Business & finance professor, digital lawyer, restaurant owner, board member & traveler.
I am in Japan this week.
Japan is a country that I regularly visit — at least, two or three times a year, over the last ten years — teaching and speaking about the digital transformation. It is one of my favorite places, and I always enjoy being here.
But recently, interacting with other “foreigners,” I notice a fairly typical reaction. Especially, amongst those visiting for the first time.
Before arriving, visitors expect Japan to be a high-tech society. They look forward to being surrounded by innovative, state of the art gadgets and devices. They hope to catch a glimpse of the smart city of the future.
Robots, in particular, seem to be high on everyone’s list of technologies that we expect to find here. This is hardly surprising given that so many robots are from Japan.
Think Honda’s Asimo, Sony’s Aibo, or Toyota’s T-HR3.
Then people get here. And, of course, there are many things to love. The order, the cleanliness, the politeness, the culture, the food, and the punctuality of the public transportation.
But most people tend to be disappointed by the digital technologies. We no longer see the innovations that we expect or hope to find. At least, concerning new technologies, time seems to stand still.
Maybe twenty or thirty years ago, it was different. But now, something is definitely missing.
Yes, Japan has this reputation for technological innovation. And, in many ways, this reputation is well-deserved. In an earlier, industrial, phase of capitalism, Japanese companies combined a minimal design aesthetic with highly-efficient mass production techniques. Japanese products were known for their elegance, performance, and reliability.
Think of the Walkman or the PlayStation.
And, in North America and Europe, we can still feel the influence of Japanese management techniques. A perception that Japanese companies are innovators means that Japanese business methods and ideas continue to be influential.
A well-known example is the “Hoshin Kanri.”
“Hoshin Kanri” is a form of management that looks to integrate long-term strategic goals into daily management and processes. The essence of this approach is to break production down into manageable, discrete “steps” and then to establish a structured system of review in which the “customers” of each “step” provide continued feedback on “product” features and performance.
This feedback is then integrated into the product development process (along with inclusive self-assessment) in order to improve the next iteration of a product. The ultimate goal is customer satisfaction and, as a consequence, the long-term growth of the business.
Many Japanese companies have adopted this approach, but companies elsewhere in the world have also embraced these ideas.
And let’s be clear. Hoshin Kanri worked very well in an age of industrial capitalism.
If you are a traditional automobile manufacturer, for example, Hoshin Kanri helped guarantee reliable mass production, steady improvements in product design, and did generate higher levels of customer satisfaction. Precisely the achievements of firms like Toyota, Nissan, and Honda.
But there is a problem.
We no longer live in a world of industrial capitalism.
The world has changed. We now live in a digital world that is characterized by constant disruptive innovation. And, in this context, Hoshin Kanri is highly ineffective.
For instance, if a business puts too much emphasis on “what customers think,” it makes a mistake. With incremental consumer-driven improvements, a company builds on existing models, but it won’t achieve genuine innovation. After all, genuine disruptive innovation involves delivering a product that consumers don’t expect or demand.
In a digital age, the best products are “unimagined” by consumers. Think Google search, the iPod, or smartphones. There was no demand or market for these goods or services before they were created.
And, if everyone in a company is trained to think and operate in their own little box, potentially creative individuals who are complicated and disruptive, may not feel fulfilled or be appreciated.
With Hoshin Kanri you risk creating “silos” and “blind-spots” that result in missed opportunities. If a business focuses on the consumer view of a product, then it won’t disrupt, but — more than that — it won’t be ready to compete when disruption does happen.
Compartmentalized production and a strong customer focus is not going to achieve genuine innovation.
So, what’s the answer? What can Japanese companies do to re-discover their capacity for innovation?
Here are two connected ideas that seem particularly relevant in a Japanese context.
The first idea involves re-thinking our attitude towards “chaos” and encouraging what I would call “Organized Chaos.”
We usually think of chaos as a “bad thing.” After all, chaos is the opposite of order. As order spins out of control, we are left with a damaging disorder that we need to limit.
In Japan, for instance, you don’t stick your head out, take a chance and risk failing. Chaotic thoughts and behavior are usually discouraged.
But, this is the wrong attitude towards chaos.
Digital thinking requires a certain amount of creative, organized chaos.
Of course, listening to others is important but so is independent thinking, disagreement, and conflict.
Business is not only about dividing tasks and responsibilities — establishing efficiency and order — but it should also involve the embracing risk and experimentation, and fostering the creative tensions that emerge from having multiple voices and perspectives involved in the process of product design.
The second (related) suggestion concerns leadership and establishing a new style of leadership, what I would call “Distributed Leadership.”
When “leadership” means top-down leadership or centralized leadership or the presence of dominant, charismatic leaders, it will be difficult for a company to achieve sustained strategic innovation. After all, hierarchies are unattractive to the best talent, and a company rarely flourishes after the departure (or death) of a charismatic leader.
Instead, we need to create an environment where leaders are engaged, learn from others and share. They avoid unilateral decisions, solicit input from trusted employees, make decisions that involve and convince others.
One example is the comparison between leadership in business organizations with leadership in sports teams (where team members are inspired through short meetings or “huddles”).
As such, we need to identify mechanisms for achieving innovation through the implementation of distributed leadership where this approach is found everywhere in the organization.
Leadership in a digital world needs to be more inclusive, holistic, and able to adapt to changes in the environment. This kind of experimental approach to leadership requires open and inclusive communication that produces the organized chaos necessary for the digital transformation, where the future is unknown.
Bringing it back to Japan.
I do see some positive signs. Some people and companies in Japan do seem to get this. Softbank, for instance, has adopted a more open and inclusive way of doing business that embraces organized chaos. The company’s $100 billion Vision fund aims to build the “biggest network of tech companies in the world.”
For example, whilst I was in Japan Softbank announced a new partnership with Baidu (the Google of China). Baidu agreed to produce ten of its self-driving buses for SB Drive, a subsidiary of Softbank. A third company, King Long, will handle the production of the buses, which will be delivered in 2019.
Creating together, collaborating together, sharing and experimenting with each other’s work (“organized chaos” and “distributed leadership”) is the key to building the successful platforms of the future.
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