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Changing Japan’s corporate culture to help SMEs

Global Entrepreneurship Week (GEW), which ran for nine days in 85 countries from November 16, 2009, featured seminars and events posing very difficult questions indeed. In Japan, delegates pondered: What’s affecting the nation’s entrepreneurial spirit? Can the country afford to have its vast entrepreneurial potential remain dormant and so domestically oriented? How do foreign entrepreneurs figure here? What opportunities and hazards will businesses encounter as Japan strives to realize Prime Minister Yukio Hatoyama’s bold declaration to cut 25% of CO2 emissions by 2020?

The first day opened with the factors affecting entrepreneurship in Japan. With the lowest score in the Global Entrepreneurship Monitor report, Japan has much work to do. What would help is government support for entrepreneurs. Asked about the Hatoyama administration, Synovate Healthcare President Bill Hall said: “There is fear about whether deregulation will continue and about what exactly does the Hatoyama administration have in mind.”

Hall questioned whether the government will go in the opposite direction of the Koizumi- Takenaka policy, and whether it will go after taboo topics such as developing Haneda and Narita airports, while “providing the funds to revive rural areas.”

Ultimately, the drive to become an entrepreneur comes from within—founded upon confidence, passion and creativity. Ideally that kind of thinking is fostered when people open up to different ideas. According to Ernest Higa, President and CEO of Higa Industries Co., Ltd., which brought Dominos Pizza to Japan, with fewer Japanese studying overseas at top universities, the competition from students in China, South Korea and India for entry into these universities abroad is heating up; consequently, Japan’s exposure to some of the best ideas is diminishing.

Hall said the erroneous belief in the difference between culture and custom has a debilitating effect on Japan. The country hangs on to non-productive ways of doing business. For example, in Japan, custom, not culture, traditionally dictates that women don’t work full time, but instead raise a family. Custom is also the basis for the belief that “Japanese can’t speak English.” Separating custom from culture is not easy, but one way to help differentiate is by being able to communicate and work in diverse cultures. That role model does not exist in Japan and as a result it is difficult for entrepreneurs to compete outside their domestic market — although many opportunities lie beyond.

On fostering entrepreneurship and innovation within companies in Japan, corporate culture differs. Keio University Prof. Takeshi Natsuno, inventor of the i-mode Wireless Ecosystem, said there is no compensation within Japanese companies to take an entrepreneurial risk. His i-mode discovery was achieved by passion, not risk or compensation. Moreover, with such a fast product development lifecycle, explained Higa, there is little time to encourage other creative projects.

But Water Group CEO Naoki Sakai thinks differently—creativity comes from a process of thinking, and with the current change in values and beliefs, we are moving into “design thinking mode.” The economy is moving from manufacturing to knowledge to innovation to design (more precisely, the social function of design). A change in values leads to a change in ideology (belief systems) and, in turn, a change in design. This kind of thinking has opened up opportunities for Japanese expertise in the green economy. Japan, with its decades of research and development in electric vehicles and batteries, is a key player— especially when it comes to standards of battery dimensions. However, without leadership from governments to adapt infrastructure systems, there is little point in creating hardware.

Economist Jesper Koll said the biggest challenge for Japan is one of succession and demographics: the older generation needs to give the younger generation a chance. Many Japanese universities agree. They have created spaces in which to incubate ideas and to provide the much-needed guidance from elders and entrepreneurs. Delegates agreed that is a promising start, but much more needs to be done to help entrepreneurs in Japan.