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 / Spring 2004 / Issue 34(originally published by Booz & Company)


Japan's Coming Competitive Renaissance

Ben M. Bensaou, professor of technology management and Asian business at INSEAD in France, and Michael Earl of Oxford have identified several organizational characteristics of Japanese firms that have helped them overcome the problems many Western companies have experienced in IT management. The most notable is that Japanese companies typically select technologies that fit their way of doing things, rather than force-fit technology into the organization or compel a successfully designed organization to reconfigure itself for the technology. They concentrate first on independently developing company-specific operational and management processes, and then on the incremental improvement of those processes, introducing IT when needed at the specific request of the front line.

Second, in Japan there is an intrinsic “partnership” between IT systems and their users, facilitated by open offices, where information systems (IS) personnel often share the same space with the users, and work together to diagnose problems and design applications.

The practice of job rotation also helps IS personnel and users build personal networks, which are instrumental in managing operational interdependencies. Job rotation also enables Japanese managers to gain experience in systems analysis, design, and implementation, making them sufficiently knowledgeable to exploit IT, and confident enough to champion IS projects. Finally, a tradition of consensus decision making ensures management and user buy-in for IT investments from the beginning.

Some companies have become quite advantaged from this approach to IT deployment. In 1999, after a decade of flat sales, Mitsubishi Motor Sales of America Inc. embarked on a painstaking shift to a customer focus by investing in CRM and call center systems that enabled it to significantly cut costs, improve service, and do target marketing. Following September 11, 2001, Mitsubishi was able to contact customers in the New York and Washington areas to waive late payment fees and provide additional flexibility on existing financing and leases. Now, Mitsubishi can determine profiles of customers who bought specific models, identify its best customers, target noncustomers for new business, and anticipate customers’ needs. The Kao Corporation’s cosmetics division has been able to lower prices and provide women with makeup suited to their individual body chemistry, thanks to computer systems accessible directly by saleswomen at cosmetics counters, cutting out two layers of middlemen. The company can now instantly track the buying habits of individual women; only a few years ago the best information it could get from distributors was month-old sales data.

Toward Cyber-Japan
To understand why these existing sources of advantage will benefit Japan as it continues its exit from the stagnant decade, it’s necessary to show their relevance to the five central competitive factors in the New Economy. These are:

  • Reach. The ability to attract a critical mass of customers by offering superior information, products, and services.
  • Richness. The quality of information and the large variety of products and services that can attract the customer.
  • Disintermediation. The ability to go directly to customers, bypassing the supply chain.
  • Deconstruction. The ability to destroy existing supply chains, company practices, and business structures to make it more convenient for the customer to make informed purchases.
  • Speed of Competition. The ability to constantly change, experiment, invent, innovate, and plan in the midst of unpredictability and change.

By overlaying the traditional Japanese sources of advantage against the framework of New Economy competitive dynamics, it’s possible to identify two areas in which Japanese multinational companies could pose a threat to Western companies. First, their historical ability to leverage customer loyalty is enhanced by new technologies that extend reach to the customer and enhance the richness of the customer experience. Second, new technologies allow Japanese companies to extend their robust alliance networks beyond Japan.

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  1. Angela A. Andal-Ancion, Phillip A. Cartwright, and George S. Yip, “The Digital Transformation of Traditional Businesses,” Sloan Management Review, Summer 2003
  2. Yamada Atsushi, “Japan’s Economic Crossroads,” Japan Quarterly, October-December 2001
  3. Michael E. Porter and Hirotaka Takeuchi, “Fixing What Really Ails Japan,” Foreign Affairs, May-June 1999
  4. Ben M. Bensaou and Michael Earl, “Information Technology in Japan: Are There Lessons for the West?” in Information Technology and Industrial Competitiveness: How IT Shapes Competition, by Chris F. Kemerer, ed. (Kluwer Academic Publishers, 1998)
  5. Philip Evans and Thomas S. Wurster, Blown to Bits: How the New Economics of Information Transforms Strategy (Harvard Business School Press, 2000)
  6. Larry Kahaner, Competitive Intelligence: How to Gather, Analyze, and Use Information to Move Your Business to the Top (Touchstone, 1998)
  7. Miyamoto Musashi, The Book of Five Rings (Bantam Books, 1992)
  8. Kenichi Ohmae, The Invisible Continent: Four Strategic Imperatives of the New Economy (Nicholas Brealey Publishing, 2000)
  9. Michael E. Porter, Hirotaka Takeuchi, and Mariko Sakakibara, Can Japan Compete? (Basic Books, 2000)
  10. Ezra F. Vogel, Is Japan Still Number One? (Pelanduk Publications, 2000)
  11. The Japan External Trade Organization: Click here.
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