I was having lunch with a new acquaintance who has been in Japan for 4 years. We were comparing notes on what it is like to live in Japan and do business (It is his first international assignment).

When we discussed the future of the country and the significant challenges ahead (e.g. declining population, competitive threats, etc.) we came to the ultra-conservative, risk adverse culture. He shared his view on Japanese business conservatism (I paraphrase):

Japan is like the children of a rich, entrepreneurial father (Male terms are used as Japan has yet to have true feminist political or cultural progress). That father (post World War II Japan) had to pull himself out of the rubble, band together with other fathers and drive success despite significant challenges. That father had to work hard, innovate and drive out a significant competitive advantage against fierce global competition.

That father built an empire and got rich. Very rich. (Think of how afraid business was of Japan in the 80s).

And that father passed that wealth on to his children. They enjoyed a very nice lifestyle, good schools, travelled the world and came to enjoy the best of the best (Japanese are some of the world’s biggest luxury goods spenders)

Now the father has passed the torch and that 2nd generation has taken over the business. There are a few who make the business more successful, there are some who ruin it but the vast majority simply maintain it. They are so worried about losing what they have – the lifestyle they have become use to, the success that is their father’s history, the legacy of passing that wealthy and lifestyle down to their children – that they do not take risks, they do not innovate. They become the ultra-conservatives, maintaining the business out of fear of losing it all.

The problem is that around every corner is that first generation father who is starting with nothing. Who has the same drive as the post WWII Japanese father, is willing to take risks, innovate and build a competitive advantage. Fighting to build something for his family (China, Korea). The conservative 2nd generation views the competitor as uncouth and rough in their approach. They are well educated, the competitor is not. They have a position of financial strength, the competitor is building that. They are willing to work hard to continue their parent’s legacy of Japanese quality and engineering excellence, in many cases over engineering as they continue to improve on things that do not need to be improved. Their competitor is willing to sacrifice quality for volume (China) or has successfully figured out how to deliver quality at a good price (Korea).

They band with the other 2nd generation peers at the country club to discuss the up-and-comers. They discuss not wanting to compromise to compete (e.g. reduce engineer quality or service levels to be price competitive). That is the path of their fathers, the path they must follow, the honorable path. The safe path.

But that next generation is banging at the door of the country club. They want to introduce their children to that which they never had.

The banging on the country club door gets louder every day …

Sadly, his story reminded me of the day that I learned about the Horray Henry. The question is, will Japan’s business leaders realize the need for innovation, change and risk before it is too late?