Japanese Business Blog - Rudlin Consulting

Monozukuri still has merit, but smarter marketing a must

I’m a big fan of Japanese monozukuri (“the art of making things ie manufacturing) and said so in a letter published in the Financial Times recently. It attracts criticism for causing Japan’s economy to be too reliant on exports, and there are worries about how an aging population can supply enough workers to man the shopfloor. But I really think Japan should “stick to its guns” in this regard.

Here in the UK we are suffering the effects of having moved too far away from manufacturing. We’ve ended up with a society where everyone thinks they should be highly paid knowledge workers or celebrities. We have failed to give enough status and dignity to making things.

A diverse society like the UK needs a full range of jobs to stay healthy. I am not saying this out of a patronising assumption that manufacturing jobs are necessary for the unskilled and uneducated in society and that such people are somehow not fit for anything else. There seems to be a fundamental human need to see tangible results from our labours.

Besides, a career in manufacturing requires far more than dexterous fingers these days – thanks to Japanese techniques such as just-in-time delivery, visualisation, root cause analysis, multi-skilling and so on, anyone wanting to succeed in manufacturing has to be computer literate, have an understanding of logistics and be capable of rigorous problem solving.

It is noticeable in this recession that many manufacturers have struck deals with their workers on pay cuts or working time reductions. rather than resorting to mass redundancies. There is a high cost to training a fresh set of employees when the economy picks up, so it makes more sense to retain the current workforce.

In fact it is knowledge work that has proved to be more vulnerable than expected. I know of many bankers, accountants and lawyers who have been made redundant, thanks to our British economy based on trading of over-hyped assets such as houses and fancy financial instruments. Ironically, many of them are now turning to “manual” work; cookery, gardening, farming, starting a vineyard and so on.

One problem I have noticed with monozukuri, however, is the assumption that making lovely things is somehow enough. At a seminar I facilitated recently, several senior salespeople, in electronics, sanitary ware and banking, all noted that their Japanese companies did not seem to have any understanding of the basics of marketing, particularly in the current highly competitive climate. “My bank doesn’t even have a pitch book!” the banker told me. I pretended to know what he meant, and later found out that this is a fundamental marketing tool for any Western investment bank – containing all the profiles and experience of the proposed team.

In the past, Japanese companies could rely upon relationships and their reputation for quality to sell their products and services. Now they need to think long and hard about differentiation and value added. Why do we make this product and not that one? What makes our product or service better or different? Should we be making this product at all? When they have answered these questions, their sales people can sell more convincingly, and the Japanese economy can pick up again.

This article by Pernille Rudlin originally appeared in the Nikkei Weekly.

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Oxford Boat Club vs Japan’s “Black” companies

Maiko Tajima, formerly of KPMG, now working for the World Food Programme, explains in Diamond Online why the rest of the world does not understand Japan’s so-called “black” companies. As she points out, if a native English speaker heard “black company” they would probably think “black enterprise” was meant, ie a company run by someone of what in the UK would now be called “black or minority ethnic” origin. Apparently there’s also a series of novels written by an American author called The Black Company.

Anyway, the closest translation would probably be “sweatshop” but most in the West would think of this as referring to factories, or workshops, in the US or Europe in the 19th and 20th centuries, and more recently in developing countries, and find it hard to believe Tajima when she explains that such conditions are occurring in a developed country such as Japan, in the 21st century. A recent survey of its employees by Sukiya, a late night restaurant labelled a “Black Company” revealed comment such as “regardless of night or day, put all your life into your work, and if you survive, then you get to give the orders next time” and “work until your nose bleeds and you faint. Then you won’t be able to say anything is impossible any more”.

She explains how this occurs by contrasting her experiences as a member of the boat club in Oxford and also of a fencing club in a Japanese university. In the Japanese university club, the concept of “sempai” (seniors) was strongly adhered to – she calls it a “caste system”. You could not eat before your coach and your seniors started eating. Practice was to see how much you could endure. If they felt you lacked “konjo” (guts, willpower), it was the collective responsibility of the rest of the club too, so you all had to sprint around the sports hall. Tajima did get results in her matches, but she is not sure to this day if the “guts” she had at that time has really helped her in her life since.

As a member of an Oxford University Boat Club, there were of course the early morning, 5:30am starts on the river, that had to be endured over several months, but the reason behind this was “doing what we had to, to win” – starting with the desired outcome and working backwards.

The team was multicultural – American, British, Indian, Chinese and Taijma herself, and teamwork was heavily emphasised, but only in terms of getting the team to be a winner – there were no bonds outside the boat club. You were also allowed to make suggestions as to what should be done. “It was not what you could or could not endure, just what was the most rational course of action in order to win.”

As she points out, in European countries such as the Netherlands, there is the right to leave work 2 hours early, if the previous day you worked two hours overtime, and plenty of maternity and paternity leave. The focus is on trying to have a “good life” both in work and home life, as part of government policy.

She thinks that the roots of the 21st century Japanese “black companies” lie in the kinds of behaviours described by Ikujiro Nonaka in his book “The Essence of Failure” – an organisational study of the Japanese armed forces in the Second World War – emphasising human relationships over rationality, and to strive for spiritual virtue, no matter what had to be endured.

“Japan is different, but other countries are different, too” – Takeda’s Weber

Japan’s annual shareholders’ meeting season at the end of June went relatively smoothly for most companies, as their results had improved, in part due to the impact of a cheaper yen. Takeda was one of the exceptions, however, with the new President, Christophe Weber, facing protests from a 100 or so shareholders, more than half of whom were ex-Takeda employees.

Their 7 point letter claimed that the acquisition of Nycomed and Millennium Pharmaceuticals were failures, that the way Takeda was globalizing and the low morale of scientists in Japan called into question management effectiveness, that the way Weber was appointed as Hasegawa’s successor was questionable, that the focus on the executive management committee, largely peopled by “foreigners” was causing the board meetings to become a mere formality, that it was not clear why high dividends should be paid out when the financials were worsening, and finally that responsibility was not clear for the fine of $6bn in the US for concealing the risks for Actos, a diabetes drug.

Diamond Online analyses why Takeda is being criticised “from within”. Takeda was at a high point in 2006, but in decline since then, as four of its blockbuster drugs came off patent in the US. The search for new hit drugs led down the path of M&A. Takeda was the dominant Osaka pharmaceutical company, squaring up against Sankyo the Tokyo-based pharmaceutical giant. Behind the scenes, however, there were merger talks between the two. In the end Sankyo chose to team up with Daiichi.

So Takeda embarked on overseas acquisitions – Denmark’s Novo Nordisk and then Millennium in the USA in 2008, and finaly Nycomed in 2011. These acquisitions required substantial post merger restructuring, however there was noone capable of this in Takeda. The management layer below Hasegawa was “thin” ( a problem common to many Japanese companies, who cut back hiring of that cohort during the first oil shock). Hasegawa appeared isolated, and reliant on foreign executives and Japanese executives who had worked in foreign companies (in other words, not including the indigenous Japanese within Takeda)

Weber’s recent interview in the Japan Times, in which he emphasises that Takeda will remain “Japanese” is an attempt to reassure the Takeda founding family and domestic Japanese management, but whether an interview in English in Japan Times (an English language daily) is sufficient is doubtful. A charm offensive on the Nikkei group of publications might be advisable.

Japan’s soft power

In a week’s time, Rudlin Consulting will move to Norwich, UK. One of the reasons behind this choice of location is to be near the Sainsbury Institute for the Study of Japanese Arts and Culture. I am keen to explore further how corporate cultures can be expressed “non-verbally”, through Japanese arts and culture, and also hope there is scope to collaborate with the Institute.

So of course I went to the lecture that Mami Mizutori, formerly of the Japanese Embassy in the UK, and now director of the Institute, gave to the Jiji Top Seminar (a monthly lunch for Japanese business people in the UK) last week. The title was “Do you invest in the power of culture?” She focused on the importance of soft power to Japan. Whether or not you believed that only Japanese can really speak Japanese and therefore only Japanese can really understand Japanese culture, (and I am guessing she does not subscribe to this point of view) she pointed out how a non-Japanese perspective on Japanese culture can help Japanese themselves to appreciate Japan’s culture.

Would an exhibition of Shunga (erotic art) ever have been put on in Japan, she wondered, the way the British Museum did last year? Probably the Japanese establishment would have deemed it to be pornography, not art, and therefore too controversial to touch. She also told the story of Joe Price, who started collecting Ito Jakuchu, a late Edo period (18thc) artist who had been neglected, but then became popular, culminating in a blockbuster exhibition in 2006 in Tokyo, the backbone of which was Price’s collection.

As this article described, Price was then able to use his collection to help cultural institutions in the 2011 earthquake region.

Mami also lamented that there is (no longer) a tradition of individuals sponsoring the arts the way there is in the US, and to a certain extent, the UK.

She wondered whether this was because post war Japan is a much more egalitarian place, and sponsoring the arts would be seen as flashy.

Pre-war many wealthy individuals did build up art collections (the Mitsubishi founding family Iwasaki’s Seikado collection or Idemitsu for example) and post war there is some sponsorship, such as Suntory’s famous concert hall. So the question I did not ask, was whether she was hoping that Japanese companies could fill the gap more than they do now.

As was pointed out by Akiya Takahashi, the director of Mitsubishi’s Ichigokan Museum in a recent interview (in Japanese) in the Nikkei Online, many major exhibitions in Japan are sponsored by newspapers and often take place in department stores. The staff therefore tend to be newspaper marketing employees, and there is a consequent lack of professional museum and gallery people, who can network with their peers in other countries. Also, what museum and gallery staff there are tend to return to universities to become academics. He is trying to change this by developing professionals at Ichigokan, encouraging them to travel abroad.

Furthermore, the newspaper sponsorship/temporary exhibition culture means that Japanese museums often do not have a permanent collection of any great strength. Again, Takahashi has been encouraging Mitsubishi to buy up some private collections for its museum. So my old employer Mitsubishi Corp is certainly doing its bit to help Japan’s soft power (and in the UK too – sponsoring the Japan room at the British Museum). I am very much hoping to see other Japanese companies “putting their money where their mouth is” as they say, and I suspect that was the subtle message of Mami’s talk too.

What to do with the window gazing tribe

I visited Japan for the first time in a year and a half at the end of last year. I try to go to Japan once a year, each time looking out for subtle changes in a country I have been visiting or living in for the past forty years.

This time I felt some of the “genki” (a useful Japanese word meaning energy and health) had come back, compared to visits in 2011 and 2012 when there seemed to be a general atmosphere of depression.

However I also felt Tokyo had slowed down. There were visibly more elderly people, but also the younger people moved more slowly, partly as they were gazing into their smartphones as they walked.

Japan’s “yasashisa” (gentleness) and rich cultural life make it a great place to grow old. Of course I realise that it is the current generation of retirees who have it the best – a decent pension and healthier, longer lives in which to enjoy it.

My generation, both in Japan and many European countries, face the prospect of not being able to retire until we are 70. So we have at least another 20 years of working life ahead of us. In Europe it is now illegal for employers to discriminate on the grounds of age, and the default retirement age of 65 has been phased out in the UK.

Europeans reaching their fifties will not be able to afford to retire early as previously. But if they cling on to their jobs they are made to feel like they are blocking the way for younger people and are vulnerable to redundancy programmes.

It is hard to get a job in another company once you are over fifty – and there is also a question of motivation. The prospect of another 20 years doing the same thing – particularly if it is a “gemba” (shopfloor) type, active, high pressure job, is not appealing. The second half of a working life should be more about reflecting on acquired knowledge and skills and handing them on to the next generation.

I’m not sure the initiatives taken in Japan since the 1990s to deal with this – such as kata tataki (literally “shoulder tapping” where employees in their late 40s are forcefully offered very early retirement) and madogiwazoku (the window tribe – people who have been given a seat by the window and no real job to do) really worked. It was not only disheartening for those directly impacted, but also for the younger generation, who have reacted by becoming more risk averse. They want lifetime employment, but don’t see the point of being ambitious or taking risks such as working abroad.

A better way might be to help people in the second half of their working life find ways of capturing their accumulated knowledge and skills and transmitting them to the younger generation in Japan – through teaching rather than as a manager.

Locally hired employees and managers in overseas acquisitions would also welcome having an appointed mentor to help them feel more connected to Japan headquarters and understand the corporate culture and processes. If Japan could refresh its traditions of sempai/kohai (mentoring of juniors by seniors) and apprenticeship for the 21st century, I believe it could be a pioneer in developing a humane but productive ageing society.

This article by Pernille Rudlin originally appeared in the Teikoku Databank News in Japanese on February 12th 2014 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.

Marketing Japan to attract foreign investment – a fourth arrow?

Prime Minister Abe made a short, punchy speech at the “Invest in Japan” event I attended yesterday in London. Perhaps not quite as passionate as his longer speech at the Guildhall last year, but his key message was clear, that Foreign Direct Investment was an important pillar of his growth strategy and that he was aiming, with Abenomics, to make Japan a more market friendly, more exciting destination for foreign companies.

The current fashion is to say that Abenomics is losing steam, because of the lack of progress with what Abe has termed the third arrow – deregulation and structural reform. My view on this is that the Japanese government can deregulate and pass new, more liberal laws all it likes, but without significant support and action from major Japanese companies, not much will happen.

So foreign investment might be a way to stimulate action and change, if foreign competition is able to enter the Japanese market more aggressively. There is something of a chicken and egg situation, however, in that foreign investors often say they need to see deregulation and structural reform implemented before they will invest in Japan.

There is also a concern, voiced by ex ambassador Sir David Wright at the event, that foreign companies are still seen as “foreign” and may not get equal access to the benefits of any reforms or incentives. The mayor of Kobe was quick to pick up on this point – “foreign companies in Kobe will be seen as Kobe companies” he said, which is no doubt a legacy of Kobe’s long standing history as an international port. Certainly we felt very at ease when we lived in Kobe, as long ago as the 1970s, despite not being members of the rather snobby expat Kobe Club.

So Abe gave concrete examples of where there had been deregulation, in the energy sector and pharmaceutical sectors and also a strengthening of corporate governance, based on British standards. The rest of the morning was given over to presentations by the mayors of Fukuoka and Kobe, and the governors of Mie and Hiroshima prefectures, who were keen to emphasise another area of reform – the new national strategic special zones, where regulations will have a lighter touch, to enable innovation.

It seems Japan’s mayors and governors have more autonomy than in the UK, so many of them were able to showcase particular initiatives and tax breaks they had introduced to encourage investment into their regions. I had been dreading these presentations, expecting a succession of grey men explaining word for word, dreary, text box heavy powerpoint slides in incomprehensible or badly interpreted English, but to the audience’s great delight, the 4 regional leaders wowed us all with their youthful energy, dynamism and sometimes excellent, but always bravely and strongly delivered English, which seemed to come from the heart rather than a script written by someone else.

These men (there was supposed to be one woman too, the mayor of Yokohama, but she was unwell) could be Abe’s fourth arrow – if they can make a convincing case for a Japan as an Asian hub, beyond the bureacracy and vested interests of Tokyo – but I think a bit more strategic thinking behind the marketing is needed. Some sectors in the UK are already aware of Japan’s potential – I was delighted to see Paul Alger of the UK Fashion and Textile Association steer Hawick Knitwear towards Japan as a basis for entry into China, in the recent BBC programme The New Troubleshooter.

The Fukuoka mayor got some way there, with his eyecatching map showing that Fukuoka was equidistant to Shanghai, Seoul and Tokyo. Not to mention the fact that KLM has just started flights from Amsterdam to Fukuoka – a point that caught my attention, as we are about to move to Norwich, and I am looking forward to using Norwich International (sic) Airport to get to Japan, as it has several KLM flights to Amsterdam a day.

There was rather too much emphasis on the nice lifestyle to be had in Japan’s cities (and it made me very nostalgic for the lovely times I had living in Hiroshima and Kobe) and not quite enough hard headed business appeal, particularly along the lines of the point that Steve Crane, of Business Link Japan, made in the final presentation of the day, that it is important to move near your ecosystem and supply chain, when considering location.

The leaders did note the various industries or specialist zones that they were focusing on regionally, but it’s possible that they took it too much for granted that we would understand how industrial clustering works in Japan. Actually, as most of the audience were the usual Japan gang, this kind of marketing would have been wasted on us anyway.

Which brings me to my biggest constructive criticism – the government bodies that organised this seminar, Ministry of Economy, Trade and Industry, Embassy of Japan in the UK, the Japan Local Government Centre and JETRO, really need to network more with the various regions, cities and companies in the UK, so that more representatives of UK companies come to these seminars. JETRO is apparently about to hire some industry sector specialists in Europe as consultants – I presume to help with that. The JLGC head told me that twinning Japanese cities with regional governments in the UK has proved difficult, as no British politician or bureaucrat in this current climate of austerity wants to be seen to be jetting off to Japan on a sushi and sake junket.

As Sir David Warren, former ambassador to Japan, succinctly put it, “it needs to be proved that Japan can be more than a profitable niche”.

EMEA CEMEA EMEIA – Japanese regional headquarters in Europe – scope and location

My old employer Fujitsu’s latest attempt to resolve the “European regional headquarters” conundrum that many multinationals face is to create a region called EMEIA – Europe, Middle East, India and Africa. This is partly a reflection of the IT industry (having large outsourcing desktop support operations in India, which in Fujitsu’s case had actually been managed out of the USA operation previously) and also the legacy of the former Fujitsu Siemens global HQ in Germany selling hardware into India.

The EMEIA region will be headed up by Duncan Tait, CEO of Fujitsu UK & Ireland, who has also been made Corporate Senior Vice President in Fujitsu HQ’s new global matrix structure, so this represents a tipping of power back to the UK, having tipped over to Germany previously, with the previous tripartite European structure of C(ontinental) EMEA, UK & Ireland and the Nordics.

I had mentioned previously that there seemed to be a shift towards Japanese companies basing their European or EMEA headquarters in the UK. Some say this could be due to the relative tax structures in the UK being more favourable now than the Netherlands or Germany. My view is that Japanese companies are not quite as hard headed as that, and it is more to do with the favourable business climate (diverse, flexible workforce) and global infrastructure and support services that the UK offers.

I have big worries, therefore, on how any British exit from the EU might ultimately impact Japan’s investment in the UK. UKIP leader Nigel Farage and the Labour Party’s shadow chancellor Ed Balls recently had an exchange on this, with Farage (rightly alas) pointing out that Nissan were very negative on the impact of the UK not joining the euro and yet their factory is still in Sunderland.

For sure, Nissan will not be closing that factory down any time soon – it’s too efficient and the UK market is too important for that. But what I would be worried about if I was in government would be the more hidden ripple effect of headquarter location. It is true for all industries, not just the automotive industry, that the location of a major company’s regional headquarters will also affect its procurement, marketing, financing behaviours and therefore the suppliers around it. Furthermore, the roles needed to run these consolidated functions are the most senior and well paid jobs in an organisation. The economic impact is therefore not just about the size of the directly employed workforce in a factory. If the UK were no longer in the EU, I wonder whether we might not see a slow drift of headquarter functions, and supporting services and people, back to Germany or the Netherlands or Belgium.

Nissan’s European HQ is actually in Switzerland – unusually for a Japanese company – 18 out of the Top 30 Japanese employers in Europe have their regional headquarters or part of their regional headquarters in the UK. Official location may be only half the story however – I know that many Japanese companies are moving towards a more “virtual” regional structure, with top jobs and functions located across Europe. I will examine this further in future postings.

Wally Olins CBE 1930-2014

I was very sorry to hear of the death of Wally Olins on Monday. Although he was 83, and had recently undergone an operation, it seemed he was recovering well, and I was looking forward to his postponed book launch for Brand New: The Shape of Brands to Come and maybe catching up with him before then as he had said he had wanted to chat further with me about Japan – which was typical of Wally, that despite his immense expertise and experience, he was always curious to know more and very generous and open to relative newcomers to his field.

We had worked together both when I was at Fujitsu for their new brand promise “shaping tomorrow with you” and after that with his company Saffron on another corporate vision project for a Japanese owned subsidiary. As Ian Stephens, principal of Saffron, has said in their statement about his death, Wally was infectiously charming but also famously impatient – he sometimes sought reassurance from me that his straight talking style was not going to upset Japanese executives.

Although he was impatient with Japanese companies’ caution, indecisiveness and inarticulacy, I sensed Wally was approving of Japanese companies because they instinctively “get” (and had been practicing, at least in Japan) the concept he had been preaching, that a company’s brand is about nurturing its collective identity, giving it an emotional connection to its customers.

I understand his impatience now, as he did seem, despite his four score years and more, like a man who still had a lot more he wanted to give and achieve. The best compliment we can pay him therefore is to buy his new book, and keep the flag flying for his work and ideas.

6 reasons Japan is behind as a global brand

Prof Noboru Sato, of Nagoya University and formerly of Honda Motors and Samsung gave the following 6 reasons (article in Japanese) that Japan is behind, not only in the globalization of business, but in terms of global cultural influence – in the arts and sports and also the strength of “Brand Japan”. Many will come as no surprise to Japan watchers:

1. Education

Fewer Japanese students are studying abroad and Japanese universities are slow in increasing the number of foreign academics they hire. As Sato acknowledges, Japanese universities need to make their academic staffing more meritocratic if they want to attract the best in the world.

2. Young Japanese not working abroad

Sato points to how Japanese companies have not been proactive in hiring “returnees” – Japanese graduates who have spent part of their education overseas. However, and I would concur, he acknowledges this has changed recently, and many companies have been taking steps to hire foreign employees and returnees in Japan. But, as Sato points out, Japanese companies do not make any distinction in terms of pay or promotion prospects for people who have Masters degrees. This makes them an unattractive prospect for returnees and foreign graduates.

3. Uncompetitive education

Although Japan has very high literacy and numeracy rates, its educational spending as a proportion of GDP is one of the lowest in the world. In other words parents in Japan are footing the bill. Computer literacy is lower than most developed countries.

4. Industry’s lack of global competitiveness

All the famous names in electronics have been suffering recently – however Sato sees some grounds for optimism that they may regain their strength.

5. The penetration of Japanese food culture

Sato gives the first 4 reasons a fairly cursory explanation but really goes to town on this one – he’s clearly had one too many bad “Japanese” meals abroad. In Sato’s view, the “fake” Japanese restaurants, run by non-Japanese, in Europe, North America and South Korea, are ruining the Japan brand, as are the recent scandals in Japan’s own restaurants and department stores, where lower grade foods were passed off as higher grade, or wrongly stated to be from specific regions.

6. Tourism

Japan ranks #33 in the world for tourist numbers, and South Korea, with half the population of Japan, ranks 23rd. Japan should be attracting more tourists given the richness of its culture and food.

Sato concludes that much of this could be solved if there was more sense of a need for competitiveness, from primary education onwards, in Japan. There needs to be more external stimulus and awareness of the need to be competitive relative to other countries. He does not give any concrete proposals on how this is to be achieved, however. In a sense Japan has got itself in a virtuous (or vicious) circle, in that it has become one of the nicest places to live in the world, so why would Japanese people feel any sense of urgency to compete with or live in other countries, which seem more dangerous and insecure – and as for the food…

Hitachi’s new President, Toshiaki Higashihara Q&A

As blogged previously, Hitachi announced their new President and COO Toshiaki Higashihara, on January 8th. The Nikkei Business magazine’s Q&A with him in the 20th January edition asked him for his views on how Hitachi was going to grow, and what would change.

Higashihara emphasised “One Hitachi”, bringing together services, products and solutions to address customer needs such as energy saving and improving productivity. The differentiator for Hitachi against Siemens and GE being that in the infrastructure business, Hitachi can also bring ICT skills and solutions around cloud computing and big data.

A sense of speed is needed, he added, and this means that not all decisions should be made in Tokyo headquarters. R&D, purchasing and ICT systems should be looked at in a global context. He also made positive noises about further acquisitions.

What will remain constant is Hitachi’s 100 years of “monozukuri” (making things/craftsmanship) and SQDC: Safety, Quality, Delivery Time and Cost.

It seems Higashihara was close to current President Nakanishi (who becomes Chairman and CEO), as a kohai (protege) and also brings global experience – a masters’ degree in computer science from Boston University and was President of Hitachi Power Europe.