Marketing

Visualizing brands

I collect English language publications by Japanese companies dating as far back as 1910 to see how they represented themselves in the past, when they were trying to project a global image. These include books published by Mitsui and Mitsubishi, which feature many photographs of their impressive office buildings, ships, mines and founding families. The message is one of scale, solidity and history.

In the 21^st century Japanese companies don’t need to impress so much and prefer to put a human face on what they do. But there is a lack of appealing photos that show both Japanese and non-Japanese people working together in a natural way. Many such photos feature models who are impossibly glamorous, or have distracting hairdos or beards. They are also usually doing things which I have never seen people do in an office such as all gathering around one laptop and pointing at it, or writing on glass walls.

Using photos of your own employees is one way around this. I featured in several annual reports and brochures for a Japanese trading company I worked for, as I usefully represented two types of diversity at once – being both female and not Japanese. But even then I did things which I would never do in my normal working life such as pointing at a clipboard and wearing a helmet.

We wanted to use employees in our marketing at a Japanese ICT company I worked for, to communicate our corporate brand value of genuineness. Most employees are not good actors however, so looked very awkward in the photos and videos.

Japanese corporate websites tend to be bland and abstract in design, still focusing on solidity and history and look much like the websites of other multinationals. It seems that if a company tries to be globally appealing, it loses what makes it distinctive.

British brands had similar issues in the past. British Airways tried to drop the “British” and be BA, “the world’s favourite airline”, removing the British flag from the airplane tailfins. Mrs Thatcher, who was Prime Minister at the time, objected strongly to this so the plan was dropped. Similarly, Royal Mail tried to sound more global by rebranding itself Consignia, but reverted to Royal Mail after much criticism.

Arguments also break out over the words used for the brand values and mission statement. British and American native speakers can have very different reactions to words like “ambitious”, and non-native English speakers feel left out of a linguistic battle they cannot win.

Japanese companies should not be afraid to use visuals with a distinctively Japanese appeal to their global stakeholders – customers, employees and communities. Which is why the Osaka Expo mascot Inochi no Kagayaki-kun is very clever – it is clearly Japanese, but also has the quirky personality of a living thing. I hope more Japanese organisations work with designers to come up with such humanised representations of their corporate culture, which do not have to rely on English words or fake-seeming photographs.

This article was originally published in Japanese in the Teikoku Databank News on October 14th 2020

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The soft power of Japanese content

From time to time clients have requested that I show videos in my seminars for Europeans on how to work with Japanese counterparts. I usually try to dissuade them from this. Partly because the technology never works well – I either have to try to get a DVD player to work on the client’s system, or if I try to stream something from YouTube, there is a problem with the firewall or internet connection.

Also, there used to be a lack of good content to show. There are films like Karate Kid or Lost in Translation but they are either rather stereotyped or it’s difficult to find a clip that makes sense on its own without seeing the whole film.

We thought about making our own videos of Japanese and European actors interacting in typical business situations, but not only is this costly, it dates very quickly, and can look awkward and artificial.

I can understand why it would be good to show some videos. They would not only bring variety to the training, but also to help people feel empathy with other cultures through watching emotionally engaging films of people from those cultures, behaving in a way that they can relate to.

Recently I’ve noticed a huge improvement in the amount of video content available on Japan. I have been crying with laughter at Aggretsuko, the anime from Sanrio about a red panda office lady which is currently showing on Netflix in the UK. I assumed it would not be appealing to people who did not know the Japanese workplace, but actually my 18-year-old son, and our Hong Kong Chinese homestay student both really enjoy it too.

It led to an interesting conversation with my son who compared it to the Japanese manga Beastars which also had anthropomorphic characters. It turns out this will be shown as an anime on Netflix in 2020, joining other “made in Japan” series like Midnight Diner, The Naked Director and Terrace House.

My son’s generation get most of their content from Netflix, YouTube and Amazon Prime, to the extent that we hardly ever watch live TV together any more. The UK public broadcasting service, the BBC, is beginning to see its license fee revenue decline because younger people are watching these channels on their laptops and smartphones, and so do not have TVs.

This means that for businesses, the way to reach the younger generations is not through live TV advertising or news stories on TV or newspapers, but through online videos.

What seems to work best is either an authentic rather than scripted conversation, between real people rather than actors, or a short “how to” or story telling style narration of a video. These kinds of videos are much easier and cheaper to make than the older style feature film type videos. So I have started to record my own – but they will be to advertise my business rather than to use in a training session.

This article was originally published in Japanese in the Teikoku Databank News on 11th March 2020

“Why is our Japan sales team so useless?”

I am asked a variant of this question, several times a year, by Western companies with sales subsidiaries in Japan. They may not say “useless” as such, rather complain about the passivity, and lack of interest in trying something new in their Japanese team.

The Western managers feel obliged to visit Japan once or twice a year. They make visits to the same prospects, where they present their thoughts on what is going on in the industry and new offerings from their company. They are listened to politely but no business results from it. Or they explain the marketing strategy and new approaches to the Japan sales team and there is no engagement at all. Instead they receive a list of what seem like trivial customer complaints.

Of course if you talk to the Japan sales team, they have their own frustrations about the lack of understanding on the Western side about how sales and marketing works in Japan.

So here are the 3 issues that face sales and marketing teams of Western companies in Japan and what to do about it:

1 – They’re not as elite as their customers

Unless it’s a very well known company like an American tech company or one of the big consultants, a Western company in Japan is unlikely to be able to attract people who have graduated from Japan’s top universities. This means their employees cannot access an old boys’ network to open doors. And even if they do manage to get in front of a potential blue chip client, they are probably already feeling pretty intimidated, added to which, in Japan, the customer is not just king, but god.

2 – The dead hand of eigyō

Eigyō is the term used to describe the sales function in Japan, but it tends to be more about relationship building with existing customers – which means regular visits to customers for no particular reason, passive and predictable “order taking” and a lot of hospitality. It’s difficult to acquire new customers, as most established companies are in long term supplier relationships. A top salesperson in Japan is traditionally considered to be the person who is out of the office all day, doorstepping and cold calling, no matter how hopeless the situation, leaving their business card and brochures with icy receptionists in the hope that one day, maybe, they’ll be invited in.

So there is nothing very strategic behind targeting and acquiring new customers other than dogged persistence. This means that many marketing concepts that are commonly used in the West are not common knowledge in Japan, such as value proposition, USP or the 5Ps.

3 – Over-servicing

Japanese customers would expect a Western company to be sticklers for sticking to the contract, and delivering only what is paid for. There’s also a nervousness that if things go wrong, a Western supplier will sue, or disappear. Japanese suppliers are meant to stick with their customers through thick and thin, customising when asked, continuing with products and services that are unprofitable because the customer wants them and over-servicing in the hope that the cost can be recouped, some time in the far distant future.

So what can Western companies do about this?

Hire the rebels and treat them as equals

Many Japanese women are attracted to working in foreign companies because they assume they will be treated more fairly, and indeed many have reached senior positions in foreign companies such as Microsoft, Boston Consulting Group and Accenture. Unfortunately Japanese companies have woken up to this and are now trying to lure them back. But Japanese women will be well aware of the barriers they will face to being treated as equals to lifetime employees in such companies. So making sure that your Western company is as inclusive of them as possible in terms of career development, including international postings and training (particularly in marketing), and ensuring their voice is heard at top level meetings, will be key to retaining them and reminding them of what attracted them to a foreign company in the first palce.

And this goes for the older male employees too. They may have been lifetime employees at a big name company and were hired by a Western company for their connections and industry knowledge. They were probably frustrated in their careers at their Japanese company and saw joining a foreign company as a risk, but a chance to start again. You may discover there were some valid reasons why they were not successful in their careers in their Japanese company, but there will still be a value in their knowledge and experience, and their rebellious mindset might offer some creative solutions.

Be innovative

About the only acceptable reason in Japan for taking on a new supplier, especially a foreign one, is that they offered something that existing Japanese suppliers did not – Salesforce.com is an example of this. Being radically cheaper, like Amazon Web Services, can also work, but is not an avenue open to all companies. Japanese companies are very risk averse, so will assume the cheapness comes with a price in terms of quality.

But this still requires putting the effort in – such as the seemingly pointless regular visits to Japan give your sales team a reason to set up a meeting with potential clients, on the promise of a new perspective or innovative offering.

Break the rules

You can also use the ugly foreigner technique. Japan has a long history of letting the foreigner say the thing that everyone knew, but didn’t want to say out loud for fear of upsetting the rest of the group. Foreigners also get a certain number of get out of jail free passes for ignoring local protocols, so long as it was done from open hearted enthusiasm rather than malign intent.

One British Japan market entry expert told me he spotted a prospective customer from the signs on the office building his taxi had stopped outside. He persuaded the terrified Japanese sales person he was in the taxi with to accompany him into the building, and made his pitch in good Japanese to the receptionist, who was sufficiently impressed that she contacted the person in charge, and a few meetings later they had a new customer.

Japanese companies such as Fujitsu are also losing patience with the old eigyō, over-servicing ways. Fujitsu has renamed employees in eigyō “business producers” and are encouraging them to take a more consultancy based approached, banning them from taking systems engineers with them to client meetings. “Business producer” may not be a common term in Western sales but Fujitsu has chosen to render it as “Bijinesu purodyu-sa-” ビジネスプロデューサー in katakana, which is the alphabet reserved for borrowed foreign words. The foreign-ness presumably makes it seem like a necessary break from the past.

Japanese companies in Europe say Brexit is their biggest worry for 2020

The annual Japan External Trade Relations Organisation (JETRO) survey of Japanese companies in Europe reveals that over 70% of Japanese companies expect their European operations to be profitable for the fifth year running, but concerns over an economic downturn in the region are higher than in previous years. Brexit came top of the list of management worries – selected by 56.5% of Japanese companies in Europe.

31% say Brexit has had a negative impact on their business so far, and 37.7% are expecting a negative impact in the future. 3.7% felt Brexit has had a positive impact on their business both now and will do in the future. A negative impact was felt by 54% of Japanese companies in the UK both now and in the future, with 2.1% of Japanese companies saying Brexit has had a positive impact and only 0.5% expecting it to have a positive impact in the future.

Brexit

More than half of the 842 companies who responded cited Brexit as their biggest management concern, outstripping the perennial headache of recruiting and retaining employees. Unsurprisingly the group that was most worried was the manufacturing sector in the UK – but the services sector in Ireland and the UK also ranked Brexit highly as a concern. Nearly 70% of Japanese companies in Poland and Portugal picked Brexit as a key issue – significantly higher than the average for Japanese companies across Europe.

54% of Germany based Japanese manufacturers chose Brexit as their primary concern, but interestingly, the non-manufacturing sector in Germany was even more concerned by Brexit (59%). For all groups, the short term disruption from a no deal Brexit was the main reason for concern and the second biggest issue was the future relationship of the UK and the EU.

Japanese companies in the UK were worried about the impact Brexit would have on the UK economy, a cheapening £ making imports more expensive, changes to the UK regulatory and legal environment and exports to non-UK EU. Japanese companies in non-UK EU countries were most worried about exports to the UK, but also the impact of Brexit on the UK economy and on the EU economy.

Around 90% of Japanese companies were concerned about disruption to logistics and customs processes between EU and UK, considerably higher than concerns about tariffs being imposed (65%).

Japanese companies in the UK focused on freedom of movement of their employees

The worries about UK regulatory and legal changes were mostly focused on changes to the freedom of movement of people between the UK and EU. Over 50% of Japanese companies in the UK said this was their main concern, particularly those in the services sector.

In terms of countermeasures – 22% said they had either implemented or were implementing their contingency plans – particularly regarding regulatory and legal changes. Compliance with the REACH regulations for the chemicals industry and setting up a new operation were most cited as steps taken. Around 12% of UK based Japanese companies have or are in the middle of reorganising their supply chain and logistics and 4.4% have or are in the middle of reviewing their manufacturing organisation and 2.4% have or are reviewing their R&D structure. The most frequently cited measure taken by Japanese companies in non-UK EU was to secure financial passporting into non-UK EU.

Relocation from UK to EU (but some purchasing functions coming to UK)

In terms of moving out of the UK, the survey found that 3 companies had moved their EU regional HQ completely out of the UK, to Germany, and 10 had partially moved out – 5 to Germany, 3 to the Netherlands and 2 to Luxembourg. In 2015 19 companies said they wanted to expand their regional coordination function in the UK, compared to only 2 in 2019. More companies were expanding their regional HQs in Germany, Netherlands, France and Spain.

3 companies had moved their sales coordination out of the UK, to Germany, Czech Republic and Poland, 4 had partially shifted it, to Germany, Italy and the Netherlands. 2 companies had moved all their manufacturing out of the UK – 1 to Poland and one to Japan. 1 had partially moved their manufacturing to Hungary. Only 1 company had moved their R&D out of the UK, to Switzerland. 4 companies had moved their procurement function from the UK to Czech Republic, Italy, Spain and one company had moved their procurement function to the UK, from Asia.

4 companies are investigating moving their regional HQ from the UK to Germany and Italy, 2 partially moving their HQ to France and Czech Republic. 3 companies are considering moving their sales coordination to Germany and Italy or partially to Germany, France or Belgium.

1 company is considering moving all manufacturing to Japan, and 9 companies are considering partial relocation to Hungary, Germany, Czech Republic, Romania, Japan or elsewhere in Europe. 2 companies are considering wholly or partially moving their R&D to Germany or elsewhere in Europe.

14 companies in the UK are expecting to expand their high value added manufacturing in the UK, down from 25 in 2015 whereas 32 Japanese companies in Germany are expanding their high value added manufacturing. The Netherlands has become the third main host for Japanese high end manufacturing – 12 are expecting to expand their manufacturing there compared to only 2 in 2015.

12 companies are considering moving their procurement to Poland, Italy, Germany, Spain, the Netherlands, Asia or elsewhere in the EU. 3 companies are considering moving procurement to the UK from the EU, Poland, Portugal. 3 other companies are looking to move their procurement entirely out of Europe to countries such as South Korea or China.

The EPA is encouraging Japanese imports to EU

65.5% of Japanese companies who were importing from Japan to the EU and 53.1% of Japanese companies exporting to Japan from the EU said they were taking advantage of the EPA. Particularly notable were 80% of Japanese companies based in Italy (both importers and exporters) and 70% of Japanese companies in Spain. 62% of UK based Japanese companies were using the EPA to import from Japan (a lower proportion than Italy, Czech Republic, Spain, Poland, Belgium, Netherlands and Germany).

100% of Japanese companies in the logistics/warehousing, plastic components, rubber products sectors say they are using the EPA and over 70% of Japanese companies in the metal products, textiles, automotive parts, wholesalers, food and seafood processing sectors are using the EPA to import from Japan.

Sectors most making use of the EPA to export from the EU to Japan were the logistics/warehousing, automotive parts and wholesale sectors.

Overall, Japanese companies in the EU are importing 32.6% of their parts and raw materials (by value) from Japan, 1.2% up on the previous year – Japanese companies in Germany were importing the highest share of their procurement from Japan by value – 46.6%. Over 23% of Japanese companies in the EU expect to expand their procurement from Japan, particularly the services sector with 47.8% of wholesale and retail companies saying they will increase their purchases from Japan.

Economic outlook for Europe

Japanese manufacturers are however more pessimistic about prospects for 2020 than they were in 2019, with 36.7% expecting their profitability to worsen, compared to 26.6% expecting their profitability to improve. The causes differ from Western Europe to Eastern Europe – manufacturers in Western Europe expect falling demand to be the key factor whereas in Eastern Europe the primary concern is rising labour costs.

Around a third of Japanese companies are optimistic about the economic prospects in 2020 for the countries they are operating in, which is considerably down on the 57% who were optimistic for 2019 – this pessimism was particularly strong for Western European based manufacturing.

Hiring and retaining workers continues to be a headache for Japanese companies. This is especially an issue in Central and Eastern Europe and particularly at management level in Western Europe and at factory worker level in Central and Eastern Europe.

Around 50-55% of Japanese companies in Europe have or expect to maintain current employee levels – over a third have or expect to increase their workforce. 16% cut their workforce in the past year but only 11.3% expect to do so in 2020.

Strengthening selling to EU as a region

JETRO also sees evidence that Japanese companies are strengthening their approach to selling to the EU as a region, rather than individual countries. For the first time in their surveys, “The EU” outstripped Germany and Poland as the market that Japanese companies saw as the most promising for sales. Maybe this is another – psychological rather than regulatory – impact of the EPA.

Japanese companies say that strengthening their company’s brand, developing and strengthening the technical skills of their employees (particularly in Eastern Europe) and investing further in research and development are key to increasing sales in Europe.

So, as I have often said, Japanese companies are having to find ways to retain their integrity in a Europe and a world which is also dis-integrating, and Brexit is accelerating that process.

I love Japan but I don’t want to work in a Japanese company

I’ve done a screencast (around 11 minutes long) of my talk at the Centre People Appointments HR seminar earlier this year, on why people love Japan, but don’t want to work for a Japanese company, and what Japanese companies can do about it.

If you want to know more about working in a Japanese company, you can find our Japan Intercultural Consulting e-learning modules on Teachable, starting from £39 https://japan-intercultural-emea.teachable.com/

Why Germans are happier than the Japanese

Japanese people need to take longer holidays, is the answer to why Germans are happier than the Japanese, according to Japanese freelance journalist Toru Kumagai in his new book “Why do Germans feel rich on only Y2.9m (£20,000) a year?”

Japanese people see shopping as a leisure activity that they can do in just a few hours or a day for pleasure or stress release, and are too busy working. Germans can take holidays as they please, and will take 2 or 3 weeks off work at a time.

When Germans go on holiday, they will go to the seaside or countryside, with their family. In a recent insurance company survey, “sunshine and nature” was seen as the most attractive element of a holiday. Kumagai points out that as a Northern European country, Germany does not get as many hours of sunshine as Portugal or Southern France. So holidays are an important moment to refresh and recharge.

I’ve often thought that golf continues to be popular in Japan because it provides distant horizons and greenery. Respectable research in the West has shown a link between greenspace and mental health, although the causality is not yet clear. Although there is a lack of greenspace in Japanese cities, Japanese are good at taking mini breaks that let them refresh and recharge in natural surroundings, such as hiking in the mountains and staying in hot spring resorts.

Compared to Germany, there are far more advertisements and TV commercials aimed at selling something new and leading edge – whether it’s smartphones, beer or sweets, Kumagai notes. Japanese throw away old things even if they are still usable, as their homes are overflowing with new purchases. Whereas according to Kumagai, Germans will treasure old items and are used to buying second hand items. They are also very environmentally conscious and one of the major recycling nations of the world.

Kumagai also points the finger at the overservicing of customers in Japan, placing burdens on employees. He quickly adds that he doesn’t want German bad customer service to be imported into Japan, but just that Japan has gone too far in trying to please. For example, when you buy bread rolls in Japan, each one is put in a separate bag, and then all the bags put in another bag. If this kind of overservicing and customer expectations were reduced, Japanese workers could take longer holidays, Kumagai suggests.

Japanese consumers need to accept that a delivery might take a day longer, so more people can take Sundays off, or that delivery time windows will not be quite so narrow. Customers in Germany get thrown out of the shop when it’s closing time, but not in Japan.

I watched Spirited Away for the second time recently, which made me more aware of the environmental message in it – such as the river spirit spewing up old bicycles and trash. I also realised the Shinto element was a strong motif – the idea of spirits in natural things and the need to simplify life by not being unnecessarily greedy and accumulative. Much has been written, often snide, about the Shinto influence on Marie Kondo’s “spark joy” approach to decluttering, but as Kumagai says, Japan could benefit from a richer spiritual life if it went back to those Shinto ways (and also Buddhist) of not demanding so much and enduring so much in terms of long hours of work.

Data visualisation depersonalizes discussions, but you still need the people to make a judgement

I often advise Europeans who are trying to communicate a proposal, or want to have a discussion with Japanese counterparts to try to put their idea into a visual format. This has several benefits. One is that it should reduce the amount of English text that the Japanese person has to plough through to understand what is being proposed. A second reason is that it depersonalizes the discussion if there is a graphical representation – a “thing” that can be pointed at and disagreed with during the argument, rather than having to argue with someone’s abstract idea.

Thirdly, Japanese written language – kanji – is highly graphical as a communication method, so Japanese people are more receptive to complex concepts being communicated in a graphical and holistic way rather than the textual, linear form common in the West.

So I was quite surprised to hear a young Japanese expatriate woman tell me that her colleagues in the UK based market research agency she works for are much more accustomed to representing their findings in a graphical way than she was used to in Japan. Specifically, she said that they use infographics and sometimes even send the report to clients as a video, using the infographics and clips of customers being interviewed.

With the advent of “Big Data”, data visualization is a growing industry. So should Japanese companies be acquiring companies or hiring people who have those skills, or is this another area which will simply be automated, and all that is needed is to buy in or develop some software?

Automation tools already exist for data visualization, but the key is to think about why you want to put the data into a visual format in the first place. It is usually to give insights which will then provoke a discussion. An infographic does not of itself provide the solution. Discussions require human beings to provide their different interpretations of the infographics and ideas about how to act on them. The infographic provides the “thing” that can be pointed at and disagreed with, but also allows people of diverse backgrounds and native languages to have a more equal chance of contributing to the debate, because there is less of a language or technical barrier.

The market research agency at which the Japanese woman worked was founded in the UK and acquired by a Japanese company in 2014. But it also has offices across Asia, multinational staff who travel across Europe and a call centre based in the UK covering over 30 languages.

The UK is the obvious location for global marketing services, not just because it is the home of English language communication, but because of its multinational workforce, who can ensure the data is interpreted appropriately for different cultures. This is why Japanese marketing and advertising agencies have been acquiring many British companies recently. I just hope Brexit does not damage this advantage by putting up too many barriers to immigration and free movement across Europe.

This article by Pernille Rudlin originally appeared in Japanese in the Teikoku Databank News and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Mitsubishi Corp alumnus toasts the Suntory spirit

When I left Mitsubishi Corporation after 9 years, I felt guilty that I had not found a way to repay (in business development rather than money) the MBA they sponsored me through and worried that the wonderful sempai (mentors) who had supported my career would now be angry with me. I was delighted and relieved therefore, when one of the sempai, very senior in the company, invited me for a drink when I was in Japan on a business trip, and explained to me and the other team members at the table that Mitsubishi Corporation should regard people who leave as alumni, just as McKinsey do. “We may end up doing business together one day,” he predicted.

Indeed Mitsubishi Corporation is now a valued customer of mine, and I have seen many other MC alumni rise to some of the top positions in the Japanese business world. Probably the most well known one is Takeshi Niinami. A graduate of Keio University, as so many MC people are, he was sponsored by MC through a Harvard MBA. He eventually became President of Lawson, the convenience store chain that MC had invested in, leading its turn around.

He is now the President of Suntory Holdings and was interviewed in Nikkei Business magazine about recent developments there, including the acquisition of Beam Inc (but not its acquisitions in Europe of Lucozade, Ribena and Orangina) and the “Suntory Way”.

What Beam got from Suntory

“The Suntory Way means that we develop products that our competitors do not have”, says Niinami. “When I explained this to the Jim Beam factory in Kentucky they were very supportive. Beam Inc headquarters people all had MBAs. American marketers get a sense of consumer trends from consultant’s reports and decided their strategy based on that, they never went to the gemba (shopfloor) the way we do in Japan. They just told the Kentucky factory what to do, top down, from afar. If you told them to go to the gemba they’d probably quit. There wasn’t one single person in the executive team who came from manufacturing and they weren’t investing in the factory. But the Kentucky people loved making things. So when we told them we saw manufacturing as the most important thing and appointed someone from manufacturing to the board, their motivation shot up.”

“When they came to see our factories in Japan, they became aware of the need to improve their Kentucky factory. Beam is even older than Suntory – more than 200 years of history. We were able to revive their DNA.”

What Suntory learnt from Beam

“Beam are really good at managing profitability. Suntory got heavily into debt to buy Beam and we are all focused on reducing this debt. Suntory was not as good at managing cash flow as Beam but we have learnt.”

What’s next for Suntory and Niinami

Niinami was brought in by the previous President and now CEO and Chairman, Nobutada Saji (also from the founding family) in 2014. Niinami thinks his successor is likely to be another member of the founding family – current COO NobuhiroTorii – and seems in favour of this, as a way of maintaining Suntory’s spirit. He also expects Suntory to remain a privately held company, despite discussions to the contrary when he first became President. The advantage, he says, is that Suntory is able to contribute to society, through the Suntory Hall (a famous concert venue in Tokyo) and also a water sustainability initiative, without having to justify this to shareholders.

As an outsider, Niinami feels he was able to see objectively how good the Suntory spirit was, and how to roll it out globally. He has set up a Suntory University to help with this. Although Niinami is only 59, he says he is willing to finish his career at Suntory. “I am already “of age” and I don’t think anyone will be asking this “odd fish” to join them.”

What Dentsu’s woes tell us about Japan’s advertising industry and beyond

A British former advertising executive once told me that he and his counterparts in other ad agencies in Tokyo regularly held FUD drinking sessions where the D stood for Dentsu and the F and the U, well… But it does seem as if Dentsu’s iron grip on Japan’s marketing and advertising industry is coming to an end.

Dentsu is Japan’s largest advertising agency and has also recently entered our Top 30 Japanese companies in the UK thanks to the acquisition spree it has been on, consolidating multiple purchases of agencies in the UK and elsewhere into Dentsu Aegis Network, headquartered in London.

So dominant is Dentsu in advertising spend (although its rival Hakuhodo is traditionally stronger in magazine advertising) that you rarely get much critical coverage about it in the Japanese media. Critical analyses are starting to appear now though, following the suicide of Matsuri Takahashi in 2015 from overwork and then revelations in the Financial Times (clearly undeterred by being owned by the Nikkei group) of Dentsu overcharging clients for digital advertising, both leading to the resignation of the President Tadashi Ishii in December 2016.

“Corporate culture at Dentsu is like the military”

Shinichiro Kaneda in the Nikkei Business takes a look at whether the culture of Dentsu has changed since, in the May 8^th edition of the magazine. “The corporate culture is like the military” according to Takahashi’s mother. Kaneda says yelling can still be heard coming from the “sermon room” as one meeting room was known, for small mistakes or a lapse by junior staff. New graduate hires have been threatened with the tonsure if they do not reach the peak of Mount Fuji in the top group during the new staff orientation programme.

This military culture is necessary to Dentsu says Kaneda, because it is based on Dentsu’s unique position with regard to its clients. “What the head of the advertising section of a client says is an order which must be obeyed” says a former executive. “Even if they give two contradictory orders, you have to comply with both.”

Crush new graduates’ pride

But the new graduate hires have all come from elite universities like Tokyo. “People who think logically want to answer back. So Dentsu have to, at the outset, crush graduate hires’ pride and personality. That way, they will just fall in line with what other people tell them to do”.

Takahashi was a graduate of Tokyo and suffered when she found herself being sucked into this culture. Dentsu bears responsibility for not changing this culture, but behind it is a wider problem across the whole of the business sector of Japan, says Kaneda.

A wider problem across Japan’s business sector

Dentsu’s clients are major companies with advertising budgets in the millions of dollars. The head of the advertising section reports straight into the top executives of the company. Requests from clients bypass Dentsu’s own sales force and go straight to the business units and in some cases to Dentsu’s top executives. Everybody gets copied in and it becomes a “stamp rally” and if even one person opposes it, then the plan is overturned,” says a Dentsu insider.

This affects the shop-floor at Dentsu who are forever urgently redrafting proposals while at the same time having to keep an eye on costs.

The media is also very demanding. TV stations try to sell advertising as a package of both late night spots and peak time spots which Dentsu has to persuade its clients with large budgets to swallow.

When economic times were better, money flowed around and budgets and manpower were generous. Results were measured with a few qualitative surveys.

But now the Japanese economy is stagnant and with digitalization, large budgets covering everything are being subject to the scalpel and foreign companies in particular are asking for a much greater level of detail.

Traditional mass media is less influential and internet advertising is not only cheaper but results can be measured quantitatively.

Militaristic approaches do not work in this kind of situation. “It has exposed the contradictions of the Japanese workplace” says a Dentsu executive.

In order to keep up profits and save the face of the advertising departments of clients, Dentsu keeps offering advertising services that they claim will sell, but then the results are measured quantitatively, and if targets are not made, harsh treatment is handed out. This is particularly true of digital advertising.

“Dentsu is a warning to Japanese companies who do not look at what is happening at the ground level, and just pursue profit” says Kaneda.

How Dentsu compares to Hakuhodo

Former Hakuhodo (the second largest ad agency in Japan after Dentsu) employee and now author of many books, Nakagawa Junichiro, was interviewed in the Toyo Keizai magazine regarding the “super elite” of Dentsu and Hakuhodo. “they are neither a normal company nor are they media. They do anything that is related to communication. They have both made a lot of money and the employees are paid well. Yet they because they do not make their internal workings transparent, it is not clear what kind of companies they really are.”

“They will say yes to whatever the client asks for. The employees are simply a mass of corporate slaves. There are lots of internal organisations going by foreign sounding names or numbers. For example, one local government was told their account was being looked after by the #13 section but then this section split off and changed its name. This happens almost on a daily basis to meet client needs.”

“The human networks are complicated. For example if a magazine says it wants to write about Company A, the PR department of Company A will ask Hakuhodo if the magazine is respectable or just trying to blackmail them into taking advertising. Hakuhodo will ask one of its sub contractors who know this area well. But it’s not always so clear what the sub contractor’s own interests might be.”

Political campaigning

Both Hakuhodo and Dentsu run campaigns for political parties – usually Dentsu for the LDP, the centre right party that has been in power during most of the post war period and Hakuhodo for the DPJ (now the Democratic Party). Since the election has moved onto the internet, the amount of money following around has become greater. All kinds of media are now being used from videos to animated graphics and Dentsu and Hakuhodo try to offer the full range.

Learning to bow

Shazai press conferences (where executives have to bow in apology for some misdemeanour) are also good business. A rehearsal generally is charged at Y1m to Y2m ($9000-$18000) – the agency role play being journalists, they create various scenarios and make a recording of it and guide executives on what to say. “I am pretty sure you can see Dentsu’s influence on Sarah Casanova, the President of McDonalds Japan’s apology, if you look at the way she behaved the first time compared to the second time” says Nakagawa.

The amount the agencies earn from one client can be significant. In 1996 when Hakuhodo won both the Nissan and the Mazda accounts, their turnover rose by Y130bn. “So it’s tough on your career if you lose accounts like that. Retaining clients by being totally devoted to them becomes key and the sales executives are seen as the elite. Although at Hakuhodo the creatives are the elite, and the salaries are about 70% of Dentsu’s, but still pretty good. What’s true of both agencies is that sense that you cannot do anything in your own organisation or by yourself, you are nothing without the agency.” So meetings tend to be full of people, and so as not to anger the client, instead of creating the trend, you tend to go with the flow.

Nakagawa left Hakuhodo because “when I started working on the Amazon account, I realised I had become a typical agency salaryman who simply supports the career of some middle aged guy at the client’s, who I don’t even like.”

Overtime is a problem not just in the advertising agencies

“Overtime is a problem for all Japanese companies” not just advertising agencies. “People take the “customer is god” idea too much too heart. Both Dentsu and Hakuhodo try to achieve over 90% for their clients. If they stop doing that then maybe overtime will disappear.”

“Dentsu is not that strong in the digital space. There’s still things they need to learn. They are good with TV for the World Cup and the Olympics, but they are being beaten on digital. The specialist shops are stronger. Unfortunately, with digital you can always keep adjusting and improving so the work never ends”

“Advertising executives are remote from real life. They only hang out with the top few percent of income earners. They are all graduates of top universities. But they are not that corrupt.”

Why “service” has different meanings in Japanese and English

A Japanese entrepreneur told me that his friends tried to discourage him from setting up a services company, because – they said – “Japanese customers won’t pay for service”. He said this in Japanese, and I assumed he meant “services” in the plural, which in English means work that would be included in the “service sector” of the economy, in other words not the agricultural or manufacturing sectors.

That really struck a chord with me, as I also sell “services” – namely consulting and training – to Japanese companies and I have occasionally noticed that Japanese people seem reluctant to pay for what we do. Despite this I have had a profitable business for over 15 years, probably because my actual client contacts at those Japanese companies are usually Europeans, and Europeans are much more accustomed to pay for consulting and training.

Transcribing and translating service

There is a translation issue here, because If in English, we use “service” without the “a” or use “the” instead – for example “pay for service”, or “how was the service?” we mean customer service. So I think that is where the confusion lies. Maybe what the entrepreneur’s friends were saying is that Japanese customers are not prepared to pay additionally for customer service. It is assumed in Japan that good customer service is automatic, and part of what you are already paying for.

How a concept is translated into another language often provides a clue as to how that concept is viewed in that culture. Particularly with Japanese, if the word only exists in katakana (a syllabic alphabet used for transcription of foreign language words), that may mean that concept does not really exist in Japan. Furthermore, the transcription into katakana of “service” (サービス sa-bisu) in Japanese not only means “service” in English, but has an additional meaning of being “a free thing”.

Solutions preferred to service in Europe

How to charge for a service is more complicated than charging for a product. It is a mixture of the hours involved and the expertise being bought. Recently, a potential customer told me that my company’s training was 50% more expensive than another supplier (whose main business was a language school). I said that this was the price we charged to customers in a similar situation to them and it was fair value for the expertise we had. I knew the language school would not have that expertise and indeed the customer ultimately chose us, despite our higher cost.

Above all, customers in Europe are willing to pay for services which solve a problem they have. So just telling them how high quality something is or how expert you are or how many hours it takes is not enough. This is why sales people for B2B services companies in Europe first of all try to build up trust with customers so they will tell them what their problems are. And also why it is more fashionable to use the word “solution” rather than “service” – this word implies they are getting an integrated product and service, which will fix their problem.

This article was originally published in Japanese and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

For more on Japanese companies as customers, see Pernille Rudlin’s book “Omoiyari: 6 Steps to Getting it Right with Japanese Customers”

Last updated by Pernille Rudlin at 2022-12-10.

Category: Marketing