Technology as an Intersection of Public Policy and Private Initiative: A case Study of Japan, the World’s Perpetual Technology Clock

Japan, the world’s technologically most advanced nation, has been buffeted by low growth and deflation for over two decades. During this period, the country has seen three-fold appreciation of its currency (Yen vis-à-vis US Dollar), rendering its products extremely pricey in overseas markets. The country has seen a huge real estate bubble that destroyed consumer and corporate wealth. The nation has aged significantly, potentially reducing domestic savings and consumption, and increasing welfare expenditure. The manufacturing industry faced onslaughts from the more nimble Korean industry and was burdened with excess capacity. Some of the high cost, big ticket overseas acquisitions affected the overall health of certain major conglomerates. The political system has faced continuous upheavals and the legislative processes have faced fractured verdicts during the period with a consequent impact on development economics.

Despite the above adverse trends, Japan retained its preeminent position as a global industrial leader, even two decades later. Japanese products, notably automobiles and electronics, continue to dominate global markets and customer mindshare, notwithstanding Yen appreciation. Japan continued to create new architectural marvels, albeit on a muted scale, despite the real estate slump. The industry continued to develop state-of-the-art products, several of them helpful to the aged population. The overseas expansion managed to weather the acquisition turmoil and deliver value. The political system remained durable enough to welcome a recharged Prime Minister Shinzo Abe and his strategy of Abenomics. At the core of this resilience lies technology, without doubt. This is evident as one considers the unfolding of new technologies in Japan for the future decades. Also at the core has been a public policy that was supportive of industry and technology.

Unstoppable in technology       

Prior to 1964 Tokyo Olympics, Japan started operating the Shinkansen bullet train between Tokyo and Osaka, completing the travel distance of 500 kms between the two cities in just 4 hours; since then Shinkansen reduced the travel time to two and a half hours. As Tokyo prepares to host the 2020 Olympics, Japan is preparing to showcase the world’s fastest train SCMaglev (superconducting magnetic levitation) super-bullet train, a hover train that will run at more than 500 kph and drastically cut the travel time between Tokyo and Osaka to just 67 minutes. Japan has been famous for its robotic technologies from the 1930s (Robot Lilliput was the first toy mechanical robot developed in 1932 in Japan). Since then, companies like Fanuc and Kawasaki, and a few others brought robotics to industrial manufacturing. Companies such as Sony and Honda brought humanoids to mimic human movements for day to day life. In 2013, Kirobo was developed as a humanoid robot that can accompany space astronauts. The expectation is that by 2020, robots that care for elders would be commercially available.

Self-driving cars are the new challenge and opportunity for the Japanese automobile industry which has mastered the energy-efficient hybrid car technology for mass production. Toyota and Nissan have pledged to develop self-driving cars for mass production by 2020. Applying technology in a delicate manner to human life is not strange to Japan. No wonder then that a Japanese rice maker has developed a rice polishing machine that removes the hard-to-digest bran but retains the delicate nutrition-rich subaleurone layer which is just 1/100 of a millimeter thick. While the Western firms dominate the global pharmaceutical industry, it is probably less known that some of the most potent and differentiated antibiotic drugs as well as cardiac, diabetic and gastro care were innovated in Japan. The same drive is evident in the research to use adult stem cells do the job of embryonic stem cells as induced pluripotent stem cells (iPSCs) to develop regenerative medicine that is free of controversies of embryonic stem cells and is more universally available. The amazing list of future technologies that are under development in Japan, certainly not limited to the above, is indicative of the unending quest of that nation for technological supremacy.

MITIoric Japan

What makes Japan tick with technological vision, investment commitment and execution commitment despite decades of economic deflation and political uncertainty? Forward looking government policies were often considered the facilitators of the Japanese miracle. In the post-war Japan, the famed Japanese Ministry of International Trade & Industry (rechristened as Ministry of Economy, Trade and Industry in 2001) was the facilitator of Japan’s unique industrial and export competitiveness. Decades of non-growth and industrial losses may have led to diminution of MITI’s relevance. The other answer also lies in the homogeneity of the Japanese society on one hand and the national acceptance of technology as the primary tool to improve quality of life on the other. Without the twin features of aligned public policy and private initiative, it would, for example, be impossible for a nation of the small scale of Japan to invest as much as USD 90 billion on SCMaglev super bullet trains with a 10 year investment horizon and an even longer and uncertain payback horizon. The social resolve to convert a challenge into an opportunity (for example, development of robots to take care of ageing population) also stems from a belief that technology can support rather than erode old world values.

The other feature is that Japan has always shown the wisdom and boldness to experiment with new technologies and open up new markets for new products first at home. This progressive approach has enabled Japan to master the new technologies prior to launching them with due customization abroad. The same quest makes for Japan’s high-tech toilets with a wide range of sensors and wash & dry mechanisms. At present, somewhat of a Japanese oddity, these can open new vistas in healthcare and sanitation, in a manner typically reflective of Japan – address and resolve problems at source. In several cases, the presence of several strong competitors for the domestic market also forced the Japanese manufacturers to master the art of technological parity with cost competitiveness. The differences in technological competitiveness and cost efficiency between the largest firm and the smallest firm are but marginal in Japan as contrasted with other nations where such differences across the industrial spectrum tend to be huge, and influenced by scale economics and resource accessibility. This means that a technology, once discovered or applied, becomes a national comparative advantage in Japan.

Abenomics, the three arrows

There is, of course, no denying that positive governmental policies help technological innovation and industrial growth. The miracle with Japan is that despite the fractured electoral verdicts, confused government policies and stagnant growth, technology continued to prosper. Japan has now a new hope in the new Abenomics which  refers to the new set of economic policy framework set in motion by Prime Minister Shinzo Abe upon assumption of office in December 2012. This comprises in his words “three arrows” of massive monitory easing, expansionary fiscal policy and long-term growth strategy. While the first and second arrows aim to transform Japan’s actual growth path, the third operates on the economy’s potential growth path, which assumes the optimal use of all available resources and technologies. With stock markets soaring by 40%, Yen depreciating by 20%, unemployment falling to 4%, real GDP growth increasing to 4% and job to applicant ratio nearing 1, the first arrow has decisively worked. The second arrow of sharp increase in fiscal expenditure for newer high-technology infrastructure projects takes longer to work but the projects of solar power and high speed transportation are signals that the second arrow would also work. The third arrow which aims to boost Japan’s potential growth through structural change in industry and business through techno-economic factors will become far more important.

Abe has set out the vision behind his long-term growth plan. “Japan is a country that challenges, that is open, and that innovates,” he says. The third aspect of his policy includes increased private investment, technological innovation, improved trade links, and reformed corporate-tax policy. The third component of Abenomics would depend on the pull factor from the infrastructure investments, acceleration of the intrinsic technological movement, industrial and technological collaboration between competing firms, and the investible resources that the private sector is enabled to develop. Apart from the new technologies discussed earlier, other frontier technologies such as metamaterial technologies, carbon capture technologies, magnetoresistive random access memory (MRAM), ultra-compact microwave communication systems, smart appliances, personal mobility vehicles, thorium and hydrogen technologies for nuclear power, 3D printer technologies, and several other new wave technologies are indicative of the potential that could lie ahead. Abenomocs faces the toughest challenge in ensuring that the technology led long term growth strategy is successful.

Transferonomics

India has a lot to learn from the progress of many advanced nations, not the least from Japan. As a late entrant to the world’s superpower game, India (now, expected to be the largest economic power in the world by 2028) has the benefit of absorbing the good points of several advanced nations. Japan has instructive lessons of positioning technology at the intersection of public policy and private initiative. Whether it is the efforts of MITI  and METI up to the recent times or the Abenomics in the contemporary times, public policy and private initiatives shared  technology, both as an outcome as a catalyst. Japan has been able to focus its top engineering and scientific talent on leading edge technology in Japan while outsourcing manufacturing around the world, utilizing scientific and technological resources abroad. China, Taiwan, Malaysia, Thailand and Indonesia have been great beneficiaries of Japan’s optimized global technology model. India, with scientific and technological capabilities, far greater than those of the nations in citation, except China, ought to have been in the vanguard of this optimization model.

Manmahonomics of the 2000’s was effective as a macroeconomic fiscal policy in India but recent events have demonstrated how lack of technological competitiveness and cost efficiencies can affect industrial growth, erode export competitiveness, reduce domestic capital formation, increase external debt dependence, trigger price inflation and affect overall economic growth. An alternative strategy should be to align private initiatives and public policy to position India as the leading absorber of global technologies and deliverer of products for the globe. Creation of a manufacturing base in India for the world is seen in some industrial sectors but needs a major scripting of strategy. Every new electronic device and most components of industrial equipment of the world whether from Japan or USA are manufactured in China from Day 1, in each case. India needs public policy and private initiatives that make such concurrent technology transfer to and product manufacturing in India possible. This requires encouragement of massive infrastructural investments (far beyond EoUs and SEZs), for example, creation of industrial cities with transportation and social infrastructure across the country and provision of clear policy regime for wholly owned and partially owned subsidiaries of technology giants. The policies should distinguish between companies which transfer aged products and companies which transfer the latest generation products, policies obviously favoring the latter. The criteria for evaluation should include not only investment inflows but the quantity and quality of technology inflows. The day when India can claim for itself the words Abe spoke of Japan as a country that challenges itself, that is open, and that innovates, the future of India shall remain successful and sustainable.

Posted by Dr CB Rao on December 29, 2013

     

 

 

 

 

 

 

Space, Time and Effort Management (STEM): A Paradigm for Resource and Performance Optimization

Maximization of performance is a goal avidly pursued by administrators, leaders and managers. Eventually, they discover that maximization tends to bring in other costs that erode the apparent benefits of resource utilization and performance maximization. For example, addictive workaholic behavior without any life balance dimineshes a person's energy levels eventually. All-night studies sap the energy and creativity of aspiring students. Pursuit of revenue maximization per se at any cost has landed many corporations suffer in terms of profitability and even quality. Clearly, unidirectional pursuit of singular objectives in today's multidimensional world leads to suboptimal results.

The world has occasionally discovered, but also has consistently sought to ignore, from time to time, that the earth's resources are finite. Building high for more dwelling accommodation per unit area has been as unhelpful as drilling deep for more massive fuels per unit of industrial and social activity. While concepts such as carbon credits and green building have helped focus attention on newer avenues of conservation, the world continues to splurge money and exploit resources. As a result, several campaigns have been launched by several corporations to confirm their sustainability standing. However, we need to incorporate the essentials of meaningful conservation and true optimization, both as bottom-up and top-down approaches.

Base, apex

The base of conservation lies in an understanding of the principle of finiteness. Expansion of wants and desires from the very young age characterizes a madly consumption society. While consumption is necessary to expand economic activity and drive growth, extravagance and waste are wholly deleterious to the society, diverting scarce resources to redundant production and consumption. The principle of "one need-one item" was the basis of a frugal society of the past. While it would be anachronistic to expect a slip-back to caveman days, there is clearly a need to avoid "buffet spread" culture that seems to dominate all activities and across all sections of the society. Potentially, it would commence from the very early schooling days with lean backpacks but with weighty knowledge.

The leadership pendulum swings between enviable and unenviable positions. In good times, the leadership has the luxury of high living to attract talent while in bad times it squeezes itself and the organization dry. In some cases, leadership focuses on visible cost reductions but ignores the relevance of strategic value additions and plays down the impact of invisible time and effort losses. Responsible leadership views space, time and energy in a stable fashion, in good times as well as difficult times. Large airlines like Kingfisher would not have faced the current crisis had the leadership been appreciative of the fundamental drivers of competitiveness in the volatile airlines industry.

Pull to optimize

The success of the famous Toyota Production System in particular, and the Japanese National System in general, is based on conservation. Compact buildings, single column flyovers, underground cities, over-the-ground bullet trains, avoidance of car transportation in weekdays characterize the national space management ethos. Night time construction, upgrade of machinery, pull-type demand and production planning, just-in-time deliveries and stocking, low inter-machine spacing, multi-level layouts typify wise use of space, time and effort. Interestingly, the Japanese system teaches us that if we plan our space prudently, we will automatically be enabling an optimal use of our time and effort.

To be able to effectively utilize the pull system, several hackneyed concepts such as large shells for future growth, build to inventory, stock to saturate, produce to drive share, and high work-in-process need to be jettisoned. The financial cost of profligacy in industrial infrastructure strikes at the very roots of industrial competitiveness. There may not be one-glove-fits-all solution though. In some cases, vertical planning of space would be ideal while in other cases horizontal expansion could be the solution. To be able to achieve optimal results, however, optimal planning of space, time and effort would need to be the foundation of all industrial and service design.

Conserve more, utilize more

There are essentially two options of space conservation; either compress the space to match optimal utility or expand the space available to generate optimal value. The tablet computer is a great example of the note book computer real estate being cut by half without affecting the functionality. As an extension, if the note book computer has to be better utilized in the space department, at the minimum three displays can be incorporated; the frontal large screening and the base key pad could have two small screens on either side of the touch pad. Or, the bottom base can also be converted into a touch display cum querty screen. Even automobile makers are now rethinking their design paradigms, combining compactness with luxury features. The latest advertisement of Audi, famous for its large, luxury cars, extols the virtues of smallness stating that small spaces need big thinking!

At the core of conservation lies the strategic thinking on the needs. Apple has demonstrated how few models with minimalist designs could achieve market dominance which multiple models with extravagant designs were not able to achieve. This is not to suggest that we need to return to the days of Henry Ford's single automobile or that every product can be multi-functional like an Apple product. Beneath all the extravagance, however, lies the fallibility of chief product designers that attempts overlaying buffers and modules in a please-all effort.

'Operanomics', beyond ergonomics

Extending the example of automobile industry further, it can be seen that the Japanese simple and lean thinking has achieved massive operational flexibility without affecting production scale or productivity. In the 1970s, the popular Western concept for machining of an automobile engine was the machining centre which performed customized multiple operations on the cylinder block and cylinder head with the help of dedicated jigs and fixtures and tools, rotating the two components around vertical axes of the machining centres. This, however, meant that different machining centres had to be designed for different blocks and heads depending on the number of cylinders, bore and stroke and the external dimensions. Apart from the huge dedicated investments such approach entailed, it also made low volume production unviable.

The Japanese hit upon a simple but ingenuous idea of unit operations to tackle this issue. Under the unit operations concept, the machine tool would only do one operation, for example honing of the cylinder bore. While apparently the unit operations approach may seem to ask for more machine tools, the inherent flexibility to turn out cylinder blocks of multiple dimensions and sizes enhances the investment efficiency and competitive advantage of the unit operations approach enormously. Adopting this Japanese approach, a leading Indian automotive manufacturer could manufacture four different series of diesel engines, having wide dimensional disparity and cubic variation from 4 to 10 litre capacity, in one simple machining line.

The Japanese concepts of optimal space, time and effort usage also led to replacement of long lines of sequential machining with one operator per machine to compact horse shoe lines of unitized balanced operations with one operator manning many machines. The skill in this approach lies in splitting the total cycle into unit operations and also balancing the unitized operations to synchronize movement of the workman from machine to machine within the overall line and individual machine cycle times. Examples of other operational economics involve creation of conveyor lines and work spaces around human ergonomics, use of gravity to move parts, color clustering of parts per model, error proofing of components and assemblies, and rapid changeover of giant press tools and fixtures. In addition, the Japanese system never fights shy of stopping a line if it has problems. Here again, the Japanese have an underlying concept of space; the line problems are not to be solved in distant offices but are actually solved closest to the problem area - on the line itself!

STEM, an optimization paradigm

The fundamental building block of all engineering knowledge is the concept of space. An ability to visualize and dimension in space needs to be a virtual intuitive forte of a good engineer or a designer. Over the years, however, the dimension of space rather than the functionality of space started taking control of engineering perspectives. The Japanese society, cramped as it is for space, has given a new meaning to functionality of space. Along with optimal spatial planning came the benefits of optimizing time and effort as a virtual corollary. A well planned facility, which is compactly designed, will be a natural enabler of good ergonomics.

Spatial planning is not all about squeezing things in. Where required, as in the case of highways, roadways, transit points, ports and certain other infrastructure projects spatial planning is all about expansiveness to accommodate future throughput and sustain productivity. It is also about holistic spatial development of core residential or business districts with all amenities and support services built in. USA is a great example of expansive, futuristic spatial development triggering and sustaining orderly growth for decades. The aim of spatial planning must be to optimize transaction times and costs through accessibility.

In order to give a fillip to such thinking, architecture needs to be incorporated as a core course of all engineering curricula. Ergonomics must be expanded to encompass whole lines and facilities as opposed to limited study of optimized man-machine interfaces at individual man and machine levels. Forecasting techniques must focus not merely on demand outcomes but also on activity and churn levels. For example, malls must be designed to offer choice with contiguity, shelf space with footfall estate and display splendor with spatial optimality. Process design must integrate technical elements with ergonomic optimality and productivity efficiency. Machine tools and accessories must be developed to support versatile manufacture with rapid changeovers. Complexity of whole systems must be addressed with simplicity of unit operations.

Human engineering through STEM

Engineering must go beyond providing brilliant technical solutions. Engineering must merge the machine factor with human form and facility infrastructure with social sustainability. Emerging markets such as India and China have traditionally played on the liberal land factor to attract investments. Land, however, is finite. There are already pressures related to extravagant land allocations to developers and miniscule land utilization by them. Understanding of STEM as a paradigm would enable administrators, managers and leaders seek a balance in land allocation and usage. In a larger perspective, STEM leads to resource conservation as a guiding principle all design and development work.

Toyota Prius hybrid car is a great example of human engineering and environmental sustainability where energy and motion are mutually substitutional and synergistic. The value of such pioneering development is being emulated years later by car manufacturers such as Hyundai who swore only by fuel driven cars and debunked hybrids (see their admission while launching Sonata Hybrid car recently). Space compaction, time compression and effort saving when they happen together go beyond conservation of resources; the phenomenon leads to energy recycling. The first step to spur the thinking of young engineers and wise leaders towards sustainable resource conservation is STEM as outlined in this post.

Posted by Dr CB Rao on November 25, 2011

Coping with Crippling Calamities: Management to Mitigate Misery

The massive earthquake and ferocious tsunami that struck the Sendai and other northeastern regions of Japan on March 11, 2011 have once again demonstrated how fragile human life and property would be when faced with the fury of nature. Japan’s famed building designs that withstand earthquakes, the country’s perpetual preparedness for natural calamities and the society’s incomparable discipline and fortitude have served to buffer the fatalities and losses; but unfortunately only to an extent. The loss of thousands of lives and billions of dollars in this human tragedy would take years to cope with. The Japanese government and the society have risen to the challenges of rescue, relief and reconstruction while several other governments and nations are chipping in with their support in kind and services.

The severity and consequences of such natural calamities, which are indeed unpredictable, strongly suggest that proactive management to avoid and mitigate misery needs to be high on agenda of all leaders whether in government or enterprise. This may require caution and conservatism alongside aspiration and risk-taking as the mainstay of management of nations. This blog post presents some thoughts on this, with focus on Japan but with relevance to India in the context of a larger Indo-Japanese approach to reconstruction.

Planning with pessimism

Ironically, most human civilizations and settlements had grown in regions prone to natural calamities, be they seismic zones, volcanoes, islands, sea shores, river banks, freezing terrains, desert tracks or mountain ranges. Some civilizations and settlements even got wiped out in natural adversities in the past, and some were rebuilt at huge cost. Similarly, several industrial units, whether chemical and fertilizer plants or thermal and nuclear complexes, are set up near oceans. As the recent earthquake and tsunami that struck Japan and their adverse impact on the Fukushima nuclear power complex as an aftermath demonstrated, civilization can be endangered by natural disasters even in this era of technology. Planning for protection of civilizations has to be undertaken in a scenario of pessimism, rather than in a scenario of complacence. Pessimistic planning is an essential insurance for human safety.

In today’s world, leaders are expected to be optimistic rather than pessimistic. Realistic leaders, let alone cautious leaders, seem to have little place in the contemporary annals of competitive governance and business. The adage of planning for the best and preparing for the worst is only partially followed now, with the second half of the exhortation completely ignored. Calamities such as these are a grim reminder that preparing for dangers, imminent or distant, is what wise governments and societies should aim at. Similarly, industrial managements need to ensure eternal vigilance in respect of all their units which are located near fault lines and ocean waves irrespective of the past and present tranquility. Any expenditure on preemptive vigilance which probably would cost a few millions of dollars annually would be worth the billions of dollars that would be lost in one go when calamity strikes the unplanned and unwary.

Fallible infallibility

Advanced nations such as Japan, Germany, United States and Korea, to name a few, have a culture of systemic placation of technology. Japan, in particular, has not only a flair for high technology but also an uncanny ability to obtain outstanding results even from dated technologies by appropriate upgrades, retrofits and management. However, as the Fukushima nuclear threat shows there are limits to stretch technology while assuring the needed safety. It also raises a question if the systemic approach considered infallible in a national culture context would indeed be so in respect of individual systems, particularly when old generations of technology are deployed. Even Germany has reportedly seven aged nuclear reactors which the government has shut down in the wake of the Japanese calamity. It would appear that planning for failures as well as enhancements must be a routine part of periodic technology and safety audits that all installations and systems must undergo.

One way of systemizing this could be to classify technologies in terms of key technology drivers or generations. The telecommunications field has done a good job categorizing transmission technologies from 1G to 4G, with clear distinctions in performance indicators. However, clarity in terms of relative safety or the desirability of newer generation taking over completely are not very evident in discourses; nor is there clarity in terms of definition of different generations of cellular phones and their relative radiation safety. There appear to be at least ten types of nuclear power reactors, in terms of technology, but the relative safety is not well debated. In fact, papers by the World Nuclear Association discuss safety more in terms of aging and terrorism rather than earthquakes and tsunamis. Clearly, there is a need to define and deploy technology in terms of both performance and safety, with systemic robustness that ensures performance stability and safety.

Seismic tsunami engineering

Traditionally civil engineering focused on normal construction of buildings and infrastructure with studies of earthquake-proof engineering remaining a specialty. The only country where civil and architectural engineering as well as the building codes specify earthquake resistant engineering is Japan. The benefits of such approach are evident in the way the buildings could withstand the high magnitude earthquakes and the unending series of post-quake tremors. A review of engineering curriculum (at least in India) suggests that engineering for high stress and vulnerability prevention is not a mainstream topic. It is important to revisit civil engineering and architectural curriculum to incorporate engineering for earthquakes and tsunamis as a mainstream subject at the graduate level itself. Subjects of structural dynamics should incorporate special design simulation to take care of multiple seismic zones.

Going by the experiences of 2004 and 2011, new disciplines of seismic tsunami engineering would also need to be evolved to cater to constructions within say 100 to 200 kilo meters of all coastlines. The forces that are unleashed in earthquakes, tsunamis and the seismic tsunami combination are different. Structural designs of buildings may need to be reinforced by potential embankments to cater to multiple forces. To start with, such courses may be developed in institutions which have specializations in multiple engineering disciplines including civil engineering, architecture, ocean engineering, nuclear engineering, thermo and hydro power engineering and materials engineering to ensure appropriate hybridization of the new construction and materials engineering domains.

Nuclear Security

Seismic tsunami brought into force the risks of nuclear power complexes. By their very nature, nuclear plants require enormous amounts of fresh water and/or sea water which make their location on the sea coasts rather inescapable, adding to the risk profile. Despite the robust construction mechanisms and rapid shutdown mechanisms that exist it appears that the nuclear complexes are vulnerable to earthquakes and tsunamis. This is more so in respect of plants of older designs, whose lives are extended from time to time, albeit with appropriate reviews. The use of nuclear energy would only increase in future. The number of countries producing nuclear energy is likely to move up from the current count of 30 to 50 in the years to come. The number of nuclear reactors would more than double from the current 443 to 955. India and China which have only around 2 percent of energy coming from nuclear power are likely to lead this nuclear power wave and need to be especially cognizant of the risks.

There is a need for national government and national atomic agencies to undertake immediate and comprehensive review of all the safety aspects of nuclear reactors, current and planned. The review should cover the technology deployed, radioactive materials used and generated, shutdown mechanisms, emergency power mechanisms, cooing water systems, location hazards (seismic and tsunami) proximity of civilian population, rigor of repairs, maintenance, vulnerability to water shortages and heat waves (in land-locked location), emergency response and rescue systems, radiation monitoring system, radiation treatment system and so on. As almost all nations have nuclear safety boards or atomic energy commissions with overarching powers, consistent and diligent use of their powers to audit technologies and management of nuclear power plants on an ongoing basis should be mandatory.

Safety Stock

Over the years, supply chain management has come a long way from the classic economic order quantity (EOQ) paradigm which stipulated a batch ordering and stocking system which balanced demand generation and product consumption with lead time to replenish and safety stock. Lean concepts, that originated in Japan and embraced with enthusiasm by the West all but eliminated the concept of safety stock with just-in-time ordering and replenishment concepts. Time and again, natural disasters, even on a much smaller scale such as routine floods and droughts, have brought out the benefits of safety stock to meet the emergency needs. Today, the starkly empty shelves in the retail and wholesale chains of Japan illustrate the vulnerability of the population in crises to profit-driven squeezing of supply chains. While the supply chains could be ramped up in time, the damage done due to the lack of essential goods in the critical days following the crisis can never be made up.

Rather than relentlessly pursue lean supply chain concepts, it probably would be wise to emphasize the need to ensure safety stock of all goods vital for human life in emergencies such as food items, pharmaceuticals, medical devices, clothing, personal items, automobiles, generators, rescue equipment, oil and gas and such other items. Countries such as India which have public distribution systems should have prescribed norms for emergency stores. Private sector corporations dealing in the above items must be willing to relook at the concepts of treating safety stock as a wasteful concept, and instead view safety stock as a potential means to smoothen out volatility in the best of the times and as an essential need to mitigate misery in the worst of times. Supply chain planning can in fact be more optimal with safety stock planning.

Rescue forces

Natural disasters point out the need for a group of trained experts and personnel who can carry out rescue operations in times of crises with surety, speed and empathy. Traditionally, governments have relied on the armed forces to carry out such tasks. While armed forces bring to the action scene unique capabilities of operating in all-terrain conditions and are backed by the infrastructure of air, land and sea forces, many times natural disasters bring out challenges of understanding local conditions and engaging with local provincial governments and their agencies. This task can be undertaken effectively if each province has self-help forces which are specially trained in understanding and coping with natural disasters.

The mandate for rescue forces could be to actively collaborate with provincial governments in all medium / high risk zones and undertake personal risk-mitigation audits as well as conduct safety audits. Rescue forces of each nation should link up with the forces of other nations not only to reach out in events of national emergencies like the one currently faced in Japan but also to learn from various events of this nature to strengthen the infrastructure against national disasters and reinforce the capabilities of the SHDs to respond better. Nations should earmark separate budgets for development and maintenance of rescue forces and provide them with high technology communication equipment and protective gear that can help them operate in all kinds of environmental challenges and disasters.

Market financing

It is distressing that when natural disasters strike investors in stocks and commodities speculate based on perceived impact on their investments. Rather than support market stability, investors of countries affected tend to dump stocks in panic reaction while investors in other countries tend to speculate favorably or unfavorably based on perceived impact, positive or negative. For example, post the seismic tsunami, Tokyo Stock Exchange lost thirteen percent, or USD 278 billion, in a matter of few days on perceptions of damage to the economy while a few other stock exchanges including the Indian ones gained on perceptions of softer oil prices and enhanced export opportunities with Japan. While the capitalistic market behavior and perfect market economics cannot be controlled there is no reason why the investors who are prepared to lose or invest in billions in such speculative trade transactions in the wake of crises should not be made to contribute to mitigations of misery on ground.

One way would be to impose a securities transaction tax of 0.1 percent on all transactions that take place on the bourses on a perpetual basis, and an additional special securities transaction of 0.1 percent on all transactions that take place on the bourses for a period of 3 months after any such disaster or calamity. The proceeds of such transaction tax should be credited to specially established infrastructure fund which will help in the rescue, relief and rebuilding efforts. As the investments out of this fund will be for rebuilding of infrastructure and economy, the taxes will eventually be growth triggering. The investors should not grudge such taxation economically, and should in any case be welcoming it from a humanitarian point of view.

Incredible society

Whatever be the technological, economical and infrastructural measures to combat natural disasters, it is the attitude and fortitude of the society that would be the determinant of how well a nation can cope with such disasters. Japan stands out as a role model in this aspect. It is amazing how the entire nation has calmly and methodically responded to the disaster and the emergency pressures. Attention has been on a unified national response than on individual groups indulging in critiques of the rights and wrongs. Even in the face of shortages people have been disciplined and patient. From the very composed manner in which the citizens have responded to the very courteous manner in which the rescuers and rescued have interacted one can see the society’s strong roots of self-support and mutual empathy. Despite the successive governments of Japan being in the dock for infighting and poor performance, the Japanese society’s basic strengths have endured to govern itself in an outstanding manner in the face of calamity. Japan has proved itself to be an incredible society that can meet even the most challenging disasters as effectively as is humanly possible.

Aspiring nations such as India must take Japan as a role model and attempt to build incredible societies that have both wits and guts to progress on one hand and responsibility and resilience to overcome setbacks on the other. Contrary to popular perceptions, the young in Japan are neither apathetic nor lacking in engagement. The disasters in Japan have tended to bring in a surge of volunteerism from the young. The aged are not giving up either. Apart from maintaining a healthy lifestyle that is enabling a graceful aging of the population, more of the aged themselves are working longer much beyond the traditional retirement age. The greatest cause for optimism for any nation should lie in the reservoir of social capital that generates productive wealth and growth in good times and in difficult times, as is the case with Japan. These social values would need to be inculcated from the childhood. India has a rich legacy of great religious and social values which admirably support such initiatives. These teachings which are lost in the speed and materialism of the modern living need to be restored as guiding social principles.

Seismic security for Japan, with India

The measures of reconstruction which Japan would surely undertake with perfection would restore the ravaged economy of the northeastern Japan, and of the nation in the overall. The costs of reconstruction could be as high as USD 200 billion. Investments and reconstruction do not by themselves mitigate any of the risks associated with Japan sitting on a seismic zone, perpetually prone to earthquakes and tsunamis as well as volcano eruptions. Japan needs a more permanent solution, and the history of Japan’s globalization could offer one. In its first wave of globalization covering the 1970s and 1980s, Japan became a major exporting country, exporting products made in Japan. In the second wave of globalization covering the 1990s and 2000s, Japan globalized its production substantially, with several thousands of overseas ventures contributing to over 50 percent of Japan’s gross output. Time is now compelling for Japan to look at a third wave of globalization whereby Japan would create several Little Japans in seismically and economically stable countries which have large surplus land mass, and are also hungry for growth. India comes up as an excellent choice in that respect.

India and Japan have signed a free trade agreement (FTA) in February 2011 providing enhanced trade and investment access. Rather than be concerned that the current crisis would delay the fruits of the FTA, India should propose to Japan a path-breaking strategy by which Japan could move at least 50 percent of production of all of its agricultural and industrial needs to India. To provide needed infrastructure and incentives, India should offer land banks to establish Special Japan Agricultural, Industrial, Residential and Economic Zones so that the Japanese could transfer or establish additional facilities in the manner they desire. Creation of Little Japans with interconnectivity amongst themselves in India with appropriate rail and road network, and connectivity with key industrial centers of Japan by sea and air would help catalyze such investments. Apart from reducing seismic risk to Japan, this strategy would provide a government supported low cost, high quality supply base for Japan, and access to technology and market for India.

From seismic and tsunami insecurity to regional and global security

Japan is a great nation which has the best of technological competencies, people skills and societal values. It has endured its geographical disadvantages and nature’s adversities by steeling itself as an infrastructural and social marvel. As the last Friday’s seismic tsunami has shown the nature has its gentleness and a fury of its own. Recognizing this, Japan, and other nations positioned in medium/high risk zones must readdress their national management approaches. The thoughts in this blog post, written with a heavy heart in the background of the grievous loss to life and property suffered by Japan, hopefully point a way forward for national and global security.

Posted by Dr CB Rao on March 18, 2011

The Japanese Business Mindset: Enigmatic but Efficient and Effective

The prolonged recession of over a decade cast a deep shadow on the Japanese economy.  The emergence of nimble corporations from countries such as Korea and Taiwan has posed new threats to Japan.  Yet, Japan continues to lead the world in industrial innovation and business leadership.  Despite the four-fold adverse movement in Yen-Dollar parity over three decades, Japan continues to retain a global market share for its products.  Despite not following the Western management concepts, Japan continues to be effective in global competition.  Japan amazingly defies the aging characteristics of a mature economy and continues to be youthful and vigorous in terms of technological and business leadership.

Japan’s unprecedented industrial success is often traced to the culture, homogeneity, discipline and hard working nature of the Japanese society. The inscrutability of the typical Japanese businessmen and the invisibility of the Japanese industrial system are often cited as barriers to competitors trying to replicate the Japanese success. 

The Japanese enigma, however, cannot be explained by a simple cultural or behavior paradigm.  The Japanese performance model is a national phenomenon that transcends industrial or business classification. It has its roots in a thoughtfully seeded and carefully nurtured mindset that seeks perfection and practicality in all the activities.  This paper distills the over three decade experience of the author with reputed Japanese corporations and distinguished Japanese professionals to analyse the Japanese mind-set in terms of five essentials of (i) design mindset, (ii) manufacturing mindset, (iii) marketing mindset, (iv) collaboration mindset and (v) individual mindset.  All of these reflect a simple but exacting, and uniquely Japanese, philosophy of fusing quality with elegance in whatever is done under the brand of Japan.

(i)  Design mindset

Product design is the key driver for the success of any industrial operation.  The Japanese design philosophy can be viewed in terms of five key facets which reinforce each other mutually and result in a product that is differentiated for performance, quality, reliability, usability and elegance, providing a total product life cycle experience for the users.  These five aspects are reviewed below. 

Incremental innovation-pioneering inventiveness

Japan has been a leader in Kaizen that embodies the concept of continuous improvement.  The Japanese believe that a product platform has to be basically robust but intrinsically adaptable for continuous enhancement.  The Japanese design philosophy emphasizes incremental improvements as a cost-effective yet value building route to enhance product life cycle.  The Japanese also believe that quality can be enhanced and costs reduced simultaneously.  Typically, a product design is characterized by several basic performance characteristics which when individually leveraged provide successive phrases of product enhancement.

Alongside incremental innovation, Japan has been a pioneer in breakthrough design concepts which help create whole new markets.   From the time Japan pioneered the design of robots to replace manual operations (for example, robots for welding) to the more recent development of the world’s first commercially viable humanoid robot(for example, Honda’s Asimo robot) or Toyota’s hybrid car (Prius), the country has demonstrated an uncanny capability to leapfrog ahead of the technology development curve.  If the rest of the world is focused on integrating cameras with cellular phones, Japan would be ahead integrating camcorders with cellular phones.  If the world is focusing on moving from LCD technology to LED technology, Japan is focusing on moving imaging from 2D to 3D. Except for one or two slips (for example, flat panel technology a few years ago), the Japanese industry has been a step ahead of the rest of the countries in terms of breakthrough inventions that could be commercialized.

The ability to simultaneously follow the twin strategies of incremental innovation and pioneering inventions helps the Japanese companies expand and diversify the market segments on one hand and create totally new markets on the other.  It also helps the Japanese industry to straddle multiple price points and value points with effective product-market segmentation.

Lighter in weight but higher in strength

The success of the Japanese design philosophy is rooted in its reversal of historic engineering principles.  Even as the Western designers tried to equate higher weight with higher strength, Japanese designers consciously strove to explore light weight designs as a means of saving materials and costs while enhancing performance.  A study of various automobile designs of the world would reveal that for comparable specifications and performance, the Japanese products are at least 10% to 20% lighter.  The feature of lower tare weight directly translates into the benefits of lower manufacturing costs, higher operational productivity and better life cycle economics.

Clearly, use of newer material and component technologies and a perceptive understanding of the likely usage conditions drives the low weight-high strength philosophy.  Customization of designs to different countries and user conditions also helps the Japanese designers optimize their product characteristics with relevant design parameters. The cost impact of product weight is well appreciated by the Japanese companies.  When hit by recession, all Japanese automobile makers targeted to take off a certain percentage in the weight of the automobiles to enable meaningful cost savings.  That such weight and cost savings could be achieved with concomitant increases in strength is a reflection of the Japanese design ingenuity.

Smaller in size but greater in functionality

The Japanese design philosophy emphasizes miniaturization far more extensively than is attempted anywhere else.  Miniaturization is both an art and science.  The constraints of space that govern life in Japan could have, over generations, established a mindset which aims at space optimization.  Yet, transfer of such space-efficient approach into an organized industrial design mindset requires fusion of engineering and art.

The Japanese highway system is the most visible icon of the Japanese designers’ skill in optimizing space.  All the elevated highways are of single centre pillar design and enable free and full flow of traffic both on the ground and elevated tracks.  Industrial products with multi-functionality convergence represent a contemporary and amazing wave of new product innovations that combine smaller form factor with more ubiquitous functional performance.

Co-design with suppliers

The Japanese design philosophy is a comprehensive, end-to-end system that integrates material and component design with the end-product design.  Typically, each new product creation or new product upgrade commences with the end-product designers unveiling the total design concept to the suppliers and vendors and encouraging them to come up with their suggestions.  This collaborative process creates new products with seamless integration of multiple technologies.

In several cases, new product developments are led by the suppliers and vendors.  Globally, we have a few examples like chip manufacturers (such as Intel) constantly driving up the processing capability of devices.  This capability, however, is so diversified and deep rooted in Japan that usually every supplier or vendor has the capability to take its material or component technologies to newer levels and thus initiate fundamental changes in the end-product itself.

Product elegance for user delight

Japanese society is known for its harmony with nature.  A green, flowery ambience permeates the general landscape.  The innate sense of aesthetics prompts Japanese designers to combine product elegance with user friendliness.  Whether it is a simple product such as an instant tea sachet or a complex product such as a camera, the ability to reach higher levels of product elegance and user delight is a characteristically Japanese feature.

The Japanese design philosophy combining aesthetics with ease is an affirmation that in contemporary design style has, in fact, technological substance (see the author’s blog “Style is Substance: Management of Product Design and Manufacture” in cbrao2008.blogspot.com).  For example, a sachet which tears off in the right manner with the right effort requires a wrapper of special quality and crimping with exacting tolerance.  The approach of using technology for elegance extends to a range of products that cover industrial and domestic applications.

(ii)  Manufacturing Mindset

While innovative product design is the driver of the unique Japanese mindset, manufacturing creativity is a core facet of the Japanese industrial ingenuity.  Japan’s unique manufacturing mindset is revealed in several distinctive approaches as below.

Simplification with standardization

Manufacturing philosophy in Japan emphasizes modular manufacture with simple, standard equipment.  Japan has been a pioneer in development of flexible manufacturing systems and transfer presses.  Japan has also been a leader in quick die change systems.  Complete balancing of a production line from start to finish with careful definition of tact time is an essential feature of work flow design in Japan covering the main assembly lines, as well as the supportive sub-assembly and machining lines.  The concept of quick die and tool change is based on perfect matching of multiple sets of tools and dies to basic equipment beds.  Together such concepts ensure that a vast shop floor operates in perfect synchronization.

Unitized manufacture is yet another hallmark of the Japanese manufacturing system.  Amazing flexibility is achieved by understanding the essential core of any seemingly complex manufacturing operation and then designing operations (whether machining, casting, forming or assembling) around the core unitized operations.  For example, in the manufacture of an automobile engine, capability to handle the machining of one cylinder bore is all that is required to develop a flexible, unitized machining system that can handle a wide variety of automobile engines, from single bore to multiple bore configurations. Uniquely Japanese innovations in tool and die design and the mounting arrangements can make it possible for standard machines to undertake non-standard, variable operations, Competencies in manufacturing tools and dies of different designs is yet another capability that adds flexibility to the manufacturing system.  The quality of a manufactured product is  related to the accuracy and the detail that is ingrained in a typical tool or die.

Digitized upgrade

It is one of the enigmas of the Japanese manufacturing mindset that some of the most gleaming and tight-tolerance products are produced out of even old and seemingly obsolete machinery.  While modern Japanese plants have mirror finishes and complete automation, aged plants are also well utilized to produce contemporaneously acceptable products.

Digitization of the older equipment is extensively used by the Japanese to enhance process integrity and achieve tight manufacturing tolerances that are comparable to the ones that can be achieved by newer machinery.  Mechatronics and robotics represent the powerful face of digitization in Japan.  Even transportation and storage are highly automated using digital technologies.  Japan being the home to the electronics industry it is not surprising that digital upgrade is extensively used in the Japanese manufacturing system.

Predictive variability

Japanese understand that controlling the variability is the key to manufacturing perfection.  Control of variability is achieved in two ways.  The first is by total transparency and connectivity of information across the entire manufacturing value chain.  Japanese resort to visual communication of process flows, material flows, product machining and assembly characteristics to ensure that all participants in the manufacturing system are harmonized with a clear understanding of the requirements.

The second way of achieving predictive variability is through a resort to real time, continuous statistical process control (SPC) systems and periodic process capability studies, supported by a systematic maintenance approach.  The SPC charts not only enable strict control of quality but also provide early warning signs of any creeping process variability, enabling proactive corrective actions.  Japanese have indeed been pioneers in the use of statistics in the fields of quality control and quality assurance.

Just-in-time inventory system

The famed Kanban, Just-in-time (JIT) inventory system of the Japanese needs no introduction.  JIT is integrated from the very foundations of building a manufacturing system by eliminating spaces for inventory.  The geographical limitation of space in the country which acts as a constraint and the collaborative expansion of supply chain that includes component and material suppliers are harmoniously used by the Japanese to eliminate idle inventories.  The Japanese are clear that inventories lead to inefficiency in the manufacturing system.  If a breakdown or slippage occurs in any part of the manufacturing line, the line as a whole is stopped instead of allowing stage-wise inventories to be built up.

Adoption of pull-type manufacturing planning helps the Japanese plan production to match demand.  The pull-type system enables synchronizing of the material system and manufacturing system to the sales system through a fine-tuned logistics system.  Just-in-time inventory system synergizes with the pull-type manufacturing system as the whole system operates in a perspective of demand certainty.  The Japanese philosophy of pursuing profitability rather than chasing market share also harmonizes with the pull-type manufacturing and Just-in-time inventory systems.  Together, the continuous flow and the pull-type planning ensure that the Japanese manufacturing system operates with the lowest inventories and highest efficiencies.

5Ss, 3Ms and PY/RC approaches

The Japanese manufacturing philosophy is rooted in designing efficiency and effectiveness into the workplace.  Lean manufacturing is a way of life in Japan.  It is exemplified by the 5S and 3M concepts.  The system of 5S helps in efficient workplace organization for high productivity.  Seiri (sorting), Seiton (set in order), Seiso (cleanliness), Seiketsu (standardization) and Shitsuke (sustaining) go far beyond housekeeping to ensure workplace efficiency and safety.

The 3M concept is focused on eliminating waste in the manufacturing place.  Toyota Motor Corporation, as part of its famous Toyota Production System, defined three broad types of waste:  Muda (non-value adding work), Muri (unreasonable work) and Mura (fluctuating work). By eliminating these three broad categories of waste, the Japanese manufacturing system benefits from enhanced productivity.  These concepts are strengthened by the poka-yoke principles of fool-proofing facility design.  In the unlikely event of errors occurring, the Japanese adopt root cause analysis (with fishbone diagrams, why charts and FMEA analysis) to identify the fundamental causes of errors rather than stop at correcting the symptoms.  This process is also carried out straight at the source of the problem (Genchi Genbutsu) rather than in offices.

(iii)  Marketing mindset

Japanese marketing mindset is quite differentiated from that of other countries.  While the Japanese companies utilize the essential elements of sales and marketing as any other company, be it in terms of market research, customer segmentation, brand promotion, point of sale service and after-sales service, the Japanese marketing mindset is notable for five differentiated characteristics.

Quality as price builder

Japanese corporations aim at what they perceive as an optimal mix of market share and profitability.  The marketing mindset emphasizes the Japanese brand of functionality and quality as an enabler for seeking price premium.  Whether due to the intrinsic cost premium of superior design and superior build, the external impact of adverse Yen-exchange rate (Yen 90 to a dollar in 2009, compared to Yen 360 to a dollar in 1974!) or the deliberate premium sought for the Japanese brand, Japanese corporations price themselves at least 10 to 20% higher than comparable Korean or Taiwanese brands.  The Japanese believe that pursuit of excessive market share has an adverse profitability impact.

The fundamental premise of Japanese marketing is that higher quality provides better product feel and longer usage besides ensuring lower after sales costs.  In addition, the strong association of Japanese brand image with robust quality helps to position the users in the society as a class appreciative of a superior brand.  Whether Japanese would have achieved market dominance in each and every product segment had they pursued a strategy of price parity (if not price competitiveness) vis-à-vis their competitors is a debatable point.  As an overall system, however, long term stability and profitability of the system are perhaps better balanced with the Japanese conservative price and market policies.

Brand segmentation for market segmentation

Products with multiple functionalities are the new driving force of market segmentation.  The Japanese industrial system focuses on creativity of product design as a driver of market segmentation. In respect of a cellular phone, for example, combinations of mega pixels, optical zoom, picture capture capability, connectivity options, multi-media flexibility, battery life, display screen size are creatively combined to develop multiple product-market segments leveraging contemporaneous technologies. Gaming console companies have created new brand statements based on innovative functionalities of real time activities.

Japanese, in addition, have perfected the art of using brand segmentation as a tool for market segmentation.  Sony Ericsson’s Walkman and Cybershot branding of music and camera oriented mobile phones, respectively, is an example.  Similarly, development of concepts such as an urban off-road utility vehicle  or small family small car has been uniquely Japanese. Creation of unique brands such as Lexus and Infinity s has helped the Japanese automobile giants Toyota and Nissan make green-field positioning statements against established luxury marquees such as Mercedes and BMW.

Packaging as differentiator

Japanese retail stores have a knack of using packaging for providing customers with enhanced shopping experience.  From the smallest piece of purchase to the priciest piece of acquisition, packaging gets an integral and elegant treatment from the Japanese retail stores.  As a result product functionality, whether the product is a perishable item or long term usage item, gets preserved till the time of commissioning, and is further protected in subsequent phases of transportation.

Japanese provide an emphasis on packaging that is equal to that laid on design and manufacture.  Packaging itself has three layers; the first being the primary packaging that occurs with product delivery at the manufacturer’s end.  This ensures a perfect fit of the product and all its accessories in a creative packaging unit.  The second is the secondary package that distributes the product to different parts of the globe without any untoward mishandling or breakage.  The third, and most important, is the way the product is unpacked and repacked at retail end while providing factory-fresh delivery to the customer.  In the Japanese system, the packaging value chain is total, robust, elegant and user- friendly.  Packaging design is a fundamental part of product design in Japanese hands.

Global customization

The global success of the Japanese brands is due to a marketing mindset that is adaptive to different user requirements and usage conditions in different parts of the globe.  The phenomenal success of the Japanese automobiles across the globe is linked to the companies’ ability to identify the core characteristics of consumer demand in each country.  In the case of an automobile, for example, these are fuel efficiency, ground clearance and turning circle as far as India is concerned.  Automobile design for USA, on the other hand, emphasizes power, robustness and interior trim.  Design for Europe is focused on styling, external trim and internal trim.

Japanese companies believe that products have to be developed, manufactured and positioned in the host country markets in alignment with core country characteristics.  As a result, portability of brands across the regions is relatively limited, compared to that on offer by the Korean, US or European competitors.  Japanese cellular phone markers for example, have developed designs with user feel essentially aimed at the Japanese users as a result of which some great phone designs are yet to move beyond the Japanese shores.  This certainly is a disappointing result of the Japanese marketing conservatism.

That said, global production has been taken up aggressively by the Japanese companies in select fields to integrate their design, manufacturing and marketing philosophies with local needs.  The ability of Japan to withstand the volatility of global current markets and economic conditions is related to development of multiple manufacturing bases across the world.  Japan has thus been proactive in letting technology and operations lead the way on the marketing path.

‘Hared’ tortoise

Japanese marketing mindset is highly deliberative and rarely opportunistic.  With increased competition from other developed nations, especially the Asian Tigers such as Korea, Taiwan and China, the Japanese marketing philosophy of hastening slowly has perhaps inhibited the Japanese companies from achieving a market penetration that is proportionate to their technological superiority.  For example, though the Japanese have been first off the block in terms of light emitting diode technologies, it is the Koreans that have introduced the first products into the markets.  The hesitation of the Japanese to translate the technologies pioneered in the laboratories and shop floors as first mover products into the market place is surprising on the face of it.

The Japanese marketing philosophy may remind one of hare and tortoise.  The Japanese corporations deliberately play the tortoise in the marketplace despite developing superior or comparable technologies ahead of competitors.  Presumably they use the time to read the customer needs in a more thorough manner and also let the faster, first mover competitors open up the markets for the superior but costlier Japanese products.  It is instructive that despite the history of continuous follow-on introductions, the Japanese remain market leaders in terms of customer appreciation and brand recall.  Their brand resilience and technological virtuosity perhaps would make the Japanese proverbial tortoise in the global marketing race.

(iv)  Collaborative mindset

In today’s globalised conditions, collaborations and alliances are the essential components of globalization.  Japanese companies are a major focal point of the wave of alliances and collaborations.  This is only natural, given the needs of other countries for the Japanese technological resources on one hand and the Japanese need for global markets and cost-effective material and component supplies on the other.  Yet, the Japanese mindset on collaborations and alliances is quite unique and hesitant.  The collaborative mindset of the Japanese is expressed in five key different ways.

Cautious consideration

The typical Japanese approach to collaboration is marked by cautious consideration.  Unlike the Western counterparts, the Japanese are neither hurried nor opportunistic in trying to sew up collaborations despite the existence of market or partner opportunities.  Perhaps a perception of being adequate as a nation in revenues and profits leads to a rather smug Japanese view towards collaborations.  More importantly, the Japanese commitment to the long term and the preference to make only the winning moves influences the typical Japanese corporation to consider a host of factors prior to even deciding to start the process.

Also, the Japanese mindset is typically concerned about governmental and environmental factors that could promote or inhibit a free play. The Japanese appear reluctant to manage a restrictive bureaucratic regimen.  The flexibility and cost-competitiveness of the country as a sourcing base of the market rather than the scale of the market seem to dictate the Japanese decision to take up any market for evaluation.

Diligent evaluation

Even after the Japanese decide that a particular host country’s industrial and economic environment is aligned to their interests rarely does a Japanese corporation move into a market without extensive due diligence.  Whether the move is in the form of an investment in advanced countries such as US and Europe or a collaboration in emerging markets such as India or China, complete feasibility studies are an essential part of the exploratory process.  Typically,  the Japanese prefer to conduct their due diligence processes in alliance with local partners. Such studies, however, provide no assurance that the Japanese company would eventually tie up with the diligence partner.

The system of Japanese diligence is so rigid and unique that new facts discovered in the process of diligence hardly motivate the Japanese to make course corrections.  The Japanese tend to stick to sequential phases of diligence even if early diligence points out the need to advance certain entry steps or re-jig product and manufacturing plans.  The Japanese also are typically unwilling to share their inner perspectives with the partners, thus losing the benefit of their local insight.  While the Japanese lay solid and robust foundations for their business moves with their detailed diligence, very often they pass up major market opportunities due to the inbuilt rigidities in the diligence processes.

Planning for perfect execution

Inevitably, planning by the Japanese corporations tends to be extremely detailed aiming for perfect execution.  Several departments are simultaneously roped in with shared vision, strategy and programs of collaboration. Detailed program management plans are drawn up with all micro level issues fully considered, prior to commencement of physical activities.

The success of the several Japanese ventures in rather divergently aligned business environments of different countries (China to India, or Europe to USA) could be traced to the detail and rigor they bring to the execution plans.  The success of the Japanese automobile ventures in India is certainly attributable to such diligent planning for effective execution.

Collaboration with commitment

A typical Japanese corporation is reluctant to enter into expansive or open-sky collaborations, which could provide unlimited access to their technologies or which could demand major commitments on the part of the Japanese partners to the markets.  Collaborations usually are highly product specific and focused on a few deliverables.  This approach is prompted by a desire to understand the potential for partnership success in phases and also take up only a scope that could be successful. That said, expansion of collaboration is a challenge, but not insurmountable as demonstrated by several case studies of Japanese collaborations in India. 

Once a collaboration is taken up, the Japanese partner could be expected to provide the needed inputs to make a success of the collaboration.  In execution, commitment remains focused on the collaboration rather than the broader company issues.  Japanese companies stay committed to their collaborations and alliances even if they encounter unanticipated surprises, as evidenced by Daiichi Sankyo-Ranbaxy alliance.  The same characteristic may not be held true of Western collaborations.  The Western companies could be opportunistic in entry into as well as exit from collaborations.

Respect for partner

An industrial enterprise needs continuous induction of resources for long term play.  Even if a local partnership starts off with a majority or 50:50 equity share eventually the local partner would need to dilute its equity to bring in resources which only the cash-rich Japanese collaborator can bring in.  The Western approach seeks to assume 100% ownership and management control at the earliest and nominate its own management structure. Japanese partners on the other hand tend to be extremely respectful for the local partners, regardless of the shareholding level the local partners are reduced to.

The respect for global partner is exemplified by the Japanese in many ways.  India’s Maruti-Suzuki and Kirloskar-Toyota reflect the respectful manner in which the Japanese treat the local sentiments, from retaining the Indian names on the company marquee to continued representation of the partners in key decision making structures regardless of the equity percentage.

(v) Individual mindset

The Japanese society is as much plural as it is singular in its behavior. Anyone walking into a Japanese shopping district or shopping mall will find the sales persons extremely chirpy with pleasant greetings (“simasens” and “arigatos”) all the time. A keenness on the part of the sales people to connect with the customer will be palpable. On the other hand, a Japanese business professional tends to be cautious and careful, virtually reflecting an unwillingness to commit in any manner.

The professional approach of the individual Japanese businessman or corporate professional is marked as much by politeness and friendliness as by reticence and hesitation. As a group, however, the Japanese are amazingly focused, cohesive, analytical and achievement-oriented. The transformation from the individual to the group has a unique alchemy at work. Far from any mystical group catalyst, it is the Japanese individual’s unique underlying mindset that drives the visible group performance.

Superior role of the institution

The fundamental governing principle, either of the Japanese society or the Japanese corporation, is that every individual subordinates himself or herself to the institution he or she represents. Whatever be the inner individual preferences and predilections the individual expresses only those points of view that reflect the institutional position. The individual takes pride as a representative of the institution that has corporate achievements than as a person with personal or professional skills.

The amalgamation of the individual personality with the institutional personality starts from the time a professional joins a Japanese organization as a trainee. The training programs provide a complete exposure to the company’s business, products and processes, inculcating proficiency and generating pride in the individuals (for example, the famous Toyota Way program of Toyota Motor Corporation for its new joiners). This coupled with the system of mentoring the newcomers with identified mentors (sensei) helps the newcomers develop a total identification with the institution and its work groups.

  

Creativity of standardization

Nothing is more striking in the Japanese corporate system than the strong streak of standardization that pans across all industries and corporations, be they be small, medium or large enterprises. From the way data is captured and tabulated to the way data is analyzed and presented, there is only one unique way for the Japanese that is common across Japan. The Japanese have a time tested way of summarizing tremendous amounts of information in terms of simple bullets, graphs, schematics and tables with high visual impact. The standardization of information management across the nation in Japan is creative, and contrasts sharply with the diversity and plurality of information management which is often encountered even within an organization in other countries.

Even more amazing, however, is the very unique and creative manner in which the Japanese professionals are trained to capture, analyze and deliver solutions using a ubiquitous A3 sheet of paper. The A3 sheet has typically 6 sections comprising background, current conditions, goals and targets, analysis, proposals and the execution plan.  Sequentially, problems are comprehensively analyzed and solutions perceptively found using the A3 sheet.  Readers who are interested to learn more of this are referred to “Toyota’s Secret: The A3 Report” in MIT Sloan Management Review, Summer 2009, Volume 50, No. 4.

Management for technology

The typical Japanese, even as he grows in career, stays with technology rather than opt for general management as is practiced in the West. Management systems in Japan have a strong operational and technological orientation. There is far less importance accorded to perceptions and claims and far greater emphasis laid on facts and figures in the typical Japanese presentations. Individuals absorb and present only the corporate view of the organization. They are trained to understand and articulate operations as a system rather than as individual activities. Even at the CEO level the focus in a typical Japanese corporation is more on technology and less on management. There is thus an ambience of individualized as well as collective technological quest in all Japanese organizations. The overwhelming emphasis on technology and operations at the individual level to the detriment of managerial faculties has its own pluses and minuses perhaps.

Acceptance for job rotation is high at individual level in the Japanese corporations. It is not untypical for R&D engineers to move into marketing and operations. It is also not untypical for legal people to do stints in assembly lines. Cross-movement of engineering talent to commercial domains and commercial professionals to quasi-technical domains is commonplace. Shared understanding of corporate issues develops as job rotation helps individuals enrich their core competencies with feedback loops from the markets and peer functions, and eventually become multi-skilled.

Small groups for big decisions

The Japanese organizational system is unique for the importance accorded to the middle tier (comprising managers, senior managers and general managers) in information analysis and decision making. The nuclear decision making groups are typically small, organized vertically within domains and horizontally across domains, providing ample space and scope for individuals to express, debate and conclude on their viewpoints. These nuclear groups are, however, networked across the organization forming a rather large discussion forum. The compact yet widespread organizational grouping helps in building the consensus system of decision making for which Japanese organizations are famous for.

With Japanese, formal meetings in office settings are a great method to share information and exchange viewpoints. However, formal meetings in Japan rarely serve the objective of generating a decision, contrary to the expectations in the West or other oriental counties. The Japanese believe that each meeting provides additional information which needs to be evaluated internally before any final decisions are communicated. Meetings, visits and interactions therefore end in polite handshakes rather than in collaborative hugs. It often takes several meetings before the decisions are crystallized and relationships solidified.

Velvet hands in iron gloves

The typical Japanese professional often gives the impression of being a very polite but somewhat impersonal partner. In the process of developing a collaborative arrangement as well as implementing it the Japanese operate behind a corporate veil that limits the amount of information that is provided. In fact, for a nation that prides itself for its technological depth and perfection, the information that is made available for partnerships is rather limited in a formal sense.

That said, it is more common in the Japanese scenario for professionals to develop deep and abiding relationships with their counterparts in the partner companies. Once a relation develops, the typical Japanese professional brings out all his experience and expertise to make the collaboration work smoothly and deliver effective results. On this dimension of establishing a lifelong relationship and rapport, Japanese professionals reflect an oriental culture of working from the heart. 

The Japanese business mindset in totality

The Japanese business mindset which has helped the nation achieve technological and industrial dominance globally is complex and unique with multiple facets that reinforce the total value chain. On one hand, a unique alchemy of high-end design, manufacturing and marketing deliver world-class products and services through a global network while on the other hand carefully titrated corporate and individual approaches towards business and professional collaborations somewhat limit the market dominance the Japanese companies could have enjoyed. For proponents of technological and operational virtuosity there is indeed a lot that can be learnt from the Japanese mindset.  It is enigmatic but hugely efficient and effective!

Posted by Dr CB Rao on October 21, 2009