1
Effective Japanese Business Practice
Patricia GercikIsrael Business Conference
December 12, 2010
2
The Islands of Japan
3
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
4
5
Vertical Structure
6
7
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
8
Meiji
9
Meiji
10
Clan and the Corporate ValuesIndividual vs. Group
Bushido- Way of the sword• Loyalty• Obligation• Self and the Group• Ideal of the Family
11
Feudal StructureOrganization of Japanese Company
Enterprise Union Life-long Employment Seniority Pay Board Insiders
Inside/Outside: Roadmap to the Inside
12
TANINOuter
ENRYOHesitation
NINJOIndividualization
Go
Giri – Obligation
13
RoadmapInside/Outside
Tanin Enryo Ninjo Continuing Networks
World “hesitation” “Individualize”“other” scrutiny Uchi-inside
Soto-outside hesitation family
no relation testing spontaneity
natural amae
14
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
15
Preparation is the ActStage I: Know Me
What does it mean to prepare? Human Network
• Human Resources Go-between Nemawashi Network & use of network
16
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
17
Hierarchy
18
What’s Important?
19
What it Means to Prepare
•Self-Presentation Dress Timing Etiquette
•Preparation for each task Degree and net worth E-mail Conference call
20
Preparation and Zen
21
Preparation
22
Preparation
23
Preparation and Information
1915- 2004 new drugsMedicine for the peopleToru IwadareFounder of Banyu PharmaceuticalsChemist from University of Tokyo
24
Stage II: Trust MeScrutiny/Testing
Bonding EnablersOnGiriMentor
CommitmentgishinDocumentationSincerityGroup EthicRole of Etiquette
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:
25
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
26
27
Loyalty
MentoringHead
Mentor A Mentor A
Mentee Mentee Mentee
MenteeMentee Mentee
Mentor B
Mentor B
Mentor B
Mentor B
Mentor B
Mentor B
28
29
Ranks & Ages Division Manager (Bucho) 48
Section Manager (Kacho) 38
Group Manager (Kakaricho) 30
30
Training
2-6 months job rotations
Case of bank employees and village
31
Advancement in Japanese Corporation
Tests
Attitude
Mentor
Age
Opportunities for Networking in the Lifecycle of a Japanese business person
32
High School
University
Incoming trainees
in a company
33
Obligation – Human Feeling
Never able to be repaid• Teachers• Emperor• Country• Institution
Ability to pay in kind• Business• Personal
34
Obligation
Personal
• Gifts reflect relationship
• Dress, timing, cards – reflect respect for relationship
• Information and knowledge – reflect respect for the relationship
35
Obligation
36
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
37
Bonding
38
Process in Approach to Task
Prepare with:• E-mail• Phone Calls• Video Conference Calls
Involve Japanese through preparation• Agenda• Studies• Information
39
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
40
Effective Communication
Empathy
Context
Do not personalize
41
Empathy
42
Empathy
43
Letters/Harmony
Create Context
Make the request generated by the situation
Use institution to create empathy
Do not personalize request
44
Letters/Harmony
45
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
46
47
Implications of Obligation
Company
Personal
Rituals in Aisatsu
48
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
49
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.”
50
Implications of the Architecture of the Japanese
House
51
Implications of Japanese Physical Office Space
52
Face and Consensus
Personal
Widely known
Self-presentation
53
Face and ConsensusHierarchy
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
54
55
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 56
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
57
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
58
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
59
History of Nissan
Nissan• Losing market share for 27 years• Famous for bureaucratic management
style• Famous for engineering ability
60
Renault’s approach Renault sensitive to Nissan
corporate culture• Schweitzer “We looked into it for 6-8
months.”
61
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
62
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?
63
Alliance: what made it work? 1999 Ghosn in Tokyo “if I didn’t
have Ghosn, I could not have done this with Nissan.”
64
Alliance: what made it work? Why did Alliance make sense?
1. Renault’s design2. Cash3. Nissan engineering4. North American access for Renault
65
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”
66
What was the conflict between Renault and Nissan?
Renault wanted joint ventures Nissan wanted to explore
management and business issues without involvement from lawyers
67
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 companies68
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.”
69
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
70
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 resign71
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
72
73
A Case Study:Toyota
74
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
75
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
76
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
77
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
78
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
79
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
80
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
81
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
82
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)