6 Principles for Rebuilding Industry

In a March 28, 2011 article in Nikkei Business magazine Dr. Fumikatsu Tokiwa, the former Chairman of Japanese cosmetics giant Kao Corporation, gave his views on principles that should guide the recovery of Japanese industry in the aftermath of the recent natural disasters. There are six principles and while these are specific to Dr. Tokiwa’s experience with Japanese companies and consumers, we can draw broader and even universal lessons from them.

Principle 1. Take the opportunity to change our values about making things

What he means by this rather general statement is that people have become completely accustomed to living with plenty and have lost a sense of gratitude for what they have, always wanting more. He places the responsibility for this in part on manufacturing industry itself, which has pursued profit growth by “quantity over quality”. He criticizes the habit of product differentiation through increased features as being technology-driven, rather than focused on customer needs. As a result not only are the products suboptimal, the production methods and even the use of energy and resources has become suboptimal.

In other words, we are very wasteful as consumers and producers, and should take this moment to recalibrate our values.

Principle 2. See the other side: yin and yang

There is more than one perspective and all things should be studied from the opposite pole – a yin for a yang. Surprisingly, Dr. Tokiwa takes issue with lean thinking, identifying “visualization” within manufacturing businesses as a having the unintended consequence of discarding that which cannot be visualized, such as human experience and “heart”.

While he states he is in favor of visual management in principle, he faults the manufacturing management practice of only visualizing what is easy: performance metrics and financial data. He places “heart” at the opposite pole of efficiency, yin and yang, an important reminder to place people in the center when building or rebuilding any industry.

Principle 3. Remember that goods and services are inseparable

The scenes of deprivation in the disaster-struck parts of Japan is especially striking because it is one of the most developed countries with high standards of living, with an abundance of goods and conveniences. These disasters showed us that production power is not enough, lacking logistics to get the goods to point of consumption it is practically useless. The experience of consuming any product is always the combination of the hard and the soft, the goods and the services. When rebuilding industry, Dr. Tokiwa reminds us that we must think of the customer experience and redesign the entire supply chain, rather than simply the industrial parks.

Principle 4. Consider where to locate manufacturing hubs

There are three specific bits advice from Dr. Tokiwa. First is to learn from the vulnerability of having so many manufacturing facilities of a similar type in a small region and instead disperse them geographically in Japan. Second is to maintain the network and cooperation among companies which allowed many factories to start up quickly after the disaster. The third is to avoid off-shoring manufacturing in pursuit of low costs and instead keep factories within Japan or regions where rapid recovery efforts can be effectively taken. The general lesson we can draw from these points is that we need to design our supply chains with an understanding of risk factors, both frequency and severity, and build an appropriately resilient network with cost being an important but not the sole deciding factor.

Principle 5. Put the focus back on the people on the gemba

Dr. Tokiwa explains that the core strength of Japanese industry has been the cooperation between management and the front line workers. He cites the kaizen and the practice of developing people as essential to Japan reputation for quality. He observes that this tradition has been weakened recently in the name of restructuring and cost reduction. He says that strong leadership to collect and focus the ideas and energy of the people on the gemba is all the more necessary in the midst of natural disasters and confusion.

Principle 6. Recover the long-term thinking philosophy in manufacturing

Kao Corporation was founded in 1887. They have survived for 124 years in part because of this long-term philosophy and an heavy investment in research and development. In fact long-term focused basic R&D was the foundation of many innovative products and technologies that came from Japanese industry. Dr. Tokiwa warns against the trend towards American-style management stressing transparency and visualization of metrics, resulting in quarterly business performance evaluation and short-term thinking. While much of the article is from a Japanese perspective and a reflection on Japanese manufacturing industry in this time of crisis, Dr. Tokiwa does remind the readers that we a live in a world today in which we are all connected and that no nation can survive alone in the long-term. Redesign and successfully recovery of industry must considering the broadest perspective.

These same principles for recovery in time of crisis apply to any industry or sector, to some extent even to rebuilding personal careers, families and lives after the disruption from the recent natural disasters. Friends and family members of mine who are volunteering in the recovery efforts in northeast Japan would agree that long-term thinking, putting the focus back on people and seeing the light (yang) in the darkness (yin) are essential principles for both personal and industrial recovery.

Natural disaster or no, there are plenty of industries today that need radical rethinking and rebuilding in the United States, from healthcare to the role of government, education to the penal system, the financial sector to agriculture. We would be wise to get to work on these areas before receiving the encouragement of mother nature’s smashing force.

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