The Journal The Authority on Global Business in Japan

As Japan officially begins the Reiwa era, this historic tran­sition is emblematic of the transformations companies in Japan are undergoing. The Fourth Industrial Revolution is expected to dramatically change every industry and the way people work, and to create opportunities for new products, services, and customers.

Sometimes called Industry 4.0, this global shift is driven by digital systems, networked communications, machine learning, and large-scale data analysis, and the integration of these into business and production processes to make them self-sustaining and more efficient.

Combined with the impact of Japan’s changing labor demo­­graphics and spending patterns—and Japan’s strength in tech­­nology development—the Fourth Industrial Revolution is leading companies to transform the customer experience, increase productivity, enable diversity, and accelerate inno­vation. These trans­formations require a different employee mindset and behavior, and—at the core—a different culture.

It is Japan’s enviable culture that has enabled it, as an island nation, to wield economic power and political influence as the world’s third-largest economy. The country’s economic advancement has been achieved through a culture of dedi­cation and hard work, with unmatched quality, processes, and manufacturing technology.

This disciplined, rules-based culture, however, is not con­­ducive to the nimble, inclusive, and experiential business approach needed to pivot to the new realities of Industry 4.0. Leaders in Japan realize that their companies must trans­form, but many are struggling with how to shift their corporate culture.

Why does Japan have a reputation for being difficult to change? There are several characteristics unique to this culture that make the process of change different. These include the strength of the culture, the reliance on middle management, and a low level of trust placed in leaders by workers.

CULTURAL STRENGTH
Japan’s strong business norms and culture are evident in so many ways, from the formality and respectfulness of its lan­guage (keigo) to the strict business manners (where and how to sit and act) and communication protocols (who speaks first, order of escalation). These are all reinforced by family, labor laws, and business practices.

It is widely understood that the stronger the culture, the more difficult it is to change. The benefit of this strength, however, is that acceptance is quick once something appears to be the norm.

Companies that are successful at effecting change authen­tically communicate the same message numerous times from all levels of the organization connected to workers’ daily tasks. They utilize influencers and data, and align the workforce and business model to expedite normalization of the desired behaviors. For example, companies seeking greater levels of innovation not only celebrate team innovation successes, but also “good tries.” They measure and reward ideas, not just results, and streamline their approval processes to encourage and normalize the desired behaviors.

RELIANCE ON MIDDLE MANAGEMENT
The organizational and power dynamics in most Japanese companies differ from those found in other countries, where change is typically driven from the top. In Japan, without buy-in from middle managers and other key influencers, change either won’t happen or will only appear to do so. Firm commitment and accountability by leadership is critical.

However, due to a number of factors—including Japan’s consensus-based culture, tradition of long-term employment, and job rotation and promotion systems—sustainable change will not happen unless middle managers buy in.

So, how do you get these critical players on board? Successful companies accomplish this by involving middle managers from the beginning, giving them the necessary time and resources, and empowering them to determine how to achieve the desired state.

Middle managers must be able to work through their priority issues before they can envision the end result. This takes time and patience. It must also be managed through ongoing realignment discussions with leadership. Once the middle managers agree, the desired change is adopted more quickly and smoothly.

LOW TRUST
The work environment of many Japanese companies is charac­terized by harmony and safety. This would seem to translate into a trusting environment, but a global survey conducted in eight countries found that—when it comes to believing that leaders, bosses, and co-workers are being open and transparent in their communications—Japanese workers have a lower level of trust than the others.

Although Japan’s survey scores are usually more conservative than those of other countries, the gap in trust was significant. Mistrust is reinforced by what is at the heart of Japanese business culture: the indirect communication style, conflict avoidance, and need to “read the air” to determine what message is being conveyed.

LEADERSHIP MATTERS 
To accept change and overcome the fear of unexpected nega­tive impact, trust in the leader is imperative. Without trust, it is unrealistic to expect that employees will truly change their behavior. Trust can be built with authentic, transparent communication up front. It’s not enough just to announce things right before implementation.

It is also not enough to simply state the vision. Explain the “purpose” (rooted in societal benefits), “why” change is needed (and why now), “what” will be implemented and “how,” and the impact on each person’s daily work. Successful leaders take time to speak with—and truly listen to—employees. They provide regular updates and measures to show their commitment and accountability for success. Vulnerability and transparency help develop trust.

In this new era of business transformations, the right culture and behaviors are critical to a company’s ability to achieve its strategy. Japan’s corporate culture has been an important competitive advantage, and it can continue to be a strength if it can successfully evolve with the changing world of Industry 4.0.

Yes, change in Japan is possible! But it must be approached—and deliberately managed—in a way that takes into account the cultural and systemic uniqueness of this culture.

Nancy Ngou is ACCJ treasurer and associate partner at EY Advisory and Consulting Co., Ltd. where she leads the Organizational Change practice, helping companies transform their business and culture.