Revitalising Corporate Japan a Prescription for Growth Table of Contents
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Corporate leaders need to champion organisational transformation to succeed in today’s complex international environment. Revitalising corporate Japan A prescription for growth Table of contents 02 Message from our chairman 03 Transformation towards tomorrow 04 Executive summary 11 Introduction 16 27 Reality 1: Reality 2: The arrival of Asia Increasing business 19 Maintaining leadership complexity in high-value niche 29 Operating in a markets G-Zero world 22 Myanmar 31 Complexity’s new 23 The rise of collaboration demands: Q&A with in Asia Harvard Law School’s 24 Business implications David Kennedy 34 Acquisitions in an era of complexity 36 Business implications 39 50 Reality 3: Reality 4: New models Ageing economic of innovation metabolism 43 Inside high: Mazda’s 60 Business implications Seita Kanai on innovation and branding strategies 44 Seeking solutions: Incubating new businesses in mature companies 47 Innovation in action: Q&A with Twitter Japan’s James Kondo 48 Business implications 62 A final word 66 List of interviews 69 Contributors pwc.com/gx/revitalising-corporate-japan pwc.com/jp/ja/japan-service/revitalising-corporate-japan A message from our chairman Japan was the trailblazer for today’s emerging economies, as the first non-Western nation to become a modern economic power. Its meteoric rise from postwar poverty and landmark achievement in establishing “Made in Japan” as the global catchphrase for quality set the benchmark in economic development. Today, Japan is also the pacesetter for the advanced economies, the first to face challenges looming in everyone’s future: the ageing of society and the imperative to transform mature economies to meet the demands of an increasingly complex global business environment. How Japan fares will hold lessons for us all — which is why PwC believes the world needs a deeper understanding of Japan’s current situation. We saw an opportunity to focus the unparalleled expertise of the PwC global network on the issues facing Japan and Japanese corporations. A PwC team sat down with 60 senior business and political leaders, academics and specialists for extensive discussions, and to learn what changes they’re making in their own organisations in response to current challenges. I would like to thank each of them for taking time from their busy schedules to meet with us. We greatly appreciate their candid participation; they have added invaluable context to our research. We hope our analysis will contribute to today’s debate on the future course of Japan and its leading firms. Our aim — pursued with great respect and affection — is to enrich the dialogue between Japan’s business leaders and their stakeholders. Dennis Nally Chairman PricewaterhouseCoopers International Limited 2 PwC Transformation towards tomorrow This is an exciting chapter in Japan’s history. It’s a time of change and transformation. A time that presents opportunities for leaders to take bold steps that will redefine how their organisations continue to be economic trailblazers. A time for decisions that will leverage existing strengths and substantial advantages to improve competitiveness and optimise globalisation. As advisors to the world’s largest companies, we know that change can be difficult. It presents a measure of uncertainty that requires strong leadership. While there is a measure of risk in pursuing new approaches and ideas, the risks of doing nothing are far greater. After speaking with Japanese CEOs over the past year, we believe that many business leaders are already aware of the degree of change required. Our hope is that this report will help many Japanese corporations start the process of strategic and operational transformation they seek. But we’re not just offering a report. PwC has been doing business in Japan for over 80 years. Our people work very closely together to support the growth of Japan’s great companies — its global champions — providing services here in Japan and around the world. We remain committed to helping Japanese businesses take the necessary steps to pivot, adapt and grow in an extraordinarily complex and fast-paced international environment. Juan Pujadas Hiroyuki Suzuki Vice Chairman Territory Senior Partner Global Advisory Services PwC Japan PricewaterhouseCoopers International Limited Revitalising corporate Japan 3 Executive summary 4 PwC Japan is an inspiration to the world. Its people live longer and are healthier than in any other nation. Japanese society benefits from an extraordinary degree of social cohesion and trust that allows it to accomplish remarkable things. Japan’s corporate community has long held the world’s respect. For decades, corporate Japan has been counted among the short list of global leaders for its advanced technology, standards for quality, dedicated workforce and internationally competitive private sector. The world needs a strong, confident and vibrant corporate Japan. Revitalising corporate Japan 5 Executive summary And the need today is greater than The country’s longevity sits at the That is not to say the answers to ever. The extraordinary postwar era top of Organisation for Economic the new global questions will come of peace, prosperity and dominance Co-operation and Development easily. All nations must weigh their for businesses in the world’s mature (OECD) rankings, while fertility current advantages and circum- industrial economies appears on rests at the bottom, leaving the stances in the face of new global the surface to be coming to an end. country with a shrinking work- “Realities,” which include: Issues around globalisation and force and rising elderly population. 1) The arrival of Asia Asia, the newly emerging competitive nations Demographics combined with very engine of the world’s economic and companies, resource pressure, high public debt levels and operating growth, is producing fierce, new environmental degradation and cli- costs much higher than emerging competitors. However, a new mate change have destabilised the competitors’ imply that without a middle class of Asian consumers traditional economic structures. revitalisation of its economic perfor- gives Japan an opportunity to mance, Japan’s society is going to secure its niche market advantages. The countries and sectors that suffer a decline in living standard. formerly dominated international 2) Increasing business complexity commerce are giving way to emerg- But PwC strongly believes this vital- Growing connectedness between ing markets with growing middle ity can — and must — be restored. economies and more complex classes and increasing exports. While there are many dimensions trade and financial relationships While these new competitors on the to this nexus, in this report we focus necessitates updated management global stage present real challenges on what Japanese corporations can approaches. for the economies and businesses do. We chose this focus because 3) New models of innovation that have traditionally dominated while public policy initiatives are Encouraging entrepreneurship and world markets, they also offer an essential, the needed reforms will innovation within companies can opportunity for growth, improve- not be effective unless Japanese boost competitiveness and help cap- ment and greater competitiveness. corporations also play their part. italise on diverse ideas and efforts Indeed, competition breeds success, to support new and better product and Japan is in an excellent position In many ways, Japan is the world’s development and manufacturing. to capitalise on this critical moment first advanced economy to face chal- in history. lenges like an ageing society and how 4) Ageing economic metabolism to transform a mature economy so it Restructuring domestically focused And yet, despite Japan’s capabil- can thrive in an increasingly complex businesses as well as addressing ity to be the trailblazer, those both global business environment. How it Japan’s ageing workforce and inside and outside Japan feel its tackles these challenges will serve as need for skilled human capital extraordinary vitality ebbing. models for the world. are important for greater national prosperity. 6 PwC Revitalising corporate Japan A prescription for growth Corporations need to embrace rapid transformational change with attitudes of boldness, risk-taking, velocity, flexibility and adaptability. 1 3 The arrival of Asia New models Globalisation is a business of innovation imperative and Asia is a Entrepreneurship and co-creation focal point. New, aggressive re-energise the innovation competitors are emerging processes as corporations pursue from Asia. open models. • How can you compete with • How well is your organisation your “fiercest competitor” adapted to working with from the new Asian 3 I outsiders and new partners? NN economic powers? IA O S V • How are you encouraging A A • What is the right T collaboration among your 1 I approach to deal- O employees and partners in N making and alliances innovation? in the region? Global 4Realities What is your 2 company’s 4 2 Increasing M Ageing economic C strategy? S business complexity O I metabolism M L O New strategies are required P B Japan is the first advanced L A to deal with the growing EX T economy to face challenges IT E interconnectedness in trade Y 4 M like an ageing society and and financial relationships. transforming the organisation • How integrated are your to thrive. foreign operations within • Is your organisation using your business? capital efficiently? • Do your board and • How will you compete in executive