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They Do Things Differently in Japan

As I’ve mentioned before, my current client is a large tech company who is asking us for strategic guidance. It is no wonder, then, that I have spent a fair amount of time looking at the major Japanese tech companies who, at times, seem to have a stranglehold over the global technology industry.

imageThese companies are very interesting and very distinct from most American corporate models for a number of reasons.

The first is they tend to be organized as enormous monolithic conglomerates. A company like Sony manufactures way more than just Playstations, they also manufacture LCDs, home appliances, and even sell financial service! And this is not atypical. Most of these corporate entities are huge umbrella companies overseeing several enormous and seemingly un-related divisions. Epson, in addition to making printers, are also in the business of manufacturing semiconductors, corrective lenses, and watches! Japanese companies also tend to be very stubborn about selling off divisions, even going so far as to retain majority share ownership even if they do “sell off” divisions!

While there are some Western companies organized in this fashion (GE comes to mind), it is usually accepted in the West that management’s ability to maximize the potential of completely separate businesses is oftentimes severely limited. This “business principle” explains two interesting phenomena. First, it shows why businesses divesting themselves of poorly performing divisions oftentimes improves the financial position of both the parent company AND the spun out group (management can better focus on one core business rather than several). And secondly, it underscores how mergers & acquisitions oftentimes fail — diversify your business too much, and you spread your management’s ability to drive performance too thin.

The other very quirky thing that I noticed about publicly traded Japanesimagee companies almost universally is that their annual reports always have a section in the front which is basically an interview with senior management complete with “candid” photos like this one with Epson President Seiji Hanaoka.

The interviews are usually soft-ball questions (“you are so awesome — why is that?”) fielded to smiling executive (“because I think my losses aren’t so bad this year!”) who are sitting in front of either some blurry, beautiful looking scenery (like Mr. Hanaoka above) or in front of some display with their products or in some cushy corporate lounge spot like with these happy Sony execs.

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It almost makes you think that working in Japanese company is a non-hierarchical, fun, easy-going environment where you can still go home and see your wife.

With that said, it should be remembered that despite my good-natured joking, these companies are major powerhouses in the technology industry (just how important is that American work-life balance?) and that the quality of information and insight in their annual reports (and some would argue their corporate performance) do not suffer as a result of these quirks. If anything, it suggests that they take their jobs very seriously.

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