JMA 2012 Proposal for Management Innovation

Co-evolution

November 2012

Introduction
Japanese companies face a harsh environment today. Amid fierce global competition, even key
companies—those that have been the driving force behind Japan’s economy for years—find themselvesin a difficult position. Despite committed efforts to reform management, Japanese companies do not yet
have in place a solid growth model for the future. What has brought success in the past no longer does sotoday, and corporations appear to have lost their confidence.
The fact is, however, that in the postwar period Japanese companies consistently produced technologies
and products that commanded the respect of the international community, and these companies developed
their businesses based on these innovations, leading to the nation’s extraordinary economic growth.
Japanese companies must continue to be trailblazers in every age. Corporate executives must show
resolve and take action to bring out the strengths of their companies by engaging in ongoing management
reform.
To address this situation, the Japan Management Association (JMA) set up three study groups in 2011 to
discuss what Japanese companies should do to continue to thrive, the obstacles that lie in that path, andthe actions that should be taken to overcome them. The study group of Asian experts and specialists
offered warm messages of hope, cheering Japanese companies on, encouraging them to have confidence,and offering management suggestions.
JMA marks its 70th anniversary this year. For almost three-quarters of a century, we have worked withJapanese companies to solve the management issues they face, including management efficiency,
operational efficiency, quality control, and skill development for middle managers and employees.
Reviewing and reflecting on our accomplishments to date, we must consider what role we should play inthe future.
Focusing primarily on bringing a new era in corporate management, the proposal described herein aims tohelp ensure the sustainable and healthy growth of Japanese companies. It would be our greatest pleasure
if this proposal were to provide corporate executives with an opportunity to review their management
style and actions and help them gain confidence about their future course.

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Contents

Introduction ȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷ
ȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷ
ȷȷȷȷȷȷ
ȷȷȷ1

Chapter 1. Identification of Challenges: Ensuring the Sustainability ofJapanese Companies ȷȷȷȷȷȷȷȷȷ3ųų1) Peopleųų2) Corporations and organizations
ųų3) Relations with the international community

Chapter 2. Proposal for Management Innovationȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷȷ5ųųCo-evolution:ųųDeveloping together a new level of affluence in Asia by creating value through theųųJapanese work style
Proposal I. Co-evolve with Employees Based on People-oriented Managementȷȷȷȷȷȷȷȷȷȷȷ6ųų1) Use the joy found in work to inspire employees to tackle challenges
ųų2) Harness the advantages of diversity under the banner of a common vision

Proposal II. Shift the Organizational Focus from Management to Creativity ȷȷȷȷȷȷȷȷȷȷȷȷȷ8ųų1) Change the mindset of middle management from that of manager to that ofųųentrepreneurųų2) Innovate work processes and enhance organizational creativity

Proposal III. Create a New Level of Affluence by Co-evolving Hand in Hand with Asiaȷȷȷ10ųų1) Develop hand in hand with the local areaųų2) Grow alongside local employees

2Chapter 1. Identification of Challenges: Ensuring the Sustainability ofJapanese Companies
1) People
To identify and solve the challenges facing Japanese companies today, it is necessary to reflect on the
traditional strengths of Japanese companies and note changes taking place inside and outside theseorganizations.
What are the traditional strengths of Japanese companies? First is the leadership and ethics demonstrated
by corporate executives with their strong sense of mission. Second is the diligent and earnest workforce.
Through this combination of management and employees, the third strength is generated, that ofadvanced technology and the ability of workplaces to achieve goals and solve problems. Fourth is thecreative measures Japanese companies take to create strong bonds between management and employees,
symbolized by middle-up-down management. Finally, a company’s group of subcontractors who tackle
challenges together with the company over the years also constitutes a key strength of Japanese
corporations.
These strengths reflect the sense of unity shared by management and employees. This solidarity has evenbeen described as a “monolith.” Indeed, Japanese companies have put into daily practice the saying, “Acompany is its people.” This management style of valuing employees has been the source of the strengthof Japanese companies. In such an environment, employees have been able to concentrate solely on theirwork and have thus displayed great creativity and ingenuity.
Today, however, changes are taking place in the very structure of Japanese society as well as among
working people, including the acceleration of population aging with the decline in the birthrate and thedecrease in the “hunger” among workers to strive for higher levels of excellence. It appears today as if
workers no longer have satisfaction and meaning in their jobs and have lost their sense of purpose inworking. More and more people experience job insecurity and as a result cannot plan their future. In theworkplace, relationships among employees, which are cultivated through collaborative work, have
weakened, while more than a few people struggle with mental disorders.
These issues related to people together represent a weakening of companies’ human resources foundation,
and we need to thoroughly rethink work itself as well as work styles. It is also necessary to ask ourselves
once again whether Japanese companies today truly value their people.

32) Corporations and organizations
The primary significance of the economic activities of corporations and organizations is to create value
and solve social issues. Japanese society faces a variety of challenges, including an aging population withfewer children, the risk of large-scale natural disasters, and a potential energy crisis. These problems also
provide opportunities for companies to find a new raison d’être for themselves.
For companies to provide society with new value requires innovation and creativity. If these elements are
lost, it will be difficult for them to continue to survive. Many companies that used to consistently produce
attractive products and services and that used to be praised for their creativity have been sluggish for anumber of years now, having lost their former glory.
Perhaps Japanese companies have lost the ability to envision a new level of affluence and the creativity tosolve new problems. This is not necessarily due entirely to external factors but seems in many cases to be
due to internal factors that hinder creativity.
Thus, developing a new corporate structure and fostering a new level of creativity are major challenges
for Japanese corporations and organizations. They must shift their focus from performance, efficiency,
and the short term to value development, creativity, and the medium to long term. They must eliminate
internal factors that impede value creation and they must promote diversity, aiming to develop a newcorporate structure that facilitates creative activities.

3) Relations with the international community
Japan is geographically located in Asia and is part of the Asian community. Home to about half of theworld’s population, Asia continues to grow at a rapid pace every year. Japan has long maintained close
ties with its Asian neighbors, and Japan’s trade with and direct investment in the region account for alarge share of the world total and continue to increase every year. Moreover, Asia has high expectations
for Japanese companies in relation to Asia’s further development.
It is also true, however, that despite an investment record in Asia of more than 50 years, Japanesecompanies have a declining presence in the region. In contrast, multinational companies, enterprises fromemerging countries, and local companies are strong in the fiercely competitive Asian markets.
Facing the challenges of a shrinking Japanese market and decreasing competitiveness in international
markets, Japanese companies must work hard to develop their presence in Asia and the world and find an
avenue to new growth.

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Chapter 2. Proposal for Management Innovation
Co-evolution: Developing together a new level of affluence in Asia by creating
value through the Japanese work style
Co-evolution (evolving together) is a biological concept, meaning “evolution involving
successive changes in two or more ecologically interdependent species (as of a plant and its
pollinators) that affect their interactions” (Webster’s Ninth New Collegiate Dictionary).

What is the raison d’être of a company? It is to achieve sustainable growth through the work of
employees, who, under the shared goal of providing society with significant value, tackle challenges anddo things that cannot be done by others and thereby gain the strong support of customers, the community,
and society. Co-evolution in the context of corporate management means that the company aims todevelop together with employees, customers, and society through its activities and its existence.
Japanese companies possess a variety of strengths, including high ethics, advanced technology, quality
control capabilities, and outstanding teamwork. Additionally, Asian executives expect to learn fromJapanese companies about their unique human resources development practices and thoughtful customer
services. These are the fruits of Japanese companies’ management efforts, and they were developed
through employees’ committed and sincere efforts. This is the Japanese work style which our nation
boasts to the world.
For Japanese companies to grow hand in hand with Asia and continue to create new value as a way tocontinue to thrive, they must seriously reflect on the merits of this Japanese work style. Then, they needto release employees’ untapped potential and passion for excellence and develop a management structure
where creativity can be maximized. By so doing, they will be able to produce innovative technologies,
products, and businesses, address problems in Asian society, and together create a new level of affluencein Asia. In addition to leveraging the strength of the Japanese work style, Japanese companies also needto learn from leading companies around the world. In this way, co-evolution with employees, society,
Asia, and the world will be achieved. To this end, we offer the three proposals below.

Co-evolution with Employees, Society, and Asia
Co-evolution with society（contribution to the resolution ofsocial issues）

Co-evolution with Asia and world（contribution to a new levelof aﬄuence）

Co-evolution withthe environment（contribution to sustainability）

Key needs = Sources of business ideas

Creation of innovative technologies, products, and businesses

Provision of opportunities to exercise creativity (management evolution)

Joy in oneʼs work ⇒Release of untapped potential and passion for excellence5Proposal I. Co-evolve with Employees Based on People-oriented Management
Creativity and ingenuity as well as cooperative actions and attitudes are distinctly humanų qualities. People-oriented management means valuing these qualities, thereby enabling dynamic
teamwork and consistently creating new value. People-oriented management must be seen as
essential to a company’s sustainability.

To ignite employees’ passion for excellence, company executives must effectively
communicate the corporate mission and vision.
1) Use the joy found in work to inspire employees to tackle challenges
Employees are people. Unlike machines and equipment, each has a will. Positive actions from employees
do not arise from corporate executives’ imposing their views on them. Rather, employees begin
proactively tackling their work with creativity and ingenuity when they understand and see their roles andgoals as their own. Employees’ initiative is ignited not by persuasion from executives but by
understanding and recognizing their roles and goals as their personal mission. This brings productive
results.
Corporate executives should always encourage employees to think about the purpose of the company, thecontribution their work makes to society, and the mission of their business division. Employees will be
inspired by sharing their thoughts about these matters with their colleagues. The more challenging theobjectives and goals, the greater the joy will be when they are achieved. Corporate executives must be
attentive to make sure their employees are experiencing joy in their work.
Leading companies have a distinctive culture. Corporate culture gives direction to employees in their
day-to-day work. If employees correctly understand what is expected of them, they can decide
immediately how to act in a given situation. Corporate culture cannot be easily imitated by othercompanies because it represents the wisdom the company has accumulated over the years. Corporate
culture is a company’s true or fundamental strength. Corporate executives have to not only inherit
corporate culture but also tailor it so it remains relevant to the times.

62) Harness the advantages of diversity under the banner of a common vision
Every employee has unique views, talents, abilities, and strengths. Amid fierce global competition,organizations need to have a diverse range of people. The higher the degree of heterogeneity, the greater
the synergy the organization can create, generating tremendous creative energy.
However, heterogeneous groups also have tremendous potential for clashes and divisions. Advancement
to a higher level can be achieved only after overcoming healthy conflict. For this reason, corporate
executives need to raise high the banner of a common vision and have deep, ongoing dialogue with
employees. Furthermore, no efforts should be spared to make sure information is distributed to
employees. When employees see the company’s purpose, objective, and vision as their own, groupcohesion will increase and teamwork will be facilitated.
Under the banner of a common vision, or in other words, around a common objective, new value will becreated, as the joy of the individual, the joy of the company and organization, and the joy of customers
and society are linked together. The organization in this virtuous cycle is a next-generation organization
capable of continuously creating value. The Japan Management Association is promoting KAIKA Action
as a movement to create such organizations. KAIKA Action is a new value creation activity aiming tosimultaneously achieve the professional development of employees, the revitalization of organizations,and the development of organizations’ social contribution.

Common Objective : Creation of New Value③ Providing society
with meaningfulproducts and services

Joy of customers and society④ To feed growth = Proﬁt needed

Joy of the company
and organization
Joy of working
together

Joy of creating② Striving and working
together to achieve higher goals

Joy of the individual

Joy of making
others happy① Valuing people

Joy of growing

Human nature

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Proposal II. Shift the Organizational Focus from Management to Creativity
Creativity cannot be managed. The organizational focus sets the parameters for creativity, andemployees are acutely aware of it. The only way to enhance creativity is to improve theenvironment. Corporate executives must be ready to change their organizational focus.

1) Change the mindset of middle management from that of manager to that ofentrepreneur
Problems arising from organizational bloat have deep roots. When an organization grows in size,emphasis on management—rather than creativity—intensifies in no time. More and more middle
managers start to focus exclusively on organizational management, rather than on new businessdevelopment. Walls appear between organizational units, and this creates distance between management
and employees. To ensure creativity, people with these kinds of focuses must not be appointed generalmanagers. If that happens, opportunist or submissive employees will increase in number, while innovative
employees will not be able to give full rein to their talents. As a result, the organization will be filled withinward-looking employees.
This kind of issue cannot be solved by just leaving matters up to the division in charge. Corporate
executives must assess the situation themselves and take the necessary actions. It is very difficult tochange the mindset and actions of employees, and only executives can address any resistance and movethe organization in the desired direction. Many corporate executives claim to make reforms, but
employees are checking whether they are serious. If executives carry out reform thoroughly andresolutely, employees’ actions will change and standard practice will improve. To do this, executives must
speak earnestly to employees, telling them their thoughts about the company and talking to them about
the company’s objective and direction. Executives must change systems and, if necessary, even involve
themselves in performance reviews.

82) Innovate work processes and enhance organizational creativity
Imposing excessive rules on employees and attaching too much importance to inward-looking consensus
building must be rooted out. Creativity blossoms in places where different ideas clash as people cometogether to reach the common objective of creating value for customers and society. People are giftedwith creativity and ingenuity by nature. Creativity will naturally be brought out if employees experience
joy in their work and no excessive control is imposed on them. Bold changes must be brought to past
views on work, including the way of engaging in work and approaching work projects, hiring, personnel
placement, and performance reviews as well as organizational structures.
Efficiency must continue to be pursued; however, if too much attention is placed on trying to enhance
management results by making efficient use of people, it may hamper their motivation and creativity.
Many transitive verbs are used in the management world, as seen in such phrases as “develop humanresources” and “motivate employees.” Employees each have a will, however, and they develop
themselves and motivate themselves. We firmly believe that, if those in managerial positions realize thisand change their behavior, an organization’s atmosphere will improve.
People’s creative ideas and actions originate in the realm of the imagination. Without experience,
however, no one can imagine. Due to overdependence on outsourcing and information technology, there
are fewer opportunities to experience things firsthand in workplaces today than there used to be.
Employees develop their ability to sense, notice, and intuit things through experiences at workplaces thathave a stimulating environment. It is effective to train people through apprenticeships or secondment
programs and other opportunities to test one’s abilities in different contexts. Japanese companies used toattach importance to these approaches. Today Japanese companies need to solidify the source of theircreativity by investing time and effort in the development of human resources, instead of focusing on
efficiency in the short term.
It is also necessary to create at the same time an environment that invites diverse ideas by making it easierto receive input from various sources through a variety of interactions both inside and outside thecompany.
Shift the organizational focus from management to creativity
Long term:
Future, invisible things, challenges

Focus on Creativity
Focus onManagement

While strengthening
the organization,
continue to create
new value

Carry on business,
keeping rules withina given framework
From managerial toentrepreneurial mindset
Innovation of work processes
Stimulating exchange of information

Short term:Firsthand experiences at workplaces

Present, visible things, protective

Routine:Autonomous:Passive, eﬃcient, uniform

Active, creative, diverse

9Proposal III. Create a New Level of Affluence by Co-evolving Hand in Hand with Asia
As an Asian country that has long experience in solving issues, Japan needs to help create a newlevel of affluence in Asia by addressing social issues. To this end, Japanese corporations should
develop management to a higher level by thoroughly learning from leading companies and further
refining Japan’s unique qualities.

1) Develop hand in hand with the local area
For Japanese companies to grow hand in hand with Asia, we must think about what we can do to help
enhance the lives of people in Asia. Growing hand in hand with Asia does not mean adding value to
products by incorporating multiple expensive features that are not useful to Asians. Nor does it mean
providing low-priced products by simply downgrading functional specifications. It means learning about
the local culture and customs with humility and creating products tailored to the local context. In
management resource allocation, it means placing emphasis on businesses that will bring affluence to the
local society, including infrastructure development, improvement in life- and environment-related areas,
and lifestyle enhancement.
Japanese companies should not aim exclusively at quantitative expansion; they should value maintaining
stable relations with society. Hiring local people will increase local employment opportunities, but that isall. If Japanese companies have the will to actively help develop local industry and take the necessary
actions, the positive influence of their presence will spread, enabling them to grow together with the local
area.
Japanese companies must continue in the future to be worthy of emulation and to maintain a level thatcannot be easily imitated. Moreover, they need to thoroughly learn from the local area and leading
companies. By so doing, they will be able to refine Japan’s unique qualities. They will bring management
to a higher level by learning what needs to be learned, such as speedy management response, diversity,and motivation to achieve goals.
It is also true, however, that Japanese companies are not necessarily well understood by the local people.
People may not have a proper understanding about why Japanese companies have set up there and why
the companies take the actions they do. Japanese companies should make efforts to deepen local
understanding of their company and of Japan in general. In addition to advertising, they should create
more opportunities to provide the general public, customers, and employees with information on Japan
via TV dramas and content using local media.

2) Grow alongside local employees
Promoting local personnel to managerial positions is a major challenge for Japanese companies. In
particular, finding and developing executive candidates is the key to the success of a local subsidiary.
Japanese companies need to identify promising persons and develop them into executives so that they canentrust them with the management of the local subsidiary. Developing corporate executives takes time.
Every company has to realize that human resources development is a long process.

10Japanese companies that are successful in Asia are dedicated to the professional development of theiremployees because they recognize that work quality and productivity are greatly influenced not only by
employees’ skills and capabilities but also by their work attitude and work ethic. Additionally, suchcompanies’ executives want their employees to develop professionally. Executives of local subsidiaries all
say that they want their employees to be happy that they work at the company.
There is also much to be learned from local companies. For example, it would be beneficial to increase
opportunities to learn together and grow together by having young Japanese employees work incollaboration with local subsidiaries or partner companies.
It should be also be remembered that Japanese subsidiaries and local companies need to develop together
as local subsidiaries identify promising local companies and then offer them guidance and collaborativework.

Co-evolve hand in hand with Asia
Develop hand in hand with the local area
Grow alongside local employees

Bring management to a higher level
Increase managerial response speed both at head oﬃce
and local subsidiaries
Clearly delegate authority and responsibilities toreliable executive personnel
Further strengthen workplaces through enhanced diversity

Learn from leading companies
Concept development, strategic planning,
managerial response speed

Engage in businesses that bringnew aﬄuence to the local area

Motivation to achieve goals, competition,
responsibilities and delegation of power

Peace of mind, infrastructure,

Diversity, attitude toward learning

the environment and energy, enhanced lifestyles

Respect the local culture, customs, religion
Reﬁne Japanʼs unique qualities
High ethics, diligence, politeness, thoughtfulness, sincerity
Outstanding technologies, quality control capabilities, teamwork,
initiative in professional development11

Co-evolution:
Developing together a new level of aﬄuence in Asia by creating value through the Japanese work style
Issue

Gloval society/Earth

Company/Organization

PeopleProposal
Shrinkage of Japanese
economy and decline
in international
competitiveness ofJapanese corporations

Proposal III
Create a New Level ofAﬄuence by Co-evolving
Hand in Hand with Asia

Decline in ability ofJapanese organizations
to produce new value

Proposal II
Shift the Organizational
Focus from Management
to Creativity

Loss of sense of
purpose in working

Proposal I
Co-evolve with Employees
Based on People-oriented
Management

Co-evolution

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JMA Action
ActionⅢ
Asia Human Network

ActionⅡ
Innovation toward
Creative Work

ActionⅠ
KAIKA ProjectURL : http://www.jma.or.jp/
հ 2012㧚JAPAN MANAGEMENT ASSOCIATION