Effectively Globalized Japanese Companies’ Habit #3: Innovate from Everywhere

In order to maximize profitable growth, successful global companies need to ensure full contribution by every region, department, and partner towards strategic innovation. This approach was described as “Blue Ocean Strategy” by W. Chan Kim and Renée Mauborgne and contrasts with “Red Ocean” strategy which may be described as competing on price with similar products in low-margin mass markets. To achieve Blue Ocean success companies need to: 1. offer increasingly helpful solutions to match potential customers’ needs, 2. sell at profitable prices by clearly and persuasively explaining why these solutions are uniquely valuable, and 3. reduce time and costs whilst increasing value.

Although Japanese companies are good at the third point due to their systems for bottom up kaizen” (continuous improvement), they may relatively weak at the first two of these compared to successful Western counterparts due to their cultural tendencies. Particularly, their “high context” communication style can make them rather vague or unclear, “appearance of inequality” style can prevent them promoting their product benefits compared to competitors, and “Confucian” values may make them act respectfully to customers, instead of asking questions or advising them consultants. Finally, they may avoid risking key relationships by providing higher quality specifications than customers request or provide extra free service in order to ensure customer satisfaction. In the short term this may put them at a cost and sales disadvantage compared to global counterparts.

For example, typical American companies may prioritize achieving success in “Blue ocean” (new solutions which don’t yet have competitors) by being first to market with an innovative product and doing strong proactive marketing and selling to build awareness, demand and sales. To achieve speed to market, they would offer a “minimum viable product” to highest need early adopter customers, who may pay a high price and overlook quality issues or limitations in order to enjoy the unique product benefits.

Simplistically, you could say that American tend to offer 80 per cent quality and 110% sales and marketing power, which offers a profitable combination of low cost and high revenue. In contrast, Japanese tend to offer 110% quality because of the high standards of domestic customers, combined with 80% sales and marketing power, because a high context, humble style is inherently ineffective in offering solutions or explaining a product’s unique value. Clearly, lower quality and higher sales will always be more profitable (at least in the short term) than higher quality and lower sales.

Japanese are often relatively weak at this first skill of supplying clients’ needs because the high context respectful conversation style they are used to in Japan involves guessing rather than asking abut needs. Also because they do teach their overseas local staff how to provide market needs information persuasively to head office – which requires building relationships with influential leaders, and offering selfless teamwork and mutual information sharing with counterparts across borders and departments. Since Japan business is relationship based, influence relies on experience and relationships rather than just providing data and logical requests. It is the person proposing, rather than the proposal that is judged.

Low sales and profits in Red Ocean markets can result from battling on price, because customers do not understand the unique benefits and ROI (return on investment). Instead of passively offering a high spec product, companies can make more money by actively asking needs and offering a special total solution. This “solution selling” style requires quickly creating trust with an informal, friendly atmosphere, smart helpful questions, brainstorming and confirmation, and a confident, positive explanation of why your solution is the best. Global companies aim to complete sales negotiations in days or weeks, whereas Japanese companies have a long term orientation that is less suitable globally. Japanese communication style that is humble, polite and trying to only say correct information and correct English cannot achieve the quick building of trust for fast selling. Rather it is suitable for domestic business where counterparts slowly get to know each other over several years, and then may end up doing business together for decades in win-win partnerships.

Interestingly, (with some exceptions when industries such as LCD TVs become too commoditized or require too high technology investments,) Japanese companies are rather good at succeeding with high market share at the high quality end of red ocean markets. Profits may be low, but cash flow is good, and the top position derives naturally from having responded to endless strict requests from domestic customers via the Kaizen process to develop an ever higher quality product. Japanese have done relatively well in B2B industries including high tech materials and machine tools where the extra quality is a multiplier for the value of the end users’ products.

Successful Japanese companies often use what I call “Purple Ocean strategy” to enjoy competitive advantage over global competitors. This mixes Blue and Red Ocean strategies to achieve greater long term success based on three typical strengths of the Japanese team-based business model: 1. Organization-wide teamwork, 2. Kaizen (continuous improvement by all stakeholders) and 3. Long term win-win partnerships.

LGS distinguishes typical Japanese companies as “ameba-style” (based on flexible organization-wide teamwork) from global “tetris” organizations (with all work clearly separated into individual accountability). Unlike tetris organizations which have to separate blue ocean new projects from existing red ocean main operations, Japanese ameba companies can better combine the two via shared problem-solving and idea-sharing between their inter-dependent staff, increasing their chance of success.

Moreover, Japanese employees at all levels also tend to do kaizen (continuous improvement) leading to customer-oriented innovation. Over time, as many of these ideas get implemented, products and services evolve into new products. Also some of these “end-user innovation” ideas could be developed into new applications for the same or different product categories or industries, offering opportunities to launch “Blue Ocean” products which do not yet have competitors. In contrast, “tetris” organizations are unlikely to support innovation across cultures because employees are expected to just focus on achieving their manager-agreed objectives, within their own job-description. If that is not a research and development role, then few innovations are expected as part of everyday work. Only in the “ameba” business model is everyone expected to innovate every day.

Finally, “ameba” organizations try for long-term win-win partnerships which can continue for decades, with “give and take,” mutually beneficial initiatives, information sharing, and even “shukko” where for example, vendor employees are posted to work inside their customers or partner’s organizations, working as one of them for the duration of the posting. Leveraging this long-term partnership behaviour allows Japanese organizations who develop new solutions or technology to launch “Blue Ocean” applications of it in multiple markets or industries at once, without excessive investment, by partnering with mutually-trusted market share leaders.

For example, Toyota’s “Lexus” was designed to be the “world’s best car” from its component parts up, in close partnership with overseas ad agencies who uniquely positioned it by creating a new “affordable luxury car” segment in the American market. Pokémon GO was created by Nintendo in partnership with Google’s spin-off company Niantic Labs, combine their geo-mapping platform with Nintendo’s games knowhow. In each case, content and expertise from across the “ameba” companies were leveraged via organization-wide information sharing and kaizen collaboration between the original Red Ocean product division and the new Blue Ocean entity:

The resulting “Purple Ocean” innovation from everywhere can be encouraged in Japanese companies via various methods. Some are traditional such as “hansei” (reflection for improvement) meetings after project steps, or “quality circles” in which production members in multiple roles gather as needed to problem solve. Others methods are based on better communication such as ensuring staff from different departments socialize together at lunch or join virtual project teams together, or supporting “hybrid” meetings that combine Socratic and Confucian style meetings, to make it easier for quieter Confucian members to brainstorm and volunteer their ideas. Finally idea-sharing itself can be supported by praising risk-takers and offering clear incentives for entrepreneurial teams, creating innovation hubs like Fuji Film, or like Kao holding special “tatakidai” meetings to share new incomplete ideas.

Jon James Lynch is the founder of J-Global, which provides organizations in Japan with training in the J-Global method, a powerful new framework of mindsets and skills for managing, working and communicating more effectively in an international environment.

Jon has decades of experience in Japan consulting for business leaders and facilitating training sessions and workshops. In his partnership with the Nikkei Group during the past 5 years, he has expanded his reach to hundreds of leading Japanese and multinational companies.

This article was originally posted on Link Global Solution’s website.