The report consists of two volumes. The first volume deals with knowledge issues in line with the four-pillar framework of the knowledge economy. The second volume provides case studies of knowledge creation and knowledge sharing at five high-performing companies.
The Implication of the Information Technology (IT) Revolution
The large number of disruptive innovations, particularly in the IT sector, distinguishes the 1990s from the 1970s and 1980s. To compete successfully in the ongoing IT revolution, it is necessary to formulate a corporate strategy that stresses speed and collaboration.
“Japan needs to strengthen complementarities between the mesh of institutions that support innovation, e.g., product market, intellectual property rights, financial markets, and labor markets” suggests Kazuyuki Motohashi, Professor at Research Center for Advanced Science and Technology, University of Tokyo. “It is important to facilitate a shift in the Japanese innovation system toward a network-based, dynamic one. In a world of global competition for speed in innovation, an in-house innovation system does not work .” The report also compares the IT use in business and organizational practices in Japan and the United States, implying takeaways from the US model.
Meeting Skill Requirements
Japan has achieved high levels of school attendance. Yet, too much emphasis on memorization and severe competition for entrance to “brand” universities disconnected the knowledge link between education and the labor market. This system was adequate while corporate in-house job training, the use of imported technology, and mass production were in place. However, in the recessive period in the 1990s and early 2000s, characterized by vigorous international competition, already-skilled personnel began to be valued more and in-house trainings were cut. As a result, vocational education and lifetime learning outside the workplace have moved higher on the policy agenda. “Japan faces inconsistent demands from micro and macro perspectives,” points out Akiyoshi Yonezawa, Associate Professor at National Institution for Academic Degrees and University Evaluation. “On the one hand, there is a strong micro demand for a stable and protected life, which supports Japanese-style long-term employment and seniority-based salaries. On the other hand, the rapidly changing environment makes the desired stability difficult. In order to keep competitiveness in the global economy, Japan needs a labor market characterized by higher mobility and flexibility.” The report outlines actions that the government is undertaking to address these challenges in the education system.
Simply Being Knowledgeable is Not Enough
What of the future? Are Japanese firms still innovative? Is the Japanese approach to knowledge creation still at the frontier of management? Has a new dynamism propelled it even further? Or has the Japanese approach been overtaken and thus reached a stalemate?
Volume two of the report takes a closer look at individual firms and their behavior in knowledge creation. The short answer to the above questions is that innovation is alive and well in Japan, and the Japanese approach has a new dynamism that makes it as relevant as ever – perhaps more so. These answers are elaborated in the five case studies: Seven-Eleven Japan, Lexus Division of Toyota, Sharp, Keyence/Nintendo, and Shimano. These firms span a wider variety of industry segments, including retailing, automobiles, television, electronic components, home video games, and bicycle parts. “The Japanese approach to knowledge differs from the traditional Western approach in a number of key areas, ” notes Takeuchi Hirotaka, Dean of the Graduate School of International Corporate Strategy at Hitotsubashi University and also the co-editor of the report. He emphasizes the distinctiveness of the Japanese approach to knowledge as it: |
1. Views a company as a living organism, rather than a machine;
2. Focuses on justifying belief much more than on seeking truth;
3. Emphasizes tacit knowledge over explicit knowledge;
4. Relies on self-organizing teams, not just existing organizational structures, to create new knowledge;
5. Turns to middle managers to resolve contradictions between top management and front-line workers; and
6. Acquires knowledge from outsiders as well as insiders.
The SECI process, a theory of knowledge creation developed by Hirotaka Takeuchi and Ikujiro Nonaka in their past research work, is adapted in much of the analyses in this report. This theory analyses the interaction between tacit and explicit knowledge through the SECI (socialization, externalization, combination and internalization) process. The report asserts that Japanese companies are pushing the frontier of knowledge management even further, generating a myriad of new concepts.
Coexistence of the New System with Traditional Practices
The Japanese economy has long been known for its unique business traditions such as keiretsu, "main bank" system, lifetime employment, promotion by seniority, and memorization-oriented education. These traditional practices once functioned well to facilitate Japan’s rapid economic growth in the postwar era. However, after the bubble burst in the early 1990s, these traditional business practices quickly became the focus of criticism. True, in today’s world where global competition is increasing and information exchange is speeding, many of these traditional practices are not only ineffective but may be impediments for gaining a competitive position. However, “there are aspects of the Japanese type model that remain valid – most especially its empowering of workers in ways more meaningful than other models' clichés,” argues Hideaki Miyajima, Professor at the Graduate School of Commerce, Waseda University. Indeed, the report acknowledges the strength of some of the traditional economic and business systems in Japan. Also, in the places where drastic reforms are needed, the changes will only come in time. The report predicts, therefore, in the meantime, Japan will find itself in a unique co-existence of the new system with traditional practices.
“What has worked in the past may not work in the future, but it is still important to know the history,” says Tsutomu Shibata, Senior Adviser of the World Bank Institute and the co-editor of the report. “Regardless of how far advanced a reader’s country is toward being a knowledge economy, it is the authors’ hope that everyone will find lessons in this book useful, be they cautionary takes or examples to follow.” |
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