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Effective Japanese Business Practice

Patricia GercikIsrael Business Conference

December 12, 2010

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The Islands of Japan

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Dominant Culture

Japanese notion of the company as family

Japanese notion of Bushido as value

Japanese notion of inside/outside

Inside-Outside Tatmae/Honne Hierarchy Family + Business Obligation Empathy Nationalism/Shinto Face

Japan– Core Values

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Vertical Structure

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Japanese HistoryDomination of Clans

1467-1568 Sengoku 1568-1601 Momoyama 1601-1867Tokugawa 1867-1912Meiji

2500 B.C.Joemon & Yayoi 646-784 A.D.Nara 784-1185 Fujiwara 1185-1333 Kamakura (Minamoto) 1333-1465 Ashikaga

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Meiji

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Meiji

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Clan and the Corporate ValuesIndividual vs. Group

Bushido- Way of the sword• Loyalty• Obligation• Self and the Group• Ideal of the Family

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Feudal StructureOrganization of Japanese Company

Enterprise Union Life-long Employment Seniority Pay Board Insiders

Inside/Outside: Roadmap to the Inside

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TANINOuter

ENRYOHesitation

NINJOIndividualization

Go

Giri – Obligation

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RoadmapInside/Outside

Tanin Enryo Ninjo Continuing Networks

World “hesitation” “Individualize”

“other” scrutiny Uchi-inside Soto-outside hesitation family

no relation testing spontaneity

natural amae

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Stages of Relatonships Stage I: Know Me - Preparation

Stage II: Trust Me - Scrutiny/Testing

Stage III: Believe Me - Working Together

Stage IV: Marry Me - Union

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Preparation is the ActStage I: Know Me

What does it mean to prepare? Human Network

• Human Resources Go-between Nemawashi Network & use of network

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What it Means to Prepare

•Information History of the company Assessment of situation Documentation Aisatsu ceremony Reveals preparation Rituals of commitment Gifts, cards, history, and seating

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What it Means to Prepare

•Self-Presentation Dress Timing Etiquette

•Preparation for each task Degree and net worth E-mail Conference call

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Preparation and Zen

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Preparation

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Preparation

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Preparation and Information

1915- 2004 new drugs

Medicine for the people

Toru Iwadare

Founder of Banyu Pharmaceuticals

Chemist from University of Tokyo

Case of Max-- Aerospace

MITIJapanese High Speed Engine

Consortium

Japanese companiesMembers of Japanese High Speed Engine

Consortium

MaxU.S.

JohnU.S.

BernardFrance

TomU.K.

Ito Facilitator (on loan to

MITI)

Choose 2 foreign companies to participate:

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Case of Max-- Aerospace

I. Critique of proposal

II. Demands by foreign companies

1. Intellectual property

2. Finance

III. Invitation from MITI to Max to be on

committee to assess proposals

Side Letter

Success

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Loyalty

MentoringHead

Mentor A Mentor A

Mentee MenteeMente

eMente

eMentee Mentee

Mentor B

Mentor B

Mentor B

Mentor B

Mentor B

Mentor B

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Ranks & Ages

Division Manager (Bucho) 48

Section Manager (Kacho) 38

Group Manager (Kakaricho) 30

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Training

2-6 months job rotations

Case of bank employees and village

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Advancement in Japanese Corporation

Tests

Attitude

Mentor

Age

Opportunities for Networking in the Lifecycle of a Japanese business person

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High School

University

Incoming trainees

in a company

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Obligation – Human Feeling

Never able to be repaid• Teachers• Emperor• Country• Institution

Ability to pay in kind• Business• Personal

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Obligation

Personal

• Gifts reflect relationship

• Dress, timing, cards – reflect respect for relationship

• Information and knowledge – reflect respect for the relationship

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Obligation

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Bonding

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Process in Approach to Task

Prepare with:• E-mail• Phone Calls• Video Conference Calls

Involve Japanese through preparation• Agenda• Studies• Information

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Meeting PreparationPreparation is the act

Circulate the agenda via e-mail

E-mail as communication and off record conversation

E-mail as involving people from both sides

Involvement of the Japanese is critical

Topics should be given on both sides

Communication around topics is essential

Reveal preparation and commitment on topics

Show willingness to understand issues from others

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Effective Communication

Empathy

Context

Do not personalize

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Empathy

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Empathy

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Letters/Harmony

Create Context

Make the request generated by the situation

Use institution to create empathy

Do not personalize request

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Implication of Japanese Decision Making

Documentation Order of CirculationMatomaru – Upper Management(Unity of thought and purpose)

Middle Management

Final Meeting on Division(Hanko)

Division Originating Request

Meeting on issues

Request responsible

parties

Division A Division B Division C

Second guess issues

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Implications of Obligation

Company

Personal

Rituals in Aisatsu

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Stage II: Trust MeScrutiny/Testing

Bonding EnablersOn

Giri

Mentor

Commitmentgishin

Documentation

Sincerity

Group Ethic

Role of Etiquette

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Stage III: Believe Me Working Together

Understanding the Work GroupConsensus

Languagenintai—patienceringi group (role)socializing (role)

Strategies to Facilitatetatemae / honnego-betweenharagei—silenceAmaeuse of human resourcesMentorningen kankei--people contact

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Strategies for a Consensual Society:Managing and Negotiation Japanese Style

Hanashiai- talk with one another

Sasshiai- creation of a good atmosphere Settoku suru- persuade

Nattaku- understand and accept

Nintaiyoku- patience

On/giri- obligation

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Strategies for a Consensual Society Language: How the Japanese Say No

“I’ll check on it and do whatever I can.”

“I’ll do my best after I talk with my senior executive.”

“I’ll think about it.”

“I’ll handle it the best I can.”

“It’s very difficult.”

“I’ll consider it in a forward-looking manner.”

“I’ll make an effort.”

“I’m not sure.”

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Implications of the Architecture of the Japanese

House

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Implications of Japanese Physical Office Space

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Face and Consensus

Personal

Widely known

Self-presentation

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Face and Consensus

Hierarchy Who is important?

Who is talking?

Praise-group ethic

Blame-group ethic

Wrap up of feelings around an issue

Issues that are taboo

How issues will be addressed

Stage IV: Marry Me - Union

Contract• Lawyers present• Repeated understanding

Keeping up networks Inclusive Consideration as part of inner groups Obligation to position

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A Case Study:The Renault-Nissan Alliance

The Renault-Nissan Alliance“To steer alliance strategy and supervise common activities on a global level, while respecting the identity of each company and not interfering in its operations.”

Louis Schweitzer, Renault’s chairman CEO President

Carlos Ghosn vice president

May 2002 Renault-NissanBV 52

History Renault

Renault oldest national automaker• Nationalized by de Gaulle 1945• Strong performance but slim profit

margin• 85% of cars sold in Western Europe• Little participation in premium cars and

light trucks

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History Renault

“Looking towards internationalization, but no European partners made sense and American partners made no sense because they were much larger. The Asian financial crisis created an opportunity for us.”

Louis Schweitzer, Renault’s chairman CEO President

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History of Renault-Nissan Alliance

1999• Renault invested 5.4 billion U.S. dollars in

Nissan for 36.8% of the company 2001

• Renault had confidence in Nissan• Nissan profits accounted for 47% of

Renaults’ profits for fiscal year 2001• Combined sales 5 million autos• Alliance had 9.2% of world auto makers

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History of Nissan

Nissan• Losing market share for 27 years• Famous for bureaucratic management

style• Famous for engineering ability

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Renault’s approach

Renault sensitive to Nissan corporate culture• Schweitzer “We looked into it for 6-8

months.”

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Deal 1999 Schweitzer and Hanawa signed

Renault and Nissan Alliance and Equity Participation Agreement

Renault 36.8 stake in Nissan for 5.4 billion dollars

Renault obtained warrants to purchase 540 million shares to be issued by Nissan at 400 yen per share

Renault could increase its stakes up to 39.9% of Nissan up to 44.4%

Nissan could purchase Renault shares under terms to be decided later

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Questions to be addressed

Would companies be able to realize further savings?

How should Renault-NissanBV address issues across disparate corporate and national cultures?

Could each company maintain their identity while working together?

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Alliance: what made it work?

1999 Ghosn in Tokyo “if I didn’t have Ghosn, I could not have done this with Nissan.”

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Alliance: what made it work?

Why did Alliance make sense? 1. Renault’s design2. Cash3. Nissan engineering4. North American access for Renault

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Alliance: what made it work?

What was the financial reception?• “Alliance of the weak”• Nissan’s point of view “please teach

us how to make a profit”

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What was the conflict between Renault and Nissan?

Renault wanted joint ventures Nissan wanted to explore

management and business issues without involvement from lawyers

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What was the new approach?Suppliers

“When we say common suppliers, it means common standards. We can only choose the supplier together if we agree on everything-including quality” Renault executive

Eliminate those who could not meet target price

Suppliers eliminated with repeated bad parts

Cut equity in supplier companies

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What did Ghosn do?

Nothing for a year: “If I had listened to consultants on Japanese culture and business, I would have gone back to France.”

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What did Ghosn do?

11 Cross Functional Teams CFT• CFT

10 members middle managers • 2 pilot member from Exec. Committee• Reports due in 3 months to Exec Committee

Sub-teams of 500 address particular issues

All reports were turned down

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Value added? Nissan taught Renault manufacturing Entry into Mexico through Nissan Joint distribution in Japan and Europe Joint information systems Joint learning of standard car platforms 20% in 3 years cost reduction Cost engineering, trust, act right away Sold stakes in all but 4 supplier

companies If goals were not met Ghosn and

Executive Committee would resign67

Human Resources

Plant closing but job saved if employee would move (18%)

Personnel• Removed seniority pay• Abolished life long employment• Bonus based on target objective

results• Board reduced from 43 to 9

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A Case Study:Toyota

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Aishin Fire and Toyota Group Aishin sole supplier to Toyota

Group for P-Valves critical in brakes (small well machined component)

Aishin Just in Time (JIT) Aishin had 2-3 weeks supply

Toyota in full production in anticipation of sales prior to the 2% consumer tax

All Toyota production halted with the fire

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Aishin Seikin’s Role as Sole Supplier

Spun out of Toyota in 1949, 20% owned by Toyota, major supplier to Mitsubishi Motors and Toyota Group (65% to Toyota)

Specialist in brake components, sole supplier of P-valves

Aishin’s competitive advantage high volume, high quality production using self designed machinery and well trained workforce

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Aishin’s response: Supplier response

Feb 1• 4:18 am Sat. morning fire • 5:30 am Aishin forms Emergency

Response Unit (ERU)• 6:30 ERU forms 4 subunits (production,

materials handling, customer interface, general affairs)

• Day long efforts to identify and contact substitute producers

• Feb. 2 Aishin begins faxing designs for valves and production equipment to substitute suppliers

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Who were the Substitute Suppliers?

62 firms• 22 Aishin suppliers• Toyota• 36 Toyota suppliers• 4 outside companies (not regular

suppliers)• Supported by 70 machine tool

makers and 80 additional suppliers

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Aishin Fire and the Toyota Group Feb. 1 Fire in Aishin Seiki factory

destroying Toyota’s sole source of P-Valve Production

Feb. 3 Toyota Announces next day shutdown of 20 of 30 assembly plants

Feb. 4 Volume of P-Valve production begins on temporary lines at an Anshin supplier 62 firms involved

Feb. 6 Toyota plants reopen Feb 10 All Toyota plants back to

normal Feb 17 All Toyota plants to full

capacity

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What Were the Hurdles? Firms had little information//Toyota

and suppliers sent 500 people to Aishin

Fragile and damaged equipment//handled with care and solicited equipment

Communication poor//installed 500 lines cell and land

Coordination with suppliers//suppliers set up special teams

Technical problems//Aishin organized meetings

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Why and How did the Network Respond?

Why did the network respond?• No official pressure (why?)• No negotiations over cost and

intellectual property• Rapid transfer of expertise• Rapid problem solving for alternatives to

Aishin’s process

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Basis for Coordination and Initiative

Toyota Supplier Association: regular meetings, problem solving workshops

Transfers of people across network

Flows of people across network Shared culture and language (JIT) Trust and “social capital”

established through system

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Outcome Aishin reimbursed direct costs of

production of P-Valves to 62 participating companies

Toyota gave bonus of 1% of first quarter sales to every supplier in the Toyota network (not just those who stepped up to the plate)