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 / First Quarter 1997 / Issue 6(originally published by Booz & Company)


The Art and Practice of Japanese Management

What had changed was not just that Japan's companies were struggling against a prolonged recession and an expensive currency, crippling though these were. The prevailing wisdom was that Western companies had learned everything they needed to know about Japanese management; now it was the Japanese who would have to learn from the West.

There is no doubt that the West -- and America in particular -- has caught up quickly. Three decades after he had been spurned in his own country, Mr. Deming was rediscovered in June 1980, thanks to an NBC television documentary, "If Japan Can, Why Can't We?" The day after the program was broadcast, Mr. Deming's phone started ringing, and he spent the rest of his life (he died in 1993) giving seminars and being feted by American bosses and politicians. In America, "total quality management" was the most influential fad of the 80's. In 1987, the American Government created an equivalent of the Deming award, the Baldrige. One of the most successful adopters of the new approach, Motorola Inc., claimed that, in 1987-92, T.Q.M. added $3.2 billion to the company's bottom line.(4)

Western manufacturers have also learned the secrets of "lean production," largely by forming joint ventures with Japanese companies. The Ford Motor Company purchased 24 percent of Mazda in 1979, giving Ford's senior managers full access to Mazda's main production complex in Hiroshima.(5) The General Motors Corporation formed a joint venture with Toyota in California, transforming one of its most unproductive, strike-ridden plants into a model of efficiency. The ease with which Japanese "transplant" factories put down roots in North America and England proved that lean production was not something that could flourish only on Japanese soil.

And some Westerners improved on what they learned. Companies such as Motorola and the Chrysler Corporation have formed close links with their suppliers without subjecting themselves to the rigidities that have often bedeviled Japan's keiretsu system. "The traditional keiretsu are no longer the model of best practice," said Jordan Lewis, an expert on producer-supplier links. "For this, one has to look to the West."

To some extent, the role of master and apprentice has been reversed: even Toyota has had to turn to Ford to discover how to improve the relations between its engineers and its shop-floor workers and to Chrysler to learn about "value engineering" -- a new way to speed up car production by using more interchangeable components in different models.

All Too Japanese

Having given away its secrets, Japan, many argue, retains exclusive rights only to those things that nobody else wants. The system of lifetime employment has kept Japanese companies horribly fat, while the weakness of shareholders has allowed some firms to remain hopelessly unfocused. The country's white-collar sector is only two-thirds as efficient as its equivalent in Europe and America. Japan's overregulated economy discourages innovation and imposes high costs on businesses. In "creative" industries, such as software and multimedia, which are booming in the West, Japan is way behind, isolated by language and hampered by a conformist educational system. Japan's universities are sleepy finishing schools, not vital sources of innovation; and Japan's banks are reluctant to invest in unproved companies.

What gives these criticisms added bite is that they are being made by Japanese as well as Americans. The more sophisticated Japanese managers are stocking their libraries with Western management books and littering their conversations with words like "downsizing" and "re-engineering."

The Japanese are also beginning to question two of their mooted strengths: kaizen and consensus. While Japanese companies have continued to churn out ever smarter versions of the same thing, industry-changing products have tended to be made elsewhere. Sony and Matsushita devoted their energies to making ever more complicated Walkmans, but American firms were inventing the real breakthroughs in consumer electronics, such as the personal computer and the cellular telephone. By the mid-90's, for all their extra wing mirrors, Japanese cars were beginning to look the same. Indeed, the extra wing mirrors were cluttering up production. What was needed were simpler, bolder designs.

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