Professional Documents
Culture Documents
Behind Japan's Success
Behind Japan's Success
Peter F. Drucker
To many business people and puhlic officials in the West, the postwar success of the Japanese economy is hoth an impressive and a puzzling achievement. The success is ohvious and measurable; the reasons for it, far less so. Seeking explanations, Western ohservers often fasten with wide-eyed enthusiasm on the mysterious workings of "Japan, Inc.," that fabled edifice of business-government cooperation. To it they ascribe a continuous application of singleminded energy; from it they expect a continual flow of industrial miracles. In this article, Peter Drucker, long recognized as an authority on Japanese business, takes pointed issue with this familiar myth. No such thing exists, he argues, at least not in the form commonly attributed to it. The accomplishments of Japanese industry are the result not of some all-powerful structure hut of Japan's having defined more ahly than any other industrial nation some of
the essential rules for managing complex organizations in the modem world. Mr. Drucker is professor emeritus of management at the Graduate Business School of New York University, Clarke Professor of Social Science and Management at the Claremont Graduate School, and professorial lecturer in oriental art at Pomona Gollege. He is the author of numerous books and essays, including some 20 articles for HBR, and was himself the subject of an HBR article-"Why Read Peter Drucker?" (January-Fehruary 1980). His widely noted essay "What We Gan Learn from Japanese Management," one of the first discussions of the topic to be published in the West, appeared in the March-April 1971 issue of HBR. ///ustfdtions by Karen Watson.
"I am more afraid of the Japanese than I am of the Russians," a young lawyer said to me recently. "To be sure, the Russians are out to conquer the world. But their unity is imposed from the top and is unlikely to survive a challenge. The Japanese too are out to conquer us, but their unity comes from within. They act as one superconglomerate"a conglomerate Westerners often call "Japan, Inc." To the Japanese, however, Japan, Inc. is a joke, and not a very funny one. They see only cracks and not, as the foreigner does, a monolith. What they experience in their daily lives are tensions, pressures, conflicts, and not unity. They see intense, if not cutthroat, competition both among the major banks and among the major industrial groups. And the Japanese are themselves involved every day in the bitter factional infighting that characterizes their institutions: the unremitting guerilla warfare that each ministry wages against all other ministries and the factional bickering that animates the political parties, the Cahinet, the universities, and individual businesses. Perhaps most important, where the foreigner sees close cooperation between government and business, the Japanese often see only government attempts to meddle and dictate. "We pull at the same rope," the chief executive officer of one big company remarked, "but we pull in opposite directions." The Japanese government is not always successful in making industries work together in the national interest. Despite 20 years of continual pressure, the supposedly all-powerful Ministry of International Trade and Industry (MITI) has simply not been able to get the major computer manufacturers to pool their effortssomething that the governments of Germany, France, and Britain have all accomplished.
84
January-February 1981
One foreigner after another extols Japan's harmonious industrial relations, but the Japanese public curses the frequent wildcat strikes on the government-owned national railways. Only where the labor miions are exceedingly weakthat is, in the private sectorare labor relations harmonious. As Japanese labor leaders point out somewhat acidly. Western companies without unions (IBM, for example) tend to have the same kind of equable labor relations as do Japanese companies. In the public sector, where unions are strong (a legacy of the U.S. occupation after World War II], there is no sign of this fabled harmony. Still, the Japanese have achieved the necessary consensus to participate effectively in the world economy. Contrary to popular belief in the miracle of Japan, Inc., the competitive success of Japanese industry is not the result of some uniformity of thought and action. It is the result of something far more interestinghabits of political behavior that use the diversity in Japanese national life to produce effective economic action.
85
untried Japanese manufacturers to compete against the likes of GM, Ford, Fiat, and Volkswagen. It has also been quite fearful that a large automobile market in Japan would provoke irresistible demands to open Japan to foreign imports, the one thing it has been determined to prevent. But MITI has also believed, quite sincerely, that expansion of the automobile industry would have an adverse, indeed a deleterious, effect on Japan's balance of trade, on her abihty to earn her way in the world economy, and on her productivity generally. The more successful the Japanese automobile industry, MITI has argued, the worse the economic impact on Japan. The automobile, it has pointed out, requires the two raw materials that are in shortest supply in Japan: petroleum and iron ore. It also requires the diversion of scarce resources, both food-growing land and capital, to highways and highway construction. Instead of an automobile industry, what MITI has wanted is massive investment to upgrade the railroads' freight-handling capacity. There are plenty of diehards left, and not only at MITI, who still maintain that letting the Japanese automobile industry expand was a serious mistake. Even with record sales to North America and Western Europe, the industry's export earnings, they argue, are only a fraction of what the automobile costs Japan in foreign exchange for petroleum and iron ore imports. A small part of the sums spent on highways would have given the Japanese railroads the freight-carrying capacity that the country still laeks, for the enormous amounts spent on roads have not been enough to build an adequate highway system. Trucks clog the roads; port cities are overcrowded; and air pollution is increasing. MITI lost its fight against the automobile. It was defeated in part by the automobile industry, which forged ahead despite MITI's disapproval, and in part by the infatuation of "Nabe-san," the Japanese "man in the street," with the motor car-despite its high costs, despite the lack of places to park, and despite the traffic jams about which no one complains louder than Nabe-san sitting in the driver's seat. But at least-and this is the point-the automobile's impact on Japan's productivity, competitive position, and balance of trade was rigorously considered. Even the automobile company executives who fought MITI the hardest admit openly that it was the ministry's duty to make sure that these considerations were taken seriously, no matter how eager they might have been to proceed with production or how devoted Nabe-san might have been to his automobile.
86
January-February 1981
The demand that Japanese leadership groupsespecially Japan's business leaderstake responsibility for thinking through the policies that the national interest requires forces them to lead. It forces them to take the initiative and to formulate, propound, and advocate national policies before they become issues. Indeed, it forces them to define what the proper issues are.
87
sue, faced the high costs involved, and without any prompting from external constituencies raised the mandatory retirement age. "It's what the country needs" was the explanation they gave. The Western "self-interest first" approach worked reasonably well as long as national policy could effectively be formed through adversary proceedings that balanced the conflicting demands of large, wellestablished interest blocs. But since politics in the industrial West is currently fragmented and since the balance of national power has all too often come to rest in the hands of small groups of single-cause zealots, this traditional approach is clearly no longer adequate. Perhaps the Japanese model, under which both leaders and special interests derive their legitimacy from their stewardship of the national interest, might better serve the unavoidable pluralism of modern industrial society.'
All their time is spent on relations, even the time spent on internal company business. They keep control of things by giving careful attention to personnel decisions in the upper ranks and by requiring meticulous financial and planning reports. But they do not "manage"that is left to lower levels. The top people spend their time sitting, sipping cups of green tea, listening, asking a few questions, then sitting some more, sipping more cups of green tea, listening, asking a few more questions. They sit with the people from their own industries, with suppliers, with the trading company people, with the managers of subsidiaries. They sit with top people from other companies in their groupsas, for instance, in the famous five-hour luncheons in which the presidents of all companies in the Mitsubishi group come together once a week. They sit with people from the banks, with senior bureaucrats from the various ministries, with people from their own companies in after-hours parties in Cinza bars. They sit on half a dozen committees in half a dozen economic and industry federations. They sit and sit and sit. In all these sittings they do not necessarily discuss business, surely not their own business. Indeed, to a Westerner their conversation at times appears quite pointless. It ranges far afield, or so it seems, moving from issues of economic policy to personal concerns, from the other fellow's questions and problems to the topics of the day, from expectations for the future to reappraisals of the past. Their aim, of course, is not to solve anything but to establish mutual understanding. When there is a problem, one knows where to go. One knows what the other person and his institution expect, what they can and will do, and what they cannot or will not do. When either crisis or opportunity arrives, these immobile sitters are able to act with amazing speed, decisiveness, and at times ruthlessness, for the purpose of all this sitting is not to produce mutual liking, agreement, or trust. It is to produce an understanding of why one does not like another, does not agree, does not trust.
88
January-February I98I
compassionate than in the West. Neither "love thine enemy" nor "turn the other cheek" is to be found in any of Japan's creeds. Even nature is violent in Japan, a country of typhoons, volcanoes, and earthquakes. Where the Westerner sees no need for feuding or recriminationas, for instance, when in times past a painter or an artist parted company with his teacher and established his own style or schoolJapanese convention dictates that relations be antagonistic or at least be made to appear so. This tradition extends today to divorce, which has reached epidemic, almost Californian, proportions, especially among young, educated couples. An "amicable" divorce is apparently not considered proper. It must be made to look adversarial even if the two people part by mutual consent and on reasonably good terms. But all these are situations in which a relationship is to be dissolved permanently. However, when people or parties must live together, let alone when they must work together, the Japanese make sure that their relationships have at their core a mutuality of interest. Then, whatever conflict or disagreement exists can be subsumed in the positive bond of broadly shared concerns. One of the main, though rarely voiced, reasons that the Japanese automobile companies have been reluctant to build plants in the United States is their bafflement at management-union relations in the American automobile industry. They simply cannot understand them. "Our unions fight management," a young Toyota engineer, an avowed leftist and socialist with strong pro-union leanings, recently told me. "But yours fight the company. How can they not know that for anything to be good for the company's employees, it has to be good for the company? Where this is not taken for grantedand it's completely obvious to every one of us no Japanese could be a manager; but no Japanese could be an employee or a subordinate either." One usually does not have to live or work closely with a competitor; hence, competition tends to be ruthless between companies in the same field and between groups of companiesfor example, between Sony and Pimasonic or between Mitsui Bank and Fuji Bank. But whenever there has to be a continuing relationship with an opponent, the Japanese tend to seek common ground. And it is here that asking the questions to which all those endless sittings are largely devoted begins to pay handsome dividends. Great care is taken by all parties that there be no damage done to common interests. Great care is also
taken that there be no final victory over the individuals or groups with whom one has to live and work. The Japanese know that to win such a war is to lose the peace. Whenever groups in Japan have to live together, both sides will be more concerned with making their confiict mutually productive than with winning in any absolute sense. Yet these same people will go all out for total victory against an opponent with whom they do not share common interests and who therefore can be destroyed.
Ideals Si realities
These four habits, or rules, of competitive successtaking competitiveness seriously, considering the national interest first, making external relationships important, and not seeking final victory over opponents with whom one still has to liveare, of course, ideals and precepts. They are normative rather than descriptive of universal practice. Every Japanese can point to dozens of cases in which the niles have been broken or disregarded with impunity. Not every Japanese necessarily accepts them as being right. Some of Japan's most successful entrepreneurs and companiesHonda, for instance, or Matsushita as well as Panasonic or Sonyhave shown scant respect for some of the rules. These leaders do not give a great deal of time or attention to outside relationships, nor do they much care whether they are accepted into "the club." They do not automatically agree that putting the national interest first in one's thinking is the responsibility of the business leader. They have even, on occasion, been quite willing to infiict crushing defeats on opponents with whom they have still had to live and work. There is also a good deal of criticism within Japan, especially within business circles, of some of the rules, and there is grave doubt whether they are still fully appropriate to Japan's needs. Can top management, some leaders ask, devote practically all its time to outside relationships without losing touch with the swiftly changing realities of economics, markets, and technologies? Others grumble that efforts to find common ground with other groups, with govermnent in particular, have led to spineless appeasement and bureaucratic arrogance. These rules, in other words, have weaknesses, limitations, shortcomings; they neither enjoy universal approval nor apply without exception. Even so, they have been unusually effective in strength-
89
ening Japan's industrial performance. What, then, lies behind their acceptance and success?
builder of Mitsubishi, who was to nineteenth-century Japan what J.P. Morgan, Andrew Carnegie, and John D. Rockefeller combined were to the United States. Stoutly denying Shibusawa's claim that business leaders should take responsibility for the national interest and for embedding confiict in a bond of common interest, Iwasaki rejected out of hand Shibusawa's vision of society. Shibusawa was greatly respected, but his teachings had little infiuence on practical men of affairs, who were far more impressed with Iwasaki's business success. As a guide to industrial behavior, these rules won general acceptance only after the Second World War. When a defeated, humiliated, and almost destroyed Japan began painfully to rebuild, it asked the question "What are the proper rules for a complex modem society, a society that must participate in a competitive world economy and be dependent on it?" Only then did the answers that Shibusawa had given 60 years earlier come to be seen as right and relevant.
90
January-February 1981
nese society. Having lost economic and, in many cases, emotional security, they looked to conserve as much as possible of their former lives, yet to conserve it in terms appropriate to the changed world about them.
ise of national unity based on the least common denominator, not the largest view of national interest. But this is speculation. What is fact is that the secret behind Japan's economic achievement is not a mysterious Japan, Inc., a creation that belongs, if anywhere, in some Hollywood grade B movie. Far more likely, it is that Japan-at present alone among the major industrial nationshas addressed herself to defining the mles for a complex, pluralist society of large organizations in a world of rapid change and increasing interdependence.^