Commentary / Japan

Is Japan ready for transformational change?

by Yoko Ishikura

Contributing writer

Half of 2020 passed as many of us were busy coping with various disruptions caused by the COVID-19 pandemic. Several weeks after the state of emergency was lifted nationwide, several divides are found in corporate responses to the COVID-19 crisis.

The first divide is seen between Japanese companies and firms in other advanced economies. According to an analysis by Google (as reported July 5 by Nikkei), the ratio of Japanese firms that are planning to continue having their employees work from home is much smaller than that in many Western economies, even Japanese workers in general wish to keep working remotely.

The second divide is observed among Japanese companies regarding their intention to introduce new styles of work. Hitachi and Fujitsu have announced that they will transform the work style of their employees, having them continue to telework while reducing their office space. On the other hand, major companies such as Itochu have decided to return to office work as usual.

Reasons cited by employers for a reluctance to continue employee teleworking include inadequate technological infrastructure (including security risks), a lack of digitized data, and the fact that the tasks and jobs of the workers are “not well defined,” to name a few.

The lack of infrastructure is not limited to office work. According to a report by the OECD, Japan is ranked very low among member countries in terms of its digital infrastructure resources and the digital skills of teachers, making the future of the younger generation and companies that depend on human resources very bleak.

What corporations do at this critical juncture will have significant influence on the future course of Japan, not only economically but socially. In fact, some companies have been thinking hard about what changes to implement in their business practices, now that the immediate danger to their survival has subsided. Judging from news reports and the topics of seminars, their interest has shifted to “What’s next?” and “How do we recover and restore the economy?” Innovation and transformation are attracting the interest of business people.

I recently gave an online seminar titled “How to develop innovative people who are ready for change?” At the beginning of the seminar, a few questions were asked regarding the participants’ readiness for action. The number of participants who said they intend to use COVID-19 as an opportunity for transformational change far outnumbered those who answered that their priority is survival, not innovation, or that they want to go back to the “good old days” before the pandemic.

This response was encouraging since it showed that they are ready to develop and implement a plan for drastic transformation — making a clear departure from the past — rather than following their conventional business strategy.

But the questions we received before and during the seminar painted a different picture. Despite the overwhelming response suggesting their intention to transform, the questions appeared to reflect the reality of their organization. For example, one participant asked, “How can we deal with the dilemma of hiring people who will fit the corporate culture while also seeking very different and innovative people?” Another asked, “How do we develop people with innovative and creative minds in an organization where leaders focus on short-term profit and no mistakes are allowed?”

I was quite surprised at the big gap between what they say they want to do (seek transformation as an agent of change) and what they say they can do given the reality they face. Recommendations given during the seminar such as “keeping up global technological change” or “revisiting the purpose of your company and the ideal world you want to create” sounded so detached from their dilemma.

My recent experience of taking part in board meetings of companies making major recovery plans from pandemic-related losses also highlighted the dilemma and difficulties they face. Many of the “drastic” plans discussed at the meetings turned out to be a stretch of original plans consisting of measures using the same old business practices.

Drastic transformational planning demands hard thinking as it requires a clean departure from companies’ historical product portfolios and traditional business practices. It usually includes divestment of several businesses and/or brands, and a completely new approach to identify and develop new service and business models.

Some employees will lose their positions because the ways of dealing with customers may change. For example, the use of online tools and digital technology is increasingly required for marketing and sales. During the COVID-19 stay-home weeks, online purchases increased significantly in Japan, though much less so than in other Asian countries where online purchases and the use of smartphones have become mainstays of shopping.

Producing tangible output from such a plan will require many new skills in the area of digital technology. In many cases, the hiring of a considerable number of people with the knowledge and skill to implement digital transformation will be critical. The implementation of the plan requires tough negotiations as there will be strong objections and resistance from people who want to continue their way of doing things. The journey to implement the plan to survive and prosper in the COVID-19 era will inevitably be difficult, but there is no other choice.

Despite repeated discussion and debate on the increased use of digital tools and digital transformation of business practices over the past years, not much has been done by Japanese companies, as their responses to the COVID-19 crisis revealed. COVID-19 has forced change upon us. Now is the time for organizations as well as individuals to make up their mind and commit to transforming their ways. The strategic window of opportunity will close very soon. If we miss this opportunity, we may not be able to start our journey to transform ourselves.

Recent remarks by Asian leaders with extensive global experience seems to convey the same message. Quite a few of them say that Japan is going nowhere, despite its economic and technological prowess. Japanese society seems unable to achieve a breakthrough and be an inspirational world leader. It continues to stay in its own comfort zone.

Does Japan want to be known as the country that may see the need for change but doesn’t take action? If it loses this opportunity, it will be known as the country that never changes.

Yoko Ishikura is a professor emeritus of Hitotsubashi University and serves as an independent consultant in the area of global strategy, competitiveness and global talent. She is a member of the World Economic Forum’s Expert Network.

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