|
Interview with Mr Masao Hirano, Director, McKinsey & Company, Japan, on the business strengths and weaknesses of Japan
 How much, in your view, still needs to be done by way of new reforms -- and in what areas – to sustain Japan’s recovery?
Japan’s structural reforms have made good progress with respect to the financial system, governmental organization and the movement to instill greater discipline in fiscal spending. In that regard, the government’s priority should be to continue along the path to reducing public debt without impeding the current momentum in private sector performance and consumer confidence, which have been the key drivers of economic recovery. Following such a path requires successfully navigating a delicate policy mix that includes further spending control, government organizational streamlining, public works outsourcing, privatization, and deregulation in addition to social security and tax increases. That said, maintaining a collective mindset among the Japanese people for small-government through strong political leadership is the most critical element. Without such leadership, calls for more government intervention and support will quickly and forcefully return.
What are the key characteristics of Japan’s most successful businesses?
| In 2006, the aggregate market cap of all listed Japanese companies has finally reached about 600 trillion yen, or the equivalent value they had at the peak of Japan’s "bubble" economy in the 1990s. Industry contribution, however, has shifted significantly. In recent years, the financial sector has shrunk from 30 percent to 20 percent, whereas manufacturing has grown from 42 percent to 50 percent. Numbers such as these clearly demonstrate that Japan has reasserted its strength in the manufacturing sector, and particularly in the auto industry. Many studies have already examined the reasons behind the strength of Japan’s auto industry, primarily focusing on Toyota. |  |
"We don’t see many globally successful Japanese companies in industries that are more transactional, driven by individual talent, or software-/service-oriented, such as banking."
|
Such research frequently points to the high Japanese cultural fit with manufacturing, and uses terms such as organic, holistic, frontline, team-driven, and hardware-focused to describe it. In other words, we don’t see many globally successful Japanese companies in industries that are more transactional, disruptive, driven by individual talent, or software-/service-oriented, such as banking, digital electronics, etc. It is essential for Japanese companies to overcome these typical weaknesses in order to prosper in a 21st century economy.
What will play the biggest role in improving the pace and profile of innovation in major Japanese companies?
Japan uniquely has become a world leader in dealing with 21st century global issues, including an aging demography, healthcare cost management, energy efficiency, natural environment preservation, and the emergence of a digital information society. These issues are being confronted in Japan ahead of most other countries, and Japanese corporations are well positioned to contribute to the problem-solving effort through innovation. Because innovative solutions to global problems are needed with varying degrees of urgency, the opportunity for Japanese companies is enormous. Capturing the opportunities, however, requires an enhanced level of institutional R&D management disciplines. Innovation is neither entirely art nor entirely scientific. It requires a solid set of institutional disciplines to maintain strategic R&D focus, clear target-setting, sustained resource commitment, tight portfolio management, and good commercialization processes. Particularly when it comes to disruptive technologies or products, only top management insight and courage can overcome internal resistance and take risks in support of new, revolutionary concepts. |
