Perspectives

Two days ago, FIFA announced the sites for the 2018 and 2022 World Cup. The winners were Russia and Qatar. The unsuccessful bidders were many, but Japan stood out for me, mainly because I just returned from Tokyo on Monday and because of a memorable TV drama I had just witnessed while visiting.

Last week-end while busily packing my bags, I had a chance to watch a most riveting program on Japanese TV about a Japanese diplomat in Sweden, Kennichiro Nogami, who tried to secretly negotiate the end of WWII for his nation in 1945. Once his role was uncovered, he was viewed as a traitor and had to feign his own death in Europe to protect his wife and daughter in Japan. The story happens in 1964, 19 years after the end of the Pacific War as the Japanese would call it. Nogami returns to Japan in secret one last time to make peace with his choices, and to see his daughter.

My knowledge of Japanese history being so poor, I googled Kennichiro Noguchi, thinking I would find a deeply inspiring story of a patriot who defied the nation, someone who had the vision and courage to do what others were unwilling to do. Instead I found the story of Seicho Matsumoto, a famous writer who penned a best selling novel “Kyukei no Koya“.

So the whole TV program was fiction. But the setting was riveting. Only 19 years after the end of a most devastating war, Japan was reborn from ashes. In only 19 years, the nation went from utter ruins to the host of the first Modern Olympic Games in Asia. They built bullet trains and the tallest structure in the world at the time–the Tokyo Tower. Six years later, they hosted one of the most successful World Expos creating an attendance record broken only 40 years later by the Shanghai Expo.

The question that faced Nogami had always been–is this the Japan he dreamed of? And with the opening ceremonies of the Tokyo Olympics in the background, it was hard to argue that the traitor wasn’t actually the hero.

Back then, Japanese cars were still the laughing stock of the world. But they dreamed big dreams. People with names like Toyota and Honda and Matsushita were decades ahead of the competition in thinking global. Trading firms like Itochu, Mitsubishi, Mitsui, and Sumitomo sent their “shosha-man” all over the world. People were unafraid. It was the era of hyper-growth.

As we approach 2011 and look back 19 years, we see a Japan that had found its bubble economy busted (1991-2). The economic engine based on manufacturing was robbed of its energy by the mirage of a booming real estate and financial sector economy. The next generation of leaders became a generation of followers, doing nothing to innovate, but more to milk the most out of the goodwill that their forefathers had created for them.

A succession of articles in the LA Times, Washington Post, and New York Times about Japan’s demise and whether the US may follow got me to think… What will we say in 2030, 19 years from now. Will we look back and think of the lost opportunity because we forgot how to dream? Or will we dig ourselves out from the ruins to become a great nation once again?

In a sense, the US and Japan are now on the same boat… just 19 years apart. Both nations lost their bids for the Olympics and the World Cups for at least the next decade. Both nations face massive deficits. Both nations face a tremendous crisis in governance, as minority parties are digging in, creating legislative gridlock not seen in decades. The public is pessimistic. In America, we are asking whether the American Dream is no more. In Japan, they are asking whether there is anything to dream about, as they watch China soar past them.

I wonder what the next 19 years will bring.

Joseph Lee is an Adjunct Professor at the Peter Drucker & Masatoshi Ito Graduate School of Management and the Graziadio School of Business and Management, where he teaches a course on management consulting. He is also an Adjunct Professor at Chuo University’s Graduate School of Strategic Management where he teaches Business Communication and Negotiation/Conflict Resolution.

On January 20, 2010, the New York Times and all major Japanese papers reported the bankruptcy filing of JAL (Japan Airlines). The crane that once symbolized Japan’s powerful national airline is no more. Not even privatization could help an airline run into the ground by arrogance and incompetence.

But this is actually old news—everyone knew this was coming. The activities of the Enterprise Turnaround Initiative Corporation of Japan (ETIC), a new government body “with broad powers and a five-year mandate to revitalize Japan’s ailing regional economies,” were being reported on in the media every day.

We knew that the old CEO was a goner when Kyocera Honorary Chairman Inamori, a well respected old-timer, was dragged out of retirement into the frenzy. The appointment was supposed to add credibility to the so-called management team.

Lesson 1: Getting Bill Gates to run a bankrupt United Airlines doesn’t make too much sense, does it?

Likewise, the government’s plan of slashing 15,700 employees, mothballing all of JAL’s 747’s, and drastically reducing the debt were, perhaps, necessary steps, but hardly the foundation of a successful enterprise. In fact, we have no idea what JAL will be doing to continue as a viable player in the airline community going forward.

JAL was going to “hold shareholders accountable” by wiping out the entire capital. The only problem was that a bunch of those shareholders were individuals whose worthless stock gave them the only thing that mattered to them—special discounts to fly JAL.

The ETIC was going to ask hard sacrifices from employees by eliminating a third of the work force. They could have saved even more money by eliminating 90% of the work force, but then there wouldn’t be enough people to wash the planes. Retirees were also arm-twisted into accepting sharp reductions in their pensions. By focusing so much on teaching existing stakeholders hard lessons, perhaps the ETIC forgot that it was turning the airlines biggest fans into, well, mere stakeholders.

Competitive Fall-Out
I’m sure Delta and KLM Royal Dutch Airlines are lobbying hard for JAL not to dump all the Asian routes so that the sky won’t fall off the Sky Team label. All Nippon Airways (ANA), which was lobbying for JAL’s “good routes,” immediately did the brotherly thing by issuing a press release announcing the unfairness of a rival carrier being propped up by government money without any accountability. But ANA should be happy that JAL is alive. Toyota found out the hard way that being number one is not a guarantee of profitability.

Lesson 2: Competition is always good—it keeps management on its toes.

In the world of corporate governance, we love to use the words transparency, accountability, and independence as if they are sacred. They’re like the holy grail, but better. The members of ETIC, all experts in their own right, reported back daily on what they were doing. They demanded that all those key words be satisfied. But perhaps they forgot what stood behind them—transparency is not a goal, and neither are accountability or independence.

Lesson 3: The goal should be for companies to have sound managers making sound business decisions for the benefit of its shareholders.

Soon, the Japanese tax payers will be the shareholders of the collapsing crane. The US bail-out of GM will look like an investment in gold compared to the deal that the folks in Japan will get.

Capitalism Always Wins

I wrote a novel 4 years ago about the Japanese airline industry except the roles were reversed: A US airline was failing and was rescued by a Japanese company. The plot revolved around a major US airbase being returned to Japan as part of a big conspiracy by two airlines to dominate the trans-Pacific routes. My publisher in Japan has now moved up the release date of the paperback version of my book a few months to capitalize on the excitement over JAL.

Lesson 4 (perhaps the greatest of them all): There’s always someone waiting in the wings to capitalize on other’s misfortunes.

This is a post from Joseph Lee’s posting on the Graziadio Business Report.

Joseph Lee is an adjunct professor at the Graziadio School of Business and Management and Peter Drucker & Masatoshi Ito Graduate School of Management, where he teaches a course on management consulting. He will start teaching MBA courses in Business Communication and Negotiation/Conflict Resolution at Chuo University’s Graduate School of Strategic Management starting in April, 2010.