Japan is undergoing many cultural, business and political changes simultaneously.  For a nation that once was touted as would be No.1 in national GDP, it must be very painful to see China surpassing it and getting the World’s attention.  This blog observes that the emerging theories of organizational DNA that purport to relate a company’s leadership, strategy, culture and structure to its business success might throw some light on the current Japanese business plight.  For example, disruptive innovation is currently playing a big role in reshaping the market place by Apple and Intel in mobile and cloud computing.  Once very successful, in borrowing and copying innovation, can Japan compete with China and India in the future?  Should the Japanese companies alter their DNA to change the game in the future? Can they leverage their still preserved technical organizations, R&D Labs and investment capital? After all, even if Japan is No.3, their GDP per capita still is about 10 times that of China or India.  Here are some thoughts based on my observations over past two decades.

(日本は今、文化面、経済面、そして政治面でも多くの変化に直面している。日本 は、かつてはGDP世界第一位になろうかと賞賛されもしたが、今やGDPでも中国が 日本を凌駕し、世界を席巻しつつある状況を、痛みを伴いながらも指を咥えて見 ていなければならなくなっている。

本ブログでは、ビジネスの成功と関わりが深い企業のDNA(企業におけるリーダ シップ、戦略、文化さらには構造)について考察し、日本が現在置かれたビジネ ス面での苦境を紐解く新たな理論について示していきたい。 一例を挙げると、モバイルやクラウドコンピューティングにおいて、Apple や Intelが新たな市場形態を作り出したように、今日では破壊的イノベーションが 大きな意味合いを持つようになってきている。 かつてイノベーションを模倣することで大成功を収めたように、今回も日本は、中国やインドとも競い合えるのではないだろうか? また、日本企業が自らのDNAを変革することで、近い将来、Appleのように競争形態を変化させていけるのではないだろうか?さらには、日本企業は技術指向の組織構造をこれまで維持してきたが、Intelのようにもっと積極的に研究所や投資資本を活用していけるのではないだろうか?結局のところ、日本は例え世界第三位に甘んじていても、国民一人当たりのGDPでは依然として中国やインドの10倍近くも維持しているのである。本ブログでは、日本を過去20年以上見てきた経験に基づいて、幾つかの私の考えをまとめていく)

Kabuki Theater

The famous historic theater, Tokyo Kabuki-Za which opened in 1889, closed its curtains in the end of April 2010.  It will be torn down and become a theater and office complex with direct connections to the subway station.  According to Encyclopedia Britannica, Kabuki is a “Popular Japanese entertainment that combines music, dance, and mime in highly stylized performances. The word is written using three Japanese characters — ka (“song”), bu (“dance”), and ki (“skill”). Kabuki dates from the end of the 16th century, when it developed from the nobility’s ‘no’ theatre and became the theatre of townspeople. In its early years it had a licentious reputation, its actors often being prostitutes; women and young boys were consequently forbidden to perform, and kabuki is today performed by an adult all-male cast. Its texts, unlike no texts, are easily understood by its audience. The lyrical but fast-moving and acrobatic plays, noted for their spectacular staging, elaborate costumes, and striking makeup in place of masks, are vehicles in which the actors demonstrate a wide range of skills. Kabuki employs two musical ensembles, one onstage and the other offstage. It shares much of its repertoire with Bunraku, a traditional puppet theatre.”

A. C. Scott [1] writes that the Japanese and Chinese classical dramas have many points in common, yet differ widely from each other.  “The Kabuki, like the Chinese theater, lays great stress upon the virtuosity of the actor.  He supplies the motive for the whole drama.”  The actor must play to a knowledgeable audience within the constraints of tradition but also must display individual style that takes the symbolism to go beyond imitative repetition.  While the Chinese drama emphasizes on the actors singing, Kabuki actors do not sing at all.  “The Kabuki stage is a complex affair with elaborate settings and effects which have been developed to a high pitch of artistry through the centuries.”

For a nation that is very proud of their centuries old tradition and agrarian cultural roots, the symbolism of the Kabuki-Za transition to a modern office complex is just a portrayal of the many changes that are rapidly descending on their culture, business and political landscape.

According to the World Policy Journal [2], “Japan, once considered an economic superpower and potential contender for global pre-eminence, finds itself slipping down the rankings of leading states. Although still the second largest economy in the world (at the time this article was published), it is absent from most realpolitik discussions about the global redistribution of power that is shaping the new world order, which highlight the emergence of Russia, China, and India. China’s rise in East Asia is now eclipsing the land of the rising sun, but Japan’s slippage is not all due to China’s growth. Japan’s maladies stem from three causes largely of its own making: its loss of a distinctive national identity, its international leadership deficit, and its continuing economic and political travails.”

National GDP

According to an estimate by Japan’s Cabinet Office, Japan’s second-quarter in this fiscal year, unadjusted GDP totaled $1.2883 trillion on a nominal dollar basis, against China’s second-quarter unadjusted GDP of $1.3369 trillion.  In the first six months of 2010, Japan’s GDP before seasonal adjustments totaled $2.5871 trillion, surpassing China’s $2.5325 trillion.  “People have been expecting the Chinese economy to grow at a rapid pace and become physically larger than Japan for many years, so it is not a surprise,” said Robert Feldman, chief economist at Morgan Stanley MUFG Securities in Tokyo. [3]

“The issue is whether this will be a trigger for policy changes in Japan,” he said, and he added that in the short-term, domestic political considerations were paramount as prime minister Naoto Kan struggles with a hung parliament and a potential leadership challenge from his own party.  Given the history, being surpassed by China may be not palatable but Japan still leads China in per Capita GDP by more than a factor of 10!

Table 1 shows both nominal and per capita the GDP [4] in 2009.

Japan’s GDP surpassed that of West Germany in 1968 and became the second biggest in the world, topped only by the United States. This achievement was credited to a national effort that supported the Japanese industries who established leadership in exporting automobiles, telecommunications and consumer electronics. Today, the illustrious Toyota is saddled with quality issues [5].  Fujitsu’s ambition in the 90’s to be number one in Information Technology [6] has proven to be totally elusive.  NEC’s leadership in supercomputing has all but vanished and the company is struggling today to find its niche while selling its various assets globally.  Once considered legendary, Sony’s innovation in consumer electronics has been usurped by Apple.  Nintendo’s attempt to change the game with Wii does not seem to be sustainable.  The Samurai business men (even today, there are no significant Samurai business-women) have proven to be not invincible.  What can Japanese businesses do to prevent further decay even if they cannot completely re-engineer to regain the past successes?  How can they leverage their still preserved technical organizations, R&D Labs and investment capital?  After all, Japan is still no. 3 in GDP and No 2 in Per Capita GDP among the top three GDP leaders!

The answer may lie in revisiting the tradition of renewal practiced by the Japanese at the Ise Jingu [7], ”the most sacred shrine in Japan, with great spiritual and historical significance.  One of the most amazing things about Ise Jingu is that the wooden sanctuaries are rebuilt and rededicated to the enshrined goddesses every 20 years in a process called “shikinen sengu”. This tradition began with the first rebuilding in 690, and is still being practiced. The sixty-first rebuilding was completed in 1993, with the sixty-second scheduled for 2013. Ise Jingu is actually divided into two large shrine compounds, containing over one hundred and twenty smaller shrines in addition to the two major shrines: Naiku (Inner Shrine) and Geku (Outer Shrine). The Inner shrine enshrines the sun goddess Amaterasu Omikami, who is believed to be the ancestor of the Japanese imperial family. For this reason, the Emperor visits this shrine when he assumes office, and on other important occasions. It is said to have been erected roughly 2000 years ago, and its location was chosen by the 11th Emperor of Japan, Suinin. The Outer Shrine enshrines Toyouke no Omikami, the goddess of harvest, and was erected in 478 A.D. It is customary to visit the Outer Shrine first, but if you don’t have much time on your hands a visit to the Inner Shrine is recommended.  The entrance to the Inner Shrine begins at the Uji Bridge, which passes over the sacred Isuzu River. There are two large torii gates at either end of the bridge, and it is said that by crossing the bridge one’s mind and heart are purified.  The Uji Bridge is also rebuilt in this ceremony.  What strikes visitors to Ise Jingu the most after passing through the gates is the sense of nature and life around them. The grounds are comprised of 5500 hectares of natural forest as well as young hinoki (cypress) trees, which were planted in 1926 for future harvesting. The trees tower over one passing through the grounds. Along the way to the main building in the Inner Shrine, one can wash their hands and mouth with the water from the Isuzu River at the Mitarashi. This is also done for purifications purposes.”

A Japanese friend of mine says “change or renewal from time to time itself is in the DNA of Japan. We think preservation of old things is important, at the same time, we like new and fresh things as the Ise Jingu demonstrates.  Probably, we have it in our DNA not to stick to the materials much and want to see beyond it.”

Disruptive Innovation and Japanese Business Conundrum

There are now a few theories emerging which identify an organizational DNA [8, 9, and 10] and its impact on business success.  These theories deal with how to identify the DNA and change it to meet the evolving business needs.  While each theory attempts to claim that their model identifies the patterns that have evolutionary advantage, one stands out.

According to the website of DNA Global Network Inc.,  [8] a management consulting firm in the Silicon Valley, a company’s DNA consists of four building blocks – Leadership, Strategy, Structure and Culture.  Leadership has the responsibility to define the strategy and align the structure and culture of the organization to shape the core DNA building blocks.  Evolution it seems, has defined a set of successful patterns for each building block.  Every organization either by choice or happenstance evolves by following a path where they define the core DNA that determines their success or failure.  Leadership’s ability to shape the strategy, culture and structure determines their destiny.  The right alignment of strategy, culture and structure results in creating the value to all stake holders and a sustainable organization.

Various components of the building blocks they discuss in their website are shown in Table 2.  The claim is that certain patterns formed by a combination of these components are more successful than other combinations.

Figure 1 shows my attempt to understand the relationship patterns of the key components in the three building blocks that they claim (on their website) have proven to be successful in today’s business environment:

An organization’s DNA perceived by its customers, R&D experts, Product business units and operational groups can be measured using appropriate surveys to create clear patterns.

If this is the case, using these patterns, we can examine various companies on how close they are to the winning patterns.  Notice that the strategies have to be matched with right culture and structure to gain evolutionary advantage.  For example, a control culture to create disruptive innovation may not be ideal.  On the other hand, a control culture may be just what the doctor ordered for achieving operational excellence.  Similarly, we know that a hierarchical structure works well to achieve operational excellence whereas a matrix style works well in establishing product leadership with cross-functional coordination.

It would be very interesting to analyze individual Japanese company’s DNA and identify its current state.  If we represent each component with a color green if the organization measures high, yellow if it measures medium and red when it measures low, we can depict the DNA of an organization as a pie-chart.

The pie chart on the left shows a low scale on disruptive innovation, medium on cultivation culture and Program and functional matrix characteristics required to harness disruptive innovation.  The pie chart on the right shows a market leader with a well-balanced strategy.  Similar analysis can be performed on various component relationships.

Another way of describing the DNA-print of successful strategies is shown in Figure 3:

Different organizational DNA is required to execute a different strategy and successful companies either develop these organizations within or collaborate with others who have complementary DNA to successfully compete in the market place.  Examples of successful companies with disruptive innovation as part of their core DNA are Apple and Intel.  What would be the patterns for Japanese Companies?  How are they different from other world-class companies?  Given the differences in these patterns, can one company organize itself to create different groups with ideal patterns to deliver on all four strategies?

Twenty years ago, I concluded (in a thesis submitted as JMP-17 student at JAIMS, Japan American Institute of Management Science, Hawaii and Sophia University, Tokyo) that the Japanese companies were good at incorporating innovative technologies that are borrowed from US in hardware but were not so adept in borrowing innovation in software [11 and 12].  With the advent of Chinese and Indian competition in borrowing innovation (both in hardware and software domains which was virtually absent twenty years ago) the pressure is now on to adopt disruptive innovation in both hardware and software to differentiate.  Will Japanese companies step up to this challenge or embrace mediocrity while watching China and India surpass them in borrowing and improving innovation.  The economics of communication, collaboration and commerce at the speed of light levels the playing field in product leadership, operational excellence and customer intimacy, and China and India will no longer be Japan’s customers.  They will be more Japan’s competitors to become number One; After all, there is room at the top for only one number One.  As every one starts to battle in establishing product leadership, operational excellence and customer intimacy using same technologies that get commoditized, only choice open for nations to be number one is to bring disruptive innovation to differentiate.  Time and again, evolution has proven that architectural simplification through disruptive innovation brings orders of magnitude productivity. Life forms survive and thrive by changing their DNA and adopting to external changes.  Will the differentiation in the future come from organizing yourself to excel in disruptive innovation?  What are the limits?

This is the subject of my current research and I would like any one with appropriate insights to participate.  I am interested in listening to what the Japanese business leaders today will say about these observations.  Twenty years ago, I concluded my thesis with these remarks. “The differences in approach from hardware and software are large enough at this time, that it will be difficult to gain the competitive advantage in software as in hardware. The management is well aware of this situation and will be looking in the future to rectify it. For example the new president of Fujitsu Mr. Tadashi Sekizawa (who will start his term in June 1990) has recognized the importance of software and his motto for the future is ‘Sofuto de rieki wo koujou’ (Kogyo Shinbun, 1990).”  However, history has proven that changing at least one company’s culture in Japan was not so easy and the focus of the company still remains on hardware.   The profits from software are still elusive.  May be it is time for Japanese companies to adopt the tradition of the twenty year renewal “shikinen sengu.”  Toki wa ima.


[1] A. C. Scott, “The Kabuki Theater of Japan”, The Dover Edition, Published 1999



[4] 2009 World Economic Outlook Database-October 2010, International Monetary Fund.  Accessed on October 6, 2010. (reproduced from Wikipedia)

[5] Bunraku, Toyota Quality Woes, Japanese Hardware/Software Prowess and Management Lessons

[6] Lyne, Jack. “Fujitsu PC Corp. CEO Akio Hanada: Coming to America . . .And Just about Everywhere Else” 1996,






[12] Current Issues in Japanese Management – A Second Look – “Is Japanese Software Thrust As Powerful As Their Hardware Thrust? Or Does It Really Matter Anymore?”

Bunraku and the Harmony of Collaboration

If art tends to exaggerate the gestures, emotion and the intensity of feeling to capture the attention of its audience, to focus it on the point of artist’s expression, then Japanese Bunraku takes exaggeration to new heights by combing the collectivism of three artists and one specially crafted puppet.

According to the Wikipedia entry [1], “The main puppeteer, the omozukai, uses his right hand to control the right hand of the puppet. The left puppeteer, known as the hidarizukai or sashizukai, depending of the tradition of the troupe, manipulates the left hand of the puppet with his own right hand by means of a control rod that extends back from the elbow of the puppet. A third puppeteer, the ashizukai, operates the feet and legs. Puppeteers begin their training by operating the feet, then move onto the left hand, before being able to train as the main puppeteer. This process can take 30 years to progress.”

The end-result is a harmonic blend of fluid movement of the puppets, words of the off-stage readers, and the shamisen music from the highly accomplished players.  I had read that the puppet masters are so skillful that the audiences soon forget their presence [2], but I was not prepared for the surprise when I saw a live performance in Tokyo twenty years ago.  The exaggerated movements of the eyes, eyebrows, mouth, hands and fingers in stylized gestures create a heightened sense of reality in which the puppet and the puppeteers become one and the words and the music blend with the scene to transport the viewer into a surreal world of exquisite emotions dealing with ninjo and giri  [3].  Ninjo refers to raw human feelings or human nature not influenced by cultural norms or obligations.  Giri represents individual’s obligation to others based on inter-personal give and take relationships.  Social harmony that is the essence of collectivism is promoted by encouraging giri to supersede ninjo when a conflict occurs between an individual’s feelings and obligations to others.  The themes of Bunraku capture vividly the conflict between one’s human emotions (such as love, compassion, greed, revenge, jealousy, and anger) and one’s obligations to others in the group.  Ninjo is the equivalent of the Keynesian concept “animal spirits” [4] whereas giri represents regulation and control whether it originates from within the self or imposed from outside.

While the older generation of Japanese nostalgically lament the loss of Tokugawa era values with western influence and the emphasis on individualism, some of the younger generation, dismiss Giri and Ninjo as old feudal concepts that are no longer relevant.   Twenty years ago, a  Japanese colleague from Fujitsu, who came to see Bunraku with me, admitted that it was her first time to see Bunraku live, and was very pleasantly surprised at the impact the performance had on the viewers.  In any case, content aside, the practice and performance of the puppeteers and the puppets of Bunraku display exquisite motions and emotions that capture the attention of the audience.  The perfect timing of the three puppeteers making the emotions come alive such as a woman sobbing with a handkerchief, a villain displaying astonishment, fury and anger using eyebrows, takes years of practice and dedication.  The institutional knowledge is preserved in the continuation of the practice of the art through the support of National Theaters.  The Japanese government recognizes the dedication and sacrifice of the practitioners by giving the title “living national treasures” to the masters under Japan’s program for preserving its culture, harmony and the power of institutional knowledge.

Toyota Quality Woes

The Bunraku masters depict a culture that values the importance of the human element, synergy of the group, cross-functional coordination through intimate communication, patience, and a balance between individualism and collectivism with a bias toward collectivism.  These values also were carried into social, political and business culture and formed the foundation for the Japanese uniqueness that served them well in becoming the number two global economy.

Twenty years ago, when I was doing research for my master’s thesis at Sophia University, Tokyo, on the subject “Is Japanese Software Thrust as powerful as their Hardware Thrust?”, I was surprised at the role the cultural traits played and equally surprised at the recognition of their importance by the senior Japanese management that I interviewed.  All of them agreed with my conclusions summarized in Table 1 [5].

Two of these traits were taken to new heights by Toyota and other Japanese companies in their manufacturing process.  Quest for constant process refinement led to the perfection of Quality Function Deployment and House of Quality.  Toyota also used end-to-end information management to track various components that are part of an automobile from cradle to grave.  They used it in their testing processes.  They used it to track their automobile whereabouts globally and knew when they were due for maintenance etc.

The Toyota Way is summarized by Jeffrey K Liker [6] and has been discussed extensively by many others:

  1. Having a long-term philosophy that drives a long-term approach to building a learning organization
  2. The right process will produce the right results
  3. Add value to the organization by developing its people and partners and
  4. Continuously solving root problems to drive organizational learning

“I learn all the time, but I don’t think I’ll finish developing as a human being.  One of my main functions now is growing other Americans to follow that path.  They call it the DNA of Toyota, the Toyota Way and TPS – they are all just very integrated.”  With this statement, Gary Convis [7], the first American president of Toyota sounds more like a Bunraku master than an American business executive.

So, where did Toyota go wrong?  How could a company with such passion for quality and end-to-end information management make so many mistakes in identifying and reacting to its recent quality issues?  We can get some clues from the statements of Akio Toyoda [8]

“I have been considering the rapid growth in our manufacturing and marketing operations. And I have been eager to keep management decision-making close to our customers. We need to be where we can hear directly from our customers. That will enable us to incorporate customer feedback swiftly in research and development and, as necessary, in hands-on measures in the marketplace, including product recalls.

“In the past few months, our customers have started to feel uncertain about the safety of Toyota’s vehicles.” He says he takes “full responsibility” for that fact and goes on to blame the company’s problem on its decision to pursue growth too aggressively.

“Toyota has, for the past few years, been expanding its business rapidly”

“Quite frankly, I fear the pace at which we have grown may have been too quick.”

Toyoda says the company’s priority — which he said is ‘put safety first’ — “became confused, and we were not able to stop, think, and make improvements as much as we were able to before, and our basic stance to listen to customers’ voices to make better products has weakened somewhat.”

“We pursued growth over the speed at which we were able to develop our people and our organization, and we should sincerely be mindful of that,”.

“I regret that this has resulted in the safety issues described in the recalls we face today, and I am deeply sorry for any accidents that Toyota drivers have experienced.” [9]

Three factors seem to have played a role:

  1. Global expansion coupled with a cultural incongruence between Japanese emphasis on the “Way” and the  western tendency toward “profit at any cost” individualism have resulted in what Toyoda called the inability to “develop the people and the organization” to meet the fast growth rates demanded by short-term profit motives with same quality.
  2. End-to-end information management systems seem to have not kept up pace with global growth and the result is a communication failure between those who are close to their customer and those involved in Research & Development.
  3. A third factor, that is not so clear-cut, is the increasing role of software in the automobile itself.  As the automobiles have become more software dependent to control the efficiency and performance, software innovation, its development process and its quality control play an ever-increasing role in the overall quality of the automobile.  In the past, the cultural traits that have served well in developing Japanese hardware prowess were not utilized so well in developing the software prowess.  Twenty years ago, Japanese engineers and their management were slow in bringing innovation in software technologies into their products and were not able to deal with the fluidity of software requirements.

Japanese Hardware/Software Prowess

“The differences in approach from hardware and software are large enough at this time, that it will be difficult to gain the competitive advantage in software as in hardware. The management is well aware of this situation and will be looking in the future to rectify it. For example the new president of Fujitsu Mr. Tadashi Sekizawa (who will start his term in June 1990) has recognized the importance of software and his motto for the future is ‘Sofuto de rieki wo koujou’ (Kogyo Shinbun, 1990).” [5]

With this remark, almost twenty years ago, I concluded (in my thesis submitted as JMP-17 student at JAIMS, Japan American Institute of Management Science, Hawaii and Sophia University, Tokyo) that the Japanese business leaders in general and Fujitsu top managers in particular were poising themselves to play a bigger role in global software market.

Twenty years is a long time.  The role of software has increased in every aspect of human life.  Today, we communicate, collaborate and engage in commerce at the speed of light with myriad software systems helping us.  Automobiles today have more software controlling them than the humans who drive them.  Cultural traits have changed along with globalization and commerce at the speed of light.  Space and time boundaries have blurred.  Japanese companies today are  influenced heavily by western risk addicted, “profit at any cost”, business executives.  Sony is no longer a technology innovation company. It has transformed itself to being a risky entertainment company managed by a western executive.  Increasingly, western business practices have changed the global Japanese companies.  Global competition for market share in a crowded automobile market and a stock market which, measures share holder value by the minute through a casino like trading operation, force rapid growth at any cost.

Management Lessons

From Toyoda’s testimony, Gary Convis’s passion and beliefs seem to be different from those of Toyota’s management in charge of operations today.  Obviously, Gary Convis was not successful in passing on the mastery to his successors like the Bunraku masters were.  What is the role of cultural traits today in business management?  Have globalization and the quest for communication, collaboration and commerce at the speed of light normalized the cultural values across the globe?  Is there still a difference between Japanese hardware and software prowess today?  This is the topic of my research and I invite anyone with appropriate insight to participate in an update to my thesis of almost twenty years ago.

Despite controversy, extensive data gathered by Geert Hofstede [10] still is valuable in gaining some insights into the role of cultural dimensions.

In my recent discussions with some of the Japanese senior managers from large IT infrastructure companies in Japan, most people agreed with the three observations highlighted in the figure above.  If these hold true with a larger sample, how will these observations translate into management lessons in a global context where space and time boundaries are being blurred?  Are these cultural dimensions important in understanding the nature of Indian and Chinese business practices?  Will they explain why many high-profile American business managers and investors preferred selling dubious financial instruments to unsuspecting Icelanders instead of building energy-concious automobiles?  Will they explain the lack of corporate conscience or perhaps the corporate schizophrenia of drug companies like Pfizer which results in knowingly marketing drugs like Baxter and Cerebrex while at the same time introducing other miracle cures? Food for thought!

A more interesting correlation between GDP of a nation and the Hofstede cultural dimensions is shown in the figure below:

GDP of a nation and its cultural dimensionsThe correlation between Per Capita GDP and the cultural dimensions is very revealing as shown here:

One can draw one’s own conclusion.



[2] Donald Keene, Keizō Kaneko, “Nō ; and, Bunraku: two forms of Japanese theatre”, Columbia University Press, Morningside Edition, 1990

[3]  Shmuel Noah Eisenstadt, “Japanese Civilization: a Comparative View”. University of Chicago Press, 1995, p 341

[4]  George Akerlof and Robert J. Schiller, “Animal Spirits: How human Psychology Drives the Economy and Why it Matters For Global Capitalism”, Princeton University Press, 2009

[5] Rao Mikkilineni, Masters Thesis, Japan American Institute of Management Science and Sophia University, 1990

[6] Jeffrey K Liker, “The Toyota Way”, McGraw-Hi9ll, 2004

[7] Jeffrey K Liker, “The Toyota Way”, McGraw-Hi9ll, 2004, p175

[8] Akio Toyoda, – Toyota Motor Corporation Press Conference Addressing Quality-Related Matters , Tokyo, Japan, February 17, 2010

[9] Akio Toyoda, Congressional hearing:

[10] :