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.

2 Comments

  1. John Santomer

    April 18, 2011 - 10:55 pm

    Dear Jon,
    It is very difficult to change something that can not be “visualized” as it is very easy to discard. People’s mindsets also can not be “visualized” – one can predict but never quantify for the purpose of metrics and data comparison.
    Nobody wants to be humbled by mother nature and it is the most devastating and final awakening that one would not want for one’s self.
    In aiming for sustainability and in maintaining continuous improvement-“kaizen”, one should have an open mind as a first step to embracing change.

  2. Robert Drescher

    April 19, 2011 - 9:38 am

    Hi Jon
    Thanks for sharing Dr. Tokiwa ideas with the rest of us.
    He makes several good points.
    1. Quality despite all our talk about quality, the majority of what we buy today is in fact cheap low quality junk, often imported from low price producers.
    2. Considering the opposite of anything is a good idea, it can in fact get you to realize that you should make changes that you never considered.
    3. Goods and services are linked, but like he points out too often features and extra services get dumped onto products when no real consumer really wants them. When this happens we drive needless cost, and actually produce a product no one really varies about. I cannot remember the last time that i went into a new car dealership and found a car equipped the way I want, most of the time they come with to many useless options I just do not want.
    4. What’s new how many times have companies decided to outsource something only to find that the marginal cost saving they got disappears, in exchange rate shifts, economic growth in the producer location, extra shipping costs and risk, eventually the position of being trapped to a foreign supplier who is no longer cost effective, and sooner or later you create your new competitors (look at how many former Nike contractors are now there competition.
    5. Long-term thinking and good worker relations always go together. When you think long-term, you need to have stable relationships, that takes employees that care, you can write all the call scripts you want for people, but you cannot make their voice show they care. A recent book called the Loyalty Effect, just showed again that loyal consumers, are a result of loyal employees, loyal managers, and loyal owners. Loyalty is infectious, but if you treat your people like mindless robots, you won’t have their loyalty and you won’t have the consumers either.
    Everything he wrote was well thought out and common sense, unfortunately it will most likely be ignored by many who need it.