myself” (50%) and “self actualisation” (35%) as their other two reasons for working, not “support the family” (15%). Perhaps another angle on why Japanese women might choose the relative insecurity of a foreign owned company – where there is performance based pay, and seemingly more career development opportunities.