[Global Intelligence Series] Considerations on How Japan Can Unlock Its Full Potential in a Rapidly Evolving World

*This BBL Seminar is NOT for Quotation.

Date January 27, 2021
Speaker André ANDONIAN (Senior Partner, Chairman and Former Managing Partner of Japan, McKinsey & Company, Inc.)
Commentator NAKAGAMI Yasunori (Consulting Fellow, RIETI / Representative Director and Chief Executive Officer, Misaki Capital Inc.)
Moderator WATANABE Tetsuya (Vice President, RIETI)

Summary

Japan's uniqueness, problems and successes

I've been living in Japan now for over five years, and I am impressed how unique Japan actually is, what a unique place it is, and what a unique culture it has.

It's the largest metropolitan area, the Tokyo area, with 38 million people, but at the same time, it's one of the most livable cities in the world. The infrastructure works, it's clean, there's no crime rate, people are extremely considerate to each other, and simply everything works.

From a business perspective, Japan is also a powerhouse. It is the third largest economy after the US and China and it is the home of many iconic companies. In the global Fortune 500 are over 50 Japanese companies and many of the most iconic companies worldwide are here in Japan.

However, Japan is not without problems. One is the growth rate. The real GDP growth rate in Japan between 2011 and 2016 was 1.1%, and it may go close to zero growth in the future.

Three levers

I believe there is great potential to further unlock the inherent strengths of Japan and Japanese companies. I see three big levers. One is to liberally apply global best practices. They can be customized and adapted to the local context but nevertheless they should be applied. Secondly, greater agility is needed on governance. In Japan, decisions are made with very detailed facts and Japanese-style processes. These are great for continuous improvement but when you want to have step-change, you need to be more focused on speed. The third point is company cultures and incentive systems. These should be more variable so those who do well can also have higher incentives.

How to change

In talking to psychologists about how change happens in an organization, it comes down to a relatively simple framework that is not easy to implement. First, you have to get the people who want to change to understand why they have to. There has to be a reason and a purpose that matters to them. You have to find out what motivates people and communicate the need to change to them. Second, agile working methodology addresses well-known pain points that Japanese organizations face. The focus needs to change from inputs, like working hours, to be more output- and outcome-oriented. The third lever is the performance culture and performance incentives.

Conclusion

We put all this together with what we call the "five Rs": Resolve, Resilience, Return, Reimagine and Reform. A problem emerges, like COVID, and we have to find the solution. We call that resolve. Then we have to show resilience. Coming back to work and basically trying to work alongside COVID-19 is the return. The next two are extremely important. Really reimagining what is possible post-COVID and reforming legislation, policies and interactions with the relevant stakeholders will be key. It is important to have an open mindset.

*This summary was compiled by RIETI Editorial staff.