Competitive Intelligence: Japanese Style
Information is the lifeblood of the company -Motto of Mitsui Corporation.
US corporate managers often wonder how the Japanese economy, devastated by World War II, has grown to be the worlds second largest economic power. They lament unfair trade practices, illegal dumping of goods, and the ever present and unfair co-operation between government and private industry.
They wonder why it is that although the Japanese used to be out-spent in R&D their products are first-rate and technologically superior. The produce one-third of the worlds cars, steel, and ships and two few natural resources produces nearly 18 per cent of the worlds Gross Domestic Product and how it could have doubled its economy between 1973 and 1989. Half of the worlds top twenty banks are in Japan.
The managers say its because the Japanese dont spend money on defence like the United States. They can spend their money more wisely on industry. What else? Japanese managers dont have to worry about the stock market, satisfying the short-term-minded Street and thus can think long-term. And one more thing: Japanese workers are more committed and more loyal to their work.
Although all this may be true, it doesnt tell the whole story about The Japanese Miracle. Our managers overlook the one thread that weaves through all of these items - the one factor that underpins all of these issues - and goes to the heart of why Japanese businesses have been so successful in such a short time.
It is their absolute and unbending belief in competitive intelligence as a strategic corporate tool to make the best decisions possible.
This, more than anything else, separates the Japanese business mind-set from that of their counterparts in other countries. It is the secret of their continued success.
While consulting gurus to American industries tend to look at all of these issues, they very rarely look at competitive intelligence. Why? Because its not something thats done by many US companies. Its not taught in colleges. And, if its not done here, its not worth looking at.
When Japans economy started to skyrocket in the late 1950s and early 1960s - when Japans GDP first surpassed the United States many Westerners used to say that Japanese companies werent capable of producing anything of their own. They are just copycats was an often-heard phrase. Had American managers been more astute they would have seen beyond the catchall phrase and seen what the Japanese were really practising: prudent use of competitive intelligence. Information learned from the United States and other economically successful countries was being applied in Japan and integrated into their corporate structures...
How Americans (not just corporate Americans) feel and treat information compared to the Japanese is at the heart of the matter. There is a lot of lip service paid to the information age and how Americans embrace the idea of information and such conduits as the information superhighway. Unfortunately, it is often just talk.
In Japanese, the word joho means two things: information and intelligence. This says right off the bat that information is worthwhile. It has value. In English, information doesnt become intelligence unless something is done to it.
To an American, a scrap of info-rmation may not mean anything, but to a Japanese businessperson it has value.
In Japan, information is a commodity with an intrinsic worth. To an American, it may be like the cardboard box you keep in the attic because its sturdy and you never know when you may need it. Its only a cardboard box, hardly worth a dollar, but its perceived as potentially useful enough to keep.
Because so much of the US culture is open and free and information is pervasive, Americans tend to think of information as cheap... To the Japanese, everything someone says has some meaning. You may not have the correct context to exploit it, but it has worth.
...Information collection is an ongoing part of the Japanese business culture and complements the idea of kaizen, which means constant and continuous improvement. As you know, Japanese business horizons are long, very long, as long as a century from now. Every piece of information thats sucked up by the great Japanese information vacuum cleaner becomes part of someones long-term strategic plan.
Lest you think that I put too fine a point on this, recall the last trade show you attended. Did you notice any Japanese business people taking photos like film was free and collecting brochures like they contained discount coupons? Or perhaps your own company has hosted Japanese visitors who accepted handouts and pamphlets from you with the respect and reverence deserving a precious gift. Ask your public relations office for its list of companies who receive press release and financial information available to the public. Chances are they contain Japanese companies.
What you see in these instances is typical competitive intelligence gathering... Whatever they gathered will probably find its way back to Tokyo or other cities in Japan to be disseminated to those who can use it. Its an extraordinary worldwide system that boggles the mind of most Westerners, but to the Jap-anese its just everyday business.
Why the Japanese love information - and why theyre willing to share it with one another?
For centuries, the Japanese lived in what has been described as a rice-bowl culture. Farming families lived together in groups, and each family was responsible for its own rice paddy. Water was scarce and irrigation was used to ensure nourishment for crops. As a result, it behooved each family to take care of the water supply not only for its own sake but for that of its neighbours. Each family relied on the other. If one failed, the whole group might perish.
This, many Japan scholars say, was the beginning of the Japanese group behaviour where everyone helps one another for the common good. Some people call it a sharing culture where even enemies help each other in order to survive. It also helps to explain why Japanese people, in general, feel that they are one part of a larger community where what they do is important to everyone.
This is different from American culture where individual accomplishments are often stressed over group of team efforts. In modern-day Japan, group learning as opposed to individual learning is standard.
For many centuries, Japan was isolated from the outside world by warlords and shoguns who wanted to maintain complete control over the country.
This isolation was broken in 1853 when Admiral Matthew Perry visited Japan in a now classic case of gunboat diplomacy. The Department of the Navy dispatched Perry to Japan with the purpose of getting the emperor to sign a treaty ensuring the protection of shipwrecked American seamen. Perry presented a letter from President Millard Fillmore after making a massive show of naval strength in Tokyo Bay. The emperor, humbled and somewhat humiliated by the American naval might, signed an agreement to protect shipwrecked sailors but also agreed to sell coal to US ships and open ports to American merchants. Subsequently, the fifteenth and last Tokugawa shogun was overthrown by lords who saw the family as weak and its power compromised by the Americans who had forced the end of the countrys self-imposed isolation.
Emperor Meiji was amazed how its isolation had left Japan behind the rest of the world - almost hopelessly behind - and he set programs in place to catch up by soaking up everything he could about Western culture, business and economics. His goal was to thrust Japan into the nineteenth century as fast as possible.
...More than any other person, Meiji set the stage for Japans insatiable quest for outside intelligence for both industrial and military purposes...
One thing the Meiji leaders learned was the industrial and financial power in the West was concentrated in the hands of a few families like the Rockefellers, Rothschilds and Morgans. The only problem was that Japan didnt have such families. The government took it upon itself to build crucial industries such as shipbuilding, which they knew would be important for naval might. It also established coal mines, steel factories, and mills. However, these enterprises didnt do well and the government was forced to sell them at bargain-basement prices to family businesses that then blossomed into the zaibatsu, which were highly diversified companies owned by a single family or group.
The four major zaibatsu are...: Mitsui, Mitsubishi, Sumitomo, and Yasuda.
These zaibatsu thrived and grew monstrously large, especially during World War I when they sold munitions and other war material to the Allies. They reached their peak in the 1930s supplying the war effort against China. Later, they were instrumental during World War II building all of the aircraft, ships, and arms used against the Allies. The business of war and industry was inextricably intertwined in Japan until after world War II. Then the zaibatsu were disbanded under the auspices of General Douglas MacArthur, who, like many people, blamed the families for instigating war for the purpose of making money and extending the reach of Japans influence.
However, the scheme didnt work as MacArthur and his group had planned. Although the Zaibatsu were broken up and some directors removed, Japans post-war minister Shigeru Yoshida kept most of the powerful, forward-thinking directors in place. Also left alone by the Allied commander were two important bureaucracies, the Ministry of Finance and what was to become the Ministry of International Trade and Industry (MITI). MITI is the group that many scholars agree was the driving force behind Japans dynamic growth after the war.
Old habits die hard and even though the zaibatsu were broken up into smaller companies, most of the senior managers of the individual firms continued to work together, informally, with their old colleagues. By the 1950s - after US occupation was just a memory - these companies banded together once again into new business structures called keiretsu, which remain today...
A keiretsu is a group of individual companies united by the exchange and sharing among them of personnel, money, goods, and of course, information. The sharing culture of Japan is seen here in all its glory. Cross-directorships are a major feature as well.
There are six major horizontal keiretsus and several huge vertical ones. The large vertical ones are in autos and electronics,and companies can be members of both a horizontal and vertical keiretsu.
The trading companies
At the heart of each keiretsu is a trading company or sogo shosha. There is no Western version of such an entity either and their mission is, by American business terms, rather vague and nebulous. These trading companies are responsible for coordinating and guiding the group through all areas of commerce. Although trading companies stick mainly to the usual commodities of rice, sugar, steel and so on, they will buy and sell such items as jet fighters and naval warships. They will provide financing, marketing, management services, consulting services, and generally deal in anything as long as they can make money on it.
One of their overall tasks is to smooth the way for their affiliated companies to do business in the domestic and global marketplace. Trading companies do not produce equipment or machinery. Instead, they are defined by ideas, intellectual property, and information...
How big are these trading companies?
The nine biggest trading companies have combined sales of almost a trillion dollars, and they handle more than 60 per cent of Japans imports and 50 per cent of its exports. Mitsubishi, for instance, imports almost 20 per cent of Japans coal for steel and its machinery group handles 40 per cent of the countrys machine tool exports. It also acts as export agent for Mitsubishi Motors, the countrys third largest automaker.
Margins are low on these transactions, so many of the trading companies have been moving into more aggressive areas where they actually have an equity position in the transactions themselves.
Mitsui, for example, has established about a hundred joint ventures and subsidiaries to cash in on the growing telecommunications industry. C Itoh has paired with Hughes Aircraft to form a satellite company. Mitsubishi has a 48 per cent stake in Kentucky Fried Chicken Japan, a company with more than nine hundred outlets.The 1993 annual report lists almost 150 subsidiaries and affiliated companies.
Trading companies keep a low profile even though they have field offices in more than two hundred cities world-wide - even in the most remote areas.
On a daily basis, a typical Big Six trading company, or sogo shosha, collects about 100,000 pieces of information from its 10,000 employees in about 180 offices wo-rldwide. In addition, each trading company spends about $60 million annually maintaining their information collection infrastructure.
Mitsubishi, for example, has more than thirteen thousand employees in more than two hundred offices worldwide. They send in more than thirty thousand pieces of information daily.
This large web is especially important to a trading companys commodity trading deals, where instant information about a crisis from a faraway place can have a profound and immediate effect on commodity prices.
But the information these trading companies glean is also important to the long-term health and development of their affiliated companies. Collected information is funnelled into Japan from points all over the world, around the clock, where it is selected, dissected, analysed, and disseminated to the affiliated companies.
This is where the previously mentioned sharing culture comes into play. To the Japanese mind, information has value and thus it is important to share it with others so they may prosper along with you. All the companies in a kerietsu share information with one another. Information is even shared with competitors in another keiretsu to get a leg up on a bigger, common competitor, very often an American company. You have to remember that many of the people who manage keiretsus have family members who were in zaibatsus generations ago. To say that Japans major industries are run by an old-boys network is quite the understatement.
On the other hand, there is great rivalry among Japanese companies and they can be fiercely competitive.
Who else uses the trading companies as their eyes and ears? Its not uncommon for a Japanese ambassador in a foreign country to ask an office of a trading company in that city for help on a research project.
The government used trading companies during World War II. Mitsuis extensive network was called on to gather intelligence for Japans war effort. In 1991, Japans Ministry of Foreign Affairs used Mitsuis network to keep informed about the attempted coup that summer against Mikhail Gorbachev. Its no surprise that Mitsuis motto is: Information is the lifeblood of the company.
The companies
An interesting phenomenon occurred in the 1960s. Large companies in Keiretsus established their own competitive intelligence divisions to supplement and in many cases give more value to what is supplied by their sogo shosha.
Some of the best competitive intelligence divisions are located at companies like Canon, NEC, Toshiba, and Toyota.
John Quinn is a former US, intelligence officer who was stationed in Japan for twenty years. He is now a private competitive intelligence consultant and tells the following story about visiting Toshibha on behalf of a client. I wanted to talk to them about video conferencing for a client who was interested in a strategic alliance. I sent them a fax confirming that I would see them on Thursday at eleven 0clock. Usual procedure. When I got there I saw my fax with notes on the top that said, This guys been in Japan a long time, speaks fluent Japanese, his wife is Japanese, and he attended such and such university. I didnt give them that information. These people are very good.
This is a telling example of how Japanese businesses give themselves a subtle but useful edge over their competitors in negotiations.
The commitment to competitive intelligence by companies is strong. For example, Nissan Motor Company established a Nissan Business Research Library at corporate headquarters and has among its five libraries more than 100,000 books, documents, and reports for use by everyone in the company. The system is used extensively by employees, who have on-line access.
Lets look again at Toshiba. The Toshiba Research and Development Library has more than forty thousand volumes. Its internal network called TOSFILE delivers information from the library, wire services, newspapers, and other news sources to more than five hundred decision makers daily. World-wide distribution via satellite is being tested. The company has almost twenty competitive intelligence professionals who handle this flow of information.
Information is everyones job...
In fact, almost all employees stationed outside Japan are required to submit regular - usually weekly or monthly - reports to the companys competitive intelligence unit. From there it is sorted and distributed throughout the company. With urgent or critical information, employees are expected to send it - by fax or phone - to the appropriate person for a rapid response.
Typically, a company has ten to twenty people dedicated to competitive intelligence duties at the home office. They are usually located in the strategic planning or reserarch department.
Where do these practitioners come from?
Some are from government training facilities. In the 1960s, the Japanese government established the Institute for Industrial protection. Although you might think that with the name industrial protection the emphasis was on security, this was only partly the case. Many of the graduates of the four-month course found themselves engaging in collection and analysis of business information once they entered corporate life.
Some corporations are so large and have such complex competitive intelligence needs that they have established separate research institutes or think tanks that employ hundreds of people for the sole purpose of collecting, analysing, and distributing information. Mitsubishi, Daiwa, and Nomura are examples of companies that have done so. In addition, these think tanks often act as consultancies for other companies.
...Competitive intelligence is not a secret in Japan. In fact, a publication in 1993 called Kigyo Gaiko was a guide to 1,300 Japanese corporations operating in New York, Chicago and Atlanta. In it was each companys profile, location
number of employees and their activities.
The government
What the trading companies and individual companies collect and pass on is only part of the picture. The government plays a vital role in the operation of the huge Japanese information behemoth.
When we talk about the
relationship between big business and government in Japan, were often talking about the connection between the Ministry of International Trade and Industry, MITI, and the keiretsu.
MITI is responsible for establishing government policies to
promote industrial development...
In recent years, MITI has singled out industries such as computers (especially software development), biotechnology, robotics, and semi-conductors as areas in which it wants the nations businesses to lead the world, and it has helped them accordingly.
One of the main ways that MITI helps Japans industries succeed is through the collection and distribution of competitive intelligence.
In that regard, it employs JETRO, the Japanese Extenal Trade Organisation.
Formed in 1958, JETRO is a quasi-government organisation whose official mission is to support trade between Japan and other countries. Although it does this, JETROs major role is to act as a source of competitive intelligence for Japans sogo shoshas and individual companies...
JETRO publishes a massive amount of information and most of it is available to anyone who is
willing to take the time and effort to seek it. The bulk of it is in Japanese, but English translations are becoming more common, especially in JETRO centres in the United States. However, not reading Japanese is an impediment to fully utilising JETROs resources.
Headquarters in Tokyo, JETRO maintains thirty-two offices in Japan and seventy-nine offices overseas in fifty-seven countries. In addition, JETRO has placed twenty senior trade advisors in
various US states. World-wide staff totals 1,300 people.
Interestingly, there is no office in Washington, DC, because the embassy takes up the slack. It is common practice for JETRO personnel to use several attach