Achieving Strategic IT in the Japanese Enterpriseby Jem Eskenazi A 10-step method for educating management and staff Far too many Japanese corporations view information technology (IT) as a cost center to be controlled rather than an investment that will produce returns. But with the right set of strategic priorities, and a clear understanding of how to work within the framework of Japanese business culture, IT-savvy foreign executives and managers can guide their firms on the path to successful implementation of large-scale Information Technology projects. About a hundred years ago, when large corporations were getting their first telephone lines, this is how an executive in one company would "talk" to an executive in another company. The executive would dictate the message to his secretary, who would take it to a special telephone messenger (considered a technically savvy individual - the equivalent of today's network administrator). The messenger would then call the other company and read the message to his counterpart on the other end. That messenger would then type up the message and route it to a secretary, who would present the message to the executive for whom it was intended. Eventually, telephones started to become cheaper and easier to use. But the suggestion of providing a telephone for each employee met with a big (and negative) reaction from management. "The equipment will sit idle 90% of the time!" "Employees might use them for gossiping." So proclaimed the shortsighted managers of those times, who could not envision that the telephone would become an integral and essential part of business (or of daily life).
The more things change... One reason that Japan lags in IT implementation is culture-based. Japanese business culture is very different from that of the US, and there is a natural resistance to accepting that the same type of IT revolution that has swept the US can, and must, happen here. Yet Japan has always shown remarkable success in adapting new technologies within its different cultural frame, and there is no reason to believe that the adoption and adaptation of IT will be any different. Why, then, do most business articles analyzing the state of IT in Japan claim that - apart from a few spectacular but isolated success stories - the typical Japanese company either does not use IT or, if it does, uses it only for such simple tasks as sending electronic mail or creating printed documents? I will concede that there is some measure of truth to these claims, but they also reflect a general lack of understanding by Western journalists of how differently change occurs in Japan. It is true that the IT implementation processes are not following the same patterns in Japan as in the US; nevertheless, IT is clearly changing the face of Japanese business. It is the role of the CIO (chief information officer) and other IT-savvy managers and staff to convince company management of the necessity to aggressively drive this change. Based on my own experience, I would like to propose a 10-step method for educating Japanese company management and staff on the necessity and importance of IT for successful business. Remember that for the gaijin manager, the important initial step is trying to understand Japanese culture, and acting within the acceptable behavioral patterns in this country. Without such efforts, the best intentions (and one must wonder whether in the absence of such efforts they really can be best intentions) will invariably fail. [For an insightful discussion of the unique challenges facing foreign IT managers, see Jem Eskenazi's previous article, "Introducing Computer Culture into Japanese Firms," in our October 1996 issue, page 21.-Ed.]
1. Explain that IT really does pay off In a Japanese company, most decisions are made through consensus, so it is not enough to convince top management. You'll need to convince key people in all levels of company hierarchy. There are hundreds of outstanding examples of companies that have become very successful, or even redefined their industries, through the use of IT. Who hasn't heard of the successes of Federal Express, United Airlines, or Amazon.com? The problem with citing these examples for Japanese management, unfortunately, is that they are US-based companies, and "things are different in Japan." It will be more effective to give examples of Japanese companies who have similarly benefited from IT. There are many successful companies in Japan that are using IT strategically: Sony, Matsushita, Mitsubishi Electric, and Pillsbury Japan, for example. Two of the best examples, however, are Seven-Eleven Japan and Kao Corporation. Seven-Eleven used IT to such an extent that it basically "changed the rules" of convenience store operations in Japan. Seven-Eleven Japan is now teaching its outstanding methods to the 7-Eleven US operations. The profits - above 7% of sales as compared to the less than 2% for its biggest competitor - are clear testimony that IT is more than just exciting technology; it pays off. Similarly, Kao changed its whole corporate culture with the help of information technology. Not only Kao's distribution and refurbishing systems, but also its internal information-sharing systems, now reflect a flat, flexible, and agile operation. How many other companies are there, in Japan or elsewhere, where any employee can easily view the chairman's expense account on any PC? Kao's profit, meanwhile, is above 8% of sales, while its closest competitor's is 1.5%.
2. Convince them that change is not a threat, but an opportunity Furthermore, the typical Japanese worker associates corporate change with loss of job security. IT is feared not only because it means a change of the familiar routine, but also because it changes the rules of the game by restructuring operations, flattening the organization, and making certain administrative roles obsolete. It is, therefore, extremely important to convince all levels of the company that the changes IT - and, specifically, IT-driven re-engineering projects - will bring to the company do not constitute a threat, but instead represent an opportunity for each employee and for the organization as a whole. Unless this point is accepted by all staff, it is better not to even start the necessary change processes for using IT, since the effort is almost certain to fail due to internal resistance. Japanese workers are renowned for achieving spectacular success in projects once full consensus is obtained. But they are also remarkably good at offering subtle, passive resistance to ideas they find threatening. The CIO's role should, therefore, be one of communicator more than anything else: someone who will spend many months simply explaining to all levels of the company why a transformation project is desirable, and why it will be beneficial to all. Of course, this communication effort must be accompanied with specific planning processes to deal with those departments or individuals whose jobs the project will make obsolete, as well as planning for the careers of those individuals who will form the re-engineering team. It is unfortunate that the term "re-engineering" has been equated with painful downsizing in the US; this in itself is a major fear factor for the Japanese. The message must be clearly communicated, therefore, that the change will be driven by the employees themselves, and implemented for the benefit of the customer, the company, and the employees themselves. Again, many good examples exist in Japanese business. My preferred quotation is from Yoshio Maruta, ex-chairman of Kao, who said, "Past wisdom must not be a constraint, but something to be challenged. Yesterday's success formula is often today's obsolete dogma. My challenge is to have the organization continually questioning the past so we can renew ourselves every day." Such advice, coming not from Western cutthroat downsizing advocates but from well-respected Japanese industry leaders, can be very effective.
3. Form user-driven teams So, bring those who will benefit into the process. It is much better to partner with the people who "know the business," who can express the need for information systems in their own terms, than to be a voice in the wilderness insisting that implementing IT solutions will have great returns for the company. This applies to infrastructure plans as well as major IT related re-engineering projects. Regular IT investment for infrastructure establishment and maintenance can be driven by an IT "steering committee" composed of top managers. This committee should make decisions about the long-term direction and investment for IT within the company. Decisions announced by this committee will carry a lot more weight in a Japanese company than recommendations coming just from the IT group. (The CIO will play a special "educational" role for this committee, explaining the details and benefits of projects and investments without going into the technical details.) An even more important team is one formed for a companywide re-engineering, or transformation, project. (The Japanese term henkaku has a positive connotation for change and can be used in this context.) Such re-engineering projects are becoming more and more common in Japanese corporations, often involving the application of Enterprise Resource Planning (ERP) software packages such as SAP R/3. Regardless of country, such projects are best implemented through a team composed of key users in the company. In Japan, it is particularly important to have users drive such projects, as changes driven from the IT department will usually face resistance. Members of the team must be some of the best employees in key departments. Since the implications are often companywide process changes, the IT steering committee mentioned above, or another specifically formed for the purpose, can supervise the general direction of the project.
4. Involve the regional offices Sometimes, head office management thinks that the aim of implementing IT is to bring more information about the business of the company to the top. Although this is one important aspect of IT, typically the biggest returns are obtained from systems that allow better customer response and better marketing information at field level. Remember, though, that communication with regional offices only through memos or e-mail is not enough. As with any serious relationship in Japan, regular face-to-face meetings are essential. This takes time and effort, but it is important that IT managers travel to the regional offices to hold meetings. It is also essential to have key regional people on the steering and development teams. Not only will they bring the field view to IT projects and investments, but it will send the message to regional offices that the proposed IT initiatives are not simply head office-driven efforts.
5. Concentrate first on visible activities Although this rule applies anywhere in the world, it is particularly important in Japan: Concentrate first on activities and projects that will show quick and visible returns. These might be simple administrative systems that cut costs (e.g., communication costs) or reduce cycle times (e.g., travel expense filing). More ambitious goals might include targeting specific IT-enabled business innovation (such as enhancing interaction with customers or suppliers), targeting IT to launching a new product or service or enhancing the value of existing products or services, making accurate customer order and sales data available to sales and marketing staff, or providing real-time and accurate information to management. These may be just the tip of the iceberg from an information management point of view, but such quick and dirty solutions that are visible will create trust in the IT group. More fundamental solutions, such as ERP systems, can then follow.
6. Maintain an adequate level of investments A big danger to avoid is investing less than is required to maintain the proper level of commitment. What are some of the pitfalls to be avoided? To start with, don't implement an infrastructure project that covers only some offices or some users. Don't rely on PCs that are less powerful than necessary, or computers without appropriate software or support. Do not purchase desktop PCs simply because they are slightly cheaper if portables would be more appropriate (either because of Japanese office space considerations, or because the user could actually benefit from carrying the computer). But don't purchase heavy portable PCs if your sales people rarely drive and will have to lug their laptops on trains and buses. Cost-cutting temptations can lead to strong negative reactions from the users. In this case, micromanaging budgets to save a small percentage of expenditures simply does not make good business sense. The most important thing is to create a good computer culture in the company, and encourage the well-educated Japanese worker to adopt this new culture.
7. Benchmark with competitors For a company that has operated successfully without computers for many years, especially in change-averse Japan, this can represent a definite obstacle for management. In addition to the valid argument of the business benefits of IT applications, another strong argument for justifying IT expenditures is benchmarking with competitors in Japan or with affiliates in other countries. Benchmarking with competitors actually can be relatively easy in Japan. IT experts within a particular industry often hold friendly meetings to exchange information about their work (a rather unique feature of business in Japan). Benchmarking with affiliated group companies, in the case of an international company, of course, should be even easier. But benchmark figures such as IT budget with respect to total sales, IT investment and operational cost per user, and IT staff as a percentage of total staff should not be used as absolute rules. These are merely guidelines. And while direct comparisons are often not possible (since, for example, software or communications costs are considerably higher in Japan compared to the West), such benchmarks will create a sense of urgency in management's mind.
8. Create a proper IT organization Such an organization will naturally use computerized tools for collaboration. Not only will the formation of such an organization enable the proper implementation of modern systems, but its structure will serve as a showcase of how the company overall can become more effective through the use of IT.
9. Maintain high-quality training Such training should cover not only basic use of the computer, but also specific business systems (such as ERP packages). Behind successful projects there are always great trainers of the end users. Especially, your trainers must make certain that executives are tutored on how to use their PCs and get at the information - without being embarrassed or losing face. Children in Japan may know how to use PCs, but many top management members will have to be helped through the initial learning.
10. Promote integrated package systems Integrated package systems, or ERP systems, usually can cover the needs of a company much better than in-house developed software. These have the additional benefit of being much more reactive to the quickly changing technologies of today's market. The need for the implementation of such packages, ideally within the context of a re-engineering project, must be made clear to the whole company starting from top management. Once again, there are enough large and well-known companies in Japan that can be cited as good examples.
Starting along the path If your company is one, the time is now ripe for you to gently start to offer the right solutions to serious business problems. The above points can help CIOs and other IT advocates set their strategic priorities and avoid some pitfalls of implementing large-scale IT projects in the Japanese environment. The exploitation of IT in Japan will go by quite a different route than in the US, but weaving information technology effectively into the business environment prevalent here can achieve top-performing results and world-class networked corporations.
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