Japan must end insularity to compete on a global scale

Wholesale change of a mindset is hard. But there are ways in which Japanese companies can change their behavior could lead to useful change – even if they were only be adopted piecemeal. Here are five ways Japanese companies can break out of the exceptionalism rut: 

 1. Stop working alone 

Japanese companies are too inflexible in trying to do too much themselves rather than working with partners – especially global partners – in order to be able to progress much faster. They have to learn how to take advantage of innovations by others. 

 2. Replace strong links with weaker ones 

When working with other organizations – whatever their size – try developing weaker ties rather than strong ones. In the past, Japanese companies have typically looked to build tight, long-term relationships with their partners – the famous keiretsu system bringing together manufacturers with their suppliers, banks, distributors and other partners. Appropriate for its time, it now holds back businesses from developing the ever-changing mosaic of links that they need to navigate today’s faster changing world. 

 3. Back many more startups 

Japan suffers from a lack of new companies – in good part because of the country’s bias towards large companies. But startups offer the agility that many companies in Japan need – working with them can help established companies move faster, open themselves up to fresh viewpoints and in the process transform themselves. 

 4. Promote diversity 

The world is a diverse place, but most Japanese companies remain far too homogenous. The Olympics offer Japan an opportunity to see diversity in action – companies should use the games as a chance to encourage themselves to embrace diversity. 

 5. Adopt a global mindset 

As the world emerges from the pandemic, Japanese companies should look for opportunities to become more outward looking. That could mean working with more international partners, bringing in more managers from other countries or – above all – looking for news ways of doing things from outside Japan. 

 There are, of course, examples of Japanese companies doing well in all these areas. 

Toyota has long had a global mindset, localizing its operations everywhere from the US to China on its way to becoming the world’s top carmaker.  

Chugai Pharmaceutical has flourished on the back of a partnership agreement recached in 2002 with Roche. Although Roche took a majority stake in Chugai, the Japanese company has continued to operate independently, allowing it to become the leading player in Japan’s oncology sector. 

Ajinomoto has maintained its dominant position in seasonings, sweeteners and other food ingredients, as well as expanding into pharmaceuticals and chemicals, with a strategy of tying up with startups.  

But over the past 30 years, too much of corporate Japan has lost its way. For that to change, companies should become more flexible in both their thinking and their operations: collaborating more with multiple partners, especially startups, embracing diversity at all levels of their business, from shopfloor to management, and finding new ways of doing things by looking beyond Japan.