The Japanese system is making it difficult for innovation to emerge

In the 1980s, Japanese companies dominated the world and once won admiration for being “Japan as number one.” However, in recent years, the presence of Japanese companies is said to be declining. How did this happen? It is a difficult issue because there are various factors and they are intricately intertwined, but the system of Japanese companies or the Japanese national system may be one of the factors.

Some people say that innovation has not been coming out of Japan (Japanese companies) lately, but I think that is a little misleading. Innovations continue to come out of Japan and Japanese companies. However, it is more appropriate to say that these innovations are not the innovations that are sought after in today’s global marketplace, especially in the larger markets. Innovations are constantly being created, but as a result of not being able to capture a dominant position in large markets, their global presence is declining.

Innovation is something new that brings value to society and is born from new combinations of ideas, knowledge, technology, and other elements. However, since it is a new endeavor, which combination will work is unknown in advance. Therefore, success or failure depends on how many different combinations there are and how fast they can be tested. This is the axis along which competition in the global marketplace is developing. It could perhaps be said that this type of competition is not the type in which traditional Japanese companies and systems excel.

In such competition, it is more advantageous to be able to widely explore elements used in combinations across company boundaries and to quickly decide which combinations to try. In recent years, there have been calls for “open innovation” in Japan. This is the flip side of Japanese companies having been engaged in innovation in a closed state without crossing boundaries. If they are closed within a single company, the number of elements that can be used in combination is limited, and this puts them at a disadvantage to the success in competitions just described.

Also, the task of evaluating the creativity of new ideas requires significant cognitive resources. In addition, research has shown that decision makers who decide which ideas to be tested tend to underestimate “edgy” ideas because of the need for rationality and accuracy in the ideas, due to accountability and other reasons. Therefore, deciding within a single company which combination of ideas to try will slow down the speed of the process and may lead to so called safe ideas. In this respect, too, this would be at a disadvantage to the success in competitions.

Against this problematic background, various efforts are being made in Japan, including by the government and companies, to somehow change the system. Employment practices closely related to the system are also changing, and the mobility of human resources is expected to increase. Based on these, it can be assumed that Japanese companies will regain their presence.

However, in this context, it should be remembered that any given thing basically has advantages and disadvantages. Therefore, by changing the Japanese system, some advantages that were previously enjoyed will be lost. For example, there are certain types of innovation that can be realized only because people do not move from one organization to another and sit back and continue their research. This may be lost by increasing the mobility of human resources. The issue of whether this is really a good idea may be worth considering, although the answer may differ from industry to industry.

It should also be kept in mind that it is not so easy to undo a changed system. When leading people in some new direction, whether it is a system or a strategy, it is necessary not only to talk about the appeal of the new direction, but also to deny the status quo. To undo is to return to a once-denied state, which is more difficult than one might imagine. Those costs may also need to be considered.

It is important to make the individual’s memory the organization’s memory

When conducting corporate surveys and research, I sometimes feel the importance of knowing who knows what. This is known as transactive memory. These memories serve as a link between past failures and innovation.

Innovation, as I mentioned earlier, comes from new combinations. Therefore, failures are inevitable in the process of creating innovation. For this reason, it is often said that it is important to foster a culture that tolerates failure and risk. However, this alone is only a superficial understanding. It needs to be understood in more detail how such a culture contributes to innovation specifically.

As I mentioned earlier, one key to innovation is to try many combinations. From this point of view, an attitude of taking on new challenges without fear of failure and a culture that supports such an attitude certainly play an important role. However, “This didn’t work, so let’s try the next one” is like gambling, and is a weak system for an organization to generate innovation.

One way to increase the probability of success as an organization as much as possible is to create a system that allows failures to lead to the next step. To do this, first of all, it is necessary to preserve failures as the memory of the organization, rather than leaving them as they are or keeping them in the memory of individuals. Such efforts include analyzing even the causes of failures, compiling them into reports, reporting them at meetings, and sharing them in a database. There will be psychological resistance to the person making the mistake, but this will be covered by a culture that tolerates failure.

To create a system that makes use of failures, it is also important to go one step further and make it possible to retrieve the necessary memories when required. Although AI is advancing rapidly, I feel that it is still more efficient to rely on human memory than databases in terms of retrieving appropriate memories. This is where the transactive memory mentioned earlier becomes important. In other words, saying “I know that person has done something similar to this before. Let’s go talk to him/her” helps past failures solve current problems, resulting in innovation.

In a company our research team was recently researching, there were several examples of innovations that came about through this process. The company has a culture that tolerates failure, but it also has many opportunities and mechanisms for sharing information about failures within the company, so that everyone knows who knows what and what they have done, not only among people in the same department, but also across departments. This helps to revive memories of past technological and market failures and contributes to the realization of innovation.

I hear people say that Japanese culture is very harsh on mistakes and failures. They may think that it is impossible to instill a culture of tolerance towards failure in Japanese companies. However, our research was conducted in Japanese companies. A culture of tolerance towards failure can take root in Japanese companies as well. It is not a matter of national culture or national character that prevents such a culture from taking root, but rather an organizational problem.

Humanistic judgment necessary to create innovation

Innovation often comes from cutting-edge research. Such research activities are an attempt to solve a problem that has not yet been solved, so failure is inevitable. No matter how competent a team of researchers may be, they will fail again and again. So, what kind of team tackles cutting-edge research and finally obtains a solution? We are pondering this issue now.

I think the general image of the process of creating innovation, especially cutting-edge research activities, is that they are driven forward by scientific analysis, elaborate logic, and rational judgment. It is like a group of researchers in white coats, experimenting with the latest research equipment, discussing the results and planning the next experiment to get closer to an answer. This is a very dry process. However, based on books describing R&D stories and interviews with corporate researchers, I wonder whether this is the true picture.

With routine work, it is possible to analyze why things fail and identify the causes with a high degree of accuracy. Since we know the correct answer, we can use it as a reference point to determine what went wrong. However, when it comes to non-routine work, especially cutting-edge research, not only is the correct answer not known, but there is not even a textbook that can be referred to for analysis. If that is the case, there must be a limit to the analysis of failures, no matter how competent the researchers are.

In addition, what makes the problem even more difficult is that it is a team effort. Modern science and technology are no longer something that can be managed by a single genius, owing to the fragmentation of specialties and the increasing complexity of problems. Therefore, it has become common to work in teams to solve problems. While there are some things that are made possible by teaming up and bringing together different specialties, there are also difficulties that are unique to teams. One of these is the social process of persuasion. While an individual can decide what to do based solely on his or her own judgment, when working as a team, it becomes necessary to persuade other members of the team. If there are limitations to analysis in advanced research, this can be quite tricky. You have to convince other team members without being able to present clear arguments or objective evidence.

So what keeps a team going in the face of such analytical and team difficulties? Our research team focuses on very human factors, such as the ability to trust other team members. Research without a textbook is like searching for treasure in the dark. In such a situation, when one research member says, “There is no treasure in the direction of the east,” without any hard evidence, can you believe that claim? It may have a significant impact on the team’s search behavior and, ultimately, on the results of the study.

At first glance, it tends to be assumed that the technical and scientific challenges faced in the process of innovation realization are solved through a dry process of elaborate analysis based on objective evidence. However, given the nature of the challenges, researchers are often expected to make subjective judgments during the solution process. There, very sentimental factors, such as the ability to trust one’s peers, may play an important role. If that is the case, then in addition to simply improving one’s research skills, the “knowing who knows what” approach may also play an important role here. For a discussion on this area, please see our research results, which are currently in progress.

* The information contained herein is current as of April 2023.
* The contents of articles on are based on the personal ideas and opinions of the author and do not indicate the official opinion of Meiji University.
* I work to achieve SDGs related to the educational and research themes that I am currently engaged in.

Information noted in the articles and videos, such as positions and affiliations, are current at the time of production.