What will ignite growth in Japan?

First published by The Japan Times

Danny Risberg, Chairman of both the European Business Council in Japan and of Philips Electronics Japan, Ltd, wants Japanese to become fast, smart and independent decision makers. “Japan is a great place with great people and great technology. It’s ready. It’s right. It’s ready to explode,” he says… “But, it just hasn’t gone there yet.” Risberg, a Japanese-American ‘hafu’ who hails from California, explains.

Danny Risberg

Japanese like to think, he says. They carefully review all options before making decisions. Having done so, they’ll go back to thinking about what to do some more. Then they repeat the process—several times over. After a further review, finally everyone agrees. A decision is made. They discuss a new set of rules for everyone to follow. “Once everything is decided, they do it. And they’ll keep doing it for a long, long time,” he says. If only they would think less and do more in a virtuous loop of thinking, doing, learning, fixing and rethinking, the nation would become fast and nimble.

This holds true for Japanese entrepreneurs, many of whom still want to build businesses the old-fashioned way. Typically they are middle-aged managers who, after gaining 25 to 30 years of experience at a large Japanese company, strike out in business on their own. “On incorporation, they want to build the factory first,” notes Risberg. They borrow money against their homes to do so, as risk capital is hard to obtain. Once in hock, they end up with huge debts by digging themselves into an ever deeper hole. “If it works, great! If it doesn’t, they’re stuck.”

Risberg knows something about entrepreneurship. Before joining Philips, he started, built and sold a few small product-oriented companies in Japan and the United States. Each time he plowed his windfall profits back to fund the next new venture. He took one of those startups, a concept-stage medical product company, to the U.S. with his partner. They built the business as a lean startup and sold it to Respironics Inc. In the end, Philips bought the company. Risberg stayed on as CEO for Asia-Pacific.

By example, he explains how entrepreneurship differs. A medical technology startup in the U.S. might raise three or four funding rounds as founders move from technology development to clinical research to securing intellectual property to getting medical approval and licensing to identifying target customers. If all goes well, they build a factory with the final tranche. Entrepreneurs learn and improve what they are doing from the results of previous actions in a fast iterative process, long before assuming large overheads. Such lean startup methods reduce the cost and risks of failure. “In the U.S., entrepreneurs fail fast,” says Risberg. In contrast, the process “is almost backwards” in Japan.

Why this is so is open to conjecture. It is natural to want to do things the way we already know, as each new decision comes from something learned in the past. This is especially true for what was learned long ago and passed down from generation to generation. Such deep-rooted shared beliefs are rarely questioned.

One hypothesis suggests in ancient times survival required collective cooperation among people to successfully cultivate rice. Farmers were taught to subordinate self-interest for the greater good of the group. According to Japanese anthropologist Emiko Ohnuki-Tierney, religious powers achieved this by spinning emperor-centered myths, ensuring “the transformation of a wilderness into a land of abundant rice at the command of the Sun Goddess, whose descendants, the emperors, rule the country by officiating at rice rituals.”

The myths may have survived the test of time. Japan today runs smoothly and in a predictable manner. Those who upset social harmony too often become outcasts. Once agreed upon, Japanese people do only what has been collectively decided. And they continue doing it, regardless of effectiveness, for far too long.

Risberg believes Japan needs to reform in ways rarely discussed. Structural reforms are surely needed, including labor, immigration, agriculture, health care and corporate governance reforms. But these have been discussed for years, without sufficient progress. He says action and people-based reforms are also needed. “Problems are simple to solve if you are thinking about them, taking action and then learning. On the other hand if you’ve decided everything in advance, you’re only going to do what you’ve decided,” he repeats.

To encourage more thinking, doing, learning, fixing and rethinking, Risberg says Japan needs more role models who are “pegs that become successful, just before they would otherwise get pounded down.” Rakuten CEO Hiroshi Mikitani is one example. These are people who are unafraid to take initiative and lead the pack.

Controversially, Risberg thinks that a true business failure is needed. Japan is too safe and comfortable. There are too many zombie companies kept alive by artificial low interest rates, pressure from banks and investors, and by those who believe in Japanese exceptionalism. While regrettable — nobody wants people to suffer — a big business failure involving billions of dollars and thousands of employees could not be ignored. It might provide the needed wake-up call for people to start thinking and acting independently, leading to innovation and growth.

The disruptive thought caused me to recall a discussion I once had with Japan national rugby team head coach Eddy Jones. Jones told this author, shortly before heading off to the 2015 Rugby World Cup, that the inability of players to make quick and independent decisions under pressure was the reason his team had not won a World Cup game in 24 years. “If you ask them to do something, they just do it. And they’ll keep doing it regardless of what else happens,” he explained.

Over four years of training leading up to the big games, Jones taught players to become fast, smart and independent decision-makers. His coaching paid off, when to great celebration Japan unexpectedly beat South Africa. Here was proof that Japan, when push comes to shove, can successfully compete against the world’s best adversaries.

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