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Leaders / Digital revolution to unleash huge change / Decisive leadership in big demand

Ryuzo Suzuki/The Yomiuri Shimbun

Kazuhiko Toyama speaks to The Yomiuri Shimbun.

By Shigeki Kurokawa / Yomiuri Shimbun Senior Writer Businesses and workers alike are being exposed to tidal waves of change. For this edition of “The Leaders” column, which highlights corporate management and senior executives, The Yomiuri Shimbun spoke with Kazuhiko Toyama, chief executive officer of Industrial Growth Platform, Inc., which provides support for management reform.

We are headed for interesting times.

A great wave of destructive innovation brought on by the digital revolution will sweep across nearly all industries. In normal times, anyone can be management, but under the current “wartime” conditions, only those who display real ability will do so. Management has to choose between this or that. Whether at a local company or a global company, decisiveness is in demand.

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  • Ryuzo Suzuki/The Yomiuri Shimbun

    Kazuhiko Toyama

 

A succession of scandals have accompanied the rapid spread of the digital revolution. Behind them lurk fundamental issues with Japanese companies.

When the bubble burst around 1990, dramatic changes occurred around the world. One was the collapse of the wall between East and West, resulting in truly global competition. Another was the digital revolution. Products have become more interchangeable, and assembly techniques have lost much of their value. Japanese manufacturing was hit with a double punch. Lifetime employment and seniority-based systems work well when you’re making a series of steady improvements. However, confronted with destructive innovation, they backfire.

When you tell people on the job to increase profits using the same old way of competing, you’re ultimately counting on them to succeed no matter the odds. You’re telling them to tough it out. When things get desperate, they turn to a certain kind of “creativity and ingenuity” on their own. They end up committing acts like accounting fraud or falsifying data.

I sympathize with the workers in these cases. It happens because management has avoided making the difficult reforms they ought to have made in the first place.

In fact, conditions are favorable for Japanese companies.

Google and Apple may appear to have conquered the world through the IT revolution, but there is also the perspective that, in reality, their destructive impact only affected personal computers and telecommunications equipment. If they expand into the automotive, medical and nursing fields, that will not be the case. This is because these fields involve life and health. An accident caused by a self-driving car could be deadly. The earnest and respectful way of working — in which issues are addressed step by step — that Japanese companies have cultivated is effective. Things that have continuity will be important.

While this is a major chance, it is also a major crisis at the same time. In the midst of the digital revolution, substituting new businesses for old ones and taking advantage of new talent is unavoidable. It is impossible to win without a hybrid management model that incorporates diversity and discontinuity.

The global risks are also large. In these uncertain circumstances, management must make decisions that affect the fate of the company. If they drag their feet, the situation will only worsen.

Drama in management

The true essence of management lies in its human drama. Under good management, the lives of the people working improve. Under bad management, people become unhappy. The very highest level companies may appear to have a sense of drama, but in fact they do not.

In the Toyoko Yamasaki novel “Shizumanu Taiyo” (The never-setting sun), an elite airline employee ends up being demoted, but that really only involves him being shipped off to Kenya. In comparison, regional hotels and bus companies are full of hard-luck tales. Maybe they are unable to pay salaries for the coming month, or they are forced to file for bankruptcy due to a joint guarantee. As rebuilding continues, people’s attitudes change.

During my time at the Industrial Revitalization Corporation of Japan, we revitalized many companies, including regional hotels and construction companies. It seemed like every day some kind of strange misconduct came to light. In the meantime, cash and account balances steadily dwindle. It is necessary to keep up with your core business as well. I learned a lot from those chaotic conditions.

Some major companies place promising young employees in the planning or management department, calling it an elite track, but they’re the worst. Such a track is utterly useless. By the time one of these employees becomes president of the company, everything has changed.

The company’s subsidiary, Michinori Holdings, Inc., runs a bus company in the Tohoku region, among other businesses. IGPI is unique in that it manages small and medium-sized regional companies itself.

The area our bus company services was among those damaged by the Great East Japan Earthquake. We played a key role in transporting evacuees from the 20-kilometer radius around the Fukushima No. 1 nuclear power plant, deploying about 100 buses starting in the early morning on March 12. I felt a deep sense of gratitude. After all, it was hardly safe at the time. Still, the drivers all had incredibly high morale, and they took pride in providing local public transportation. It gave me a strong sense of how many people’s lives and livelihoods are supported by local industries with strong ties to the community.

While you might think that regional bus companies are facing a structural recession, they are actually reliably in the black.

To achieve this, a company must have highly productive management and be able to pay high salaries. In the future, local industries will also pursue productivity innovation by using AI and other technologies. Hotels and the like also have plenty of room to improve, provided they raise the standard of their management.

‘360-degree curiosity’ needed

Going forward, it will be extremely important for both management and young people to have a curiosity that extends in all directions — what I call 360-degree curiosity.

Because the world is changing fast, there is a wealth of possibilities. It depends on how diverse your interests are, or perhaps how well connected you are.

It is not enough to simply share the same spaces as the so-called prestigiously educated elites. You might have been able to succeed that way in the past, but it makes it more difficult to encounter new things.

My message to students going into work today is to try to be more curious about the world.

Whatever kind of company you get a job with, you would do well to believe your chances of being able to work there until retirement are close to zero. Gone are the old days when 60 percent or 70 percent of new graduate hires would be able to work at the same company for their entire career.

Not everyone wants to join a global company and reach the top. As hard as it may seem, if there’s something you want to do, you should pursue the work that suits you.

That’s because every job in the world is an important job. You must keep this in mind while you plan your strategy.

Everyone will be swept up in the digital revolution — to a lesser or greater extent, the same [kind of reorganization and restructuring] that has occurred in the electronics industry for the past few years will take place in other industries. It is important to mentally prepare for this.

Looking at it in another way, young people will have the chance to lead a variety of different lives. For example, until now, the hierarchy in the financial world was already decided, so whether you worked at a top bank or some other bank, you would be bound to a decision made at 22 or 23 for the rest of your life.

In these turbulent times, things have become more fluid. If a person has drive and talent, there is a world of opportunities.

■ Kazuhiko Toyama
CEO of Industrial Growth Platform, Inc.
Toyama, a native of Wakayama Prefecture, was born in 1960. He graduated from the University of Tokyo Faculty of Law and earned an MBA from Stanford University in the United States. After serving at Boston Consulting Group and other firms, he became chief operating officer of the Industrial Revitalization Corporation of Japan in 2003, and founded Industrial Growth Platform, Inc. in 2007. He has been vice chairman of the Japan Association of Corporate Executives since 2013. His main publications include “AI Keiei de Kaisha wa Yomigaeru” (AI management will revive companies) and “Naze Rokaru Keizai kara Nihon wa Yomigaerunoka” (Why Japan’s comeback starts with local economies).

■ Key Numbers: 5,100
Industrial Growth Platform, Inc. is an organization of about 200 professionals, including those from corporate revitalization and investment banking backgrounds as well as lawyers. Including affiliated subsidiaries such as Michinori Holdings, Inc., it has about 5,100 employees. They provide an “on-site collaboration” style of support that incorporates business reorganization, management reform and the creation of new businesses.

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