Instances of failed system development are frequently observed in Japanese companies. While Japanese technology is highly regarded globally, the digitalization of business operations and application development in Japan lags behind advanced English-speaking countries. This can be explained by unique Japanese ways of thinking and corporate culture.
- Japanese ways of thinking and corporate culture
- Overcoming Challenges: Real-World Examples and Success Stories
- 1. Shifting from Perfectionism to Agile: “Start Small, Try Fast”
- 2. Breaking Down Silos and Fostering Cross-Departmental Collaboration
- 3. Reducing Vendor Dependence and Promoting In-House Development
- 4. Fostering a Corporate Culture that Welcomes Change
- 5. Positioning IT Investment as a Strategic “Investment in the Future”
Japanese ways of thinking and corporate culture
The prevalence of failed system development projects in Japanese companies and their lagging performance in digitalization and application development compared to advanced English-speaking countries are deeply rooted in distinct Japanese ways of thinking and corporate culture. Below are the contributing factors:
1. Perfectionism and Extreme Caution
- Mindset: Japanese people have a very high awareness of quality, and this tendency to pursue perfection is strong in system development. They intensely dislike defects, insisting on thorough testing and verification before release. Furthermore, they prioritize minimizing risk and are extremely cautious about adopting new technologies and methods.
- Corporate Culture: This perfectionism leads to a corporate culture of “crossing a stone bridge after tapping it thoroughly” (meaning, being extremely cautious). In new system implementation or digitalization projects, there’s a strong emphasis on past successes and proven track records, making them hesitant to embrace unprecedented challenges. As a result, they often fail to keep pace with market changes and technological advancements, leading to delays in digitalization. This environment makes it difficult for agile development methodologies, which prioritize rapid iteration and improvement, to take root.
2. Siloed Organizations and Slow Decision-Making
- Mindset: In many Japanese companies, vertically segmented organizations with clear departmental roles are common. Each department operates independently, often prioritizing localized optimization over overall system optimization in system development.
- Corporate Culture: As exemplified by the “ringi” (consensus-building) system, decision-making requires approval from many departments and executives, which takes considerable time. Digitalization and new application development projects often span multiple departments, requiring extensive coordination, which can lead to prolonged project durations or even abandonment. Furthermore, accountability can become ambiguous, frequently resulting in a situation where “everyone is responsible, but no one takes responsibility.”
3. Vendor Dependence and Slow Internalization
- Mindset: Japanese companies frequently outsource system development entirely to external vendors. Due to a lack of in-house expertise in system development and digital technology, they tend to rely heavily on vendors.
- Corporate Culture: By entrusting everything to vendors, companies often fail to cultivate the ability to formulate and execute their own digital strategies. Relationships with vendors can also become fixed, making it difficult to flexibly introduce new technologies and services. Consequently, systems often fail to genuinely meet the company’s business challenges, and post-implementation modifications and improvements also depend on vendors, leading to increased costs and a lack of speed. While there are movements towards internalizing development, talent development and organizational transformation require time.
4. Conservative Mindset Resistant to Change
- Mindset: Japanese corporate culture tends to value existing methods and customs. There is a strong emphasis on stability, and significant resistance to change.
- Corporate Culture: Digitalization involves major transformations of existing business processes and organizational structures. However, many Japanese companies resist accepting such changes, and the desire to maintain the status quo is strong, hindering digital transformation. In particular, resistance from the frontline is often deeply rooted, and even when new systems are introduced, “double operations”—where both the new system and previous manual or paper-based methods continue—are frequently observed.
5. Approach to IT Investment and Short-Term Perspective
- Mindset: IT investment in Japanese companies is often viewed as a “cost” rather than an “investment in the future” compared to Western companies.
- Corporate Culture: Due to stringent short-term return on investment (ROI) demands, strategic digital investments with a long-term perspective are often not made. There’s a tendency to prioritize immediate cost reduction and efficiency, pushing innovative digital investments that could strengthen future competitiveness to the back burner.
These factors are interconnected and contribute to the delays in digitalization and system development within Japanese companies. While the technical skills of Japanese individuals are high, the organizational structures and culture needed to maximize these skills are still immature. Going forward, a shift in mindset is required: embracing change, making swift decisions, promoting internal development, and viewing IT as a strategic investment.
Overcoming Challenges: Real-World Examples and Success Stories
Many IT professionals in Japanese companies are struggling with the system development challenges stemming from unique Japanese corporate culture and mindsets. However, in recent years, some companies have successfully overcome these challenges and achieved digital transformation. Here are some concrete solutions and success stories:
1. Shifting from Perfectionism to Agile: “Start Small, Try Fast”
Solutions:
- Introducing Agile Development Methodologies: Break away from the “perfectionism” of waterfall development and adopt agile development (such as Scrum) which involves short cycles of development, testing, and improvement. This allows for rapid response to market and customer needs and minimizes rework.
- MVP (Minimum Viable Product) Thinking: Instead of incorporating all features from the start, focus on developing a Minimum Viable Product (MVP) with essential features, releasing it early, and gathering feedback.
- Fostering a Culture that Tolerates “Failure”: Promote a mindset where it’s okay to try things even if they aren’t perfect, and to learn from those attempts. It’s crucial to cultivate a culture that views failures as learning opportunities to be utilized for future improvements.
Success Stories:
- Denso: Since 2017, they established a Digital Innovation Office and have been promoting agile development in algorithm development and component manufacturing. They’ve also organized seminars for management to foster company-wide understanding of the importance of agile development.
- Japanese Consumers’ Co-operative Union: They established a “Dejima” (isolated island) organization with broad discretionary power to implement agile development. They have rapidly conceived and realized numerous new ventures, such as “Co-op Chef,” an ordering website linked to cooking recipes.
- Nissan Rent a Car: They adopted agile development for the complex official app development. With six vendors involved, they flexibly responded to specification changes and achieved speedy development.
2. Breaking Down Silos and Fostering Cross-Departmental Collaboration
Solutions:
- Forming Cross-Functional Teams: For system development projects, form integrated teams (such as Scrum teams) comprising members from relevant departments, including planning, development, and business units.
- Establishing a DX Promotion Organization: Set up a DX promotion department directly under the president to lead company-wide digital strategy planning and execution. By gathering key personnel from various business units to work concurrently, inter-departmental collaboration is strengthened.
- Shared Goals and Visualization: Set clear digitalization goals that all departments can share, and regularly visualize progress and outcomes to promote inter-departmental collaboration.
Success Stories:
- Tokyo Century Corporation: They established a DX special assignment team directly under the president and created a new DX Strategy Department. They brought in key personnel from various business divisions to work concurrently, driving corporate culture, organizational, and process reforms.
- Resona Holdings: While promoting in-house development, they are also advancing digitalization across the entire group, enabling all procedures to be completed via their app, thus improving customer experience. This demonstrates significant progress in cross-departmental initiatives within a typically siloed industry like finance.
3. Reducing Vendor Dependence and Promoting In-House Development
Solutions:
- Developing and Securing IT Talent: Train in-house personnel with expertise in system development and digital technology, strengthening the foundation for in-house development. Actively pursue reskilling and external recruitment.
- Utilizing Low-Code/No-Code Tools: Introduce low-code/no-code tools that allow even employees without specialized programming knowledge to develop systems and applications, enabling business units to create simple systems.
- Revisiting Collaboration with Vendors: Instead of completely outsourcing to vendors, establish a partnership where you clearly communicate your company’s challenges and requirements. If necessary, outsource specific feature development to vendors while maintaining overall control internally.
Success Stories:
- Nitori Holdings: They are promoting in-house data utilization, analyzing customer data to achieve a more personalized experience on their e-commerce site.
- Hoshino Resorts: Non-engineers are leveraging low-code tools (like kintone) to achieve ultra-high-speed development at 1/30th the effort of scratch development. This promotes in-house development by business units.
- Takenaka Corporation: They are building an in-house development system in cooperation with partner companies. They are independently modifying an accounting system that has been in operation for about 30 years, aiming to reform work styles and resolve talent shortages using digital technology.
4. Fostering a Corporate Culture that Welcomes Change
Solutions:
- Top-Down Commitment: The management team must lead digital transformation with a clear vision and strong will, continuously communicating its importance to all employees.
- Sharing Success Stories: Actively share even small success stories both internally and externally to demonstrate the positive changes brought about by digitalization, thereby reducing resistance to change.
- Creating a Psychologically Safe Workplace: Build a psychologically safe work environment where employees feel comfortable expressing opinions without fear of failure or trying new challenges.
Success Stories:
- Uniqlo (Fast Retailing): President Tadashi Yanai has championed the transition to an “information manufacturing retailer,” strongly promoting digitalization. They are integrating their SPA (Specialty Store Retailer of Private Label Apparel) model with digital technology, utilizing customer data, and optimizing the supply chain.
- Toyota Motor Corporation: They are focusing on “human resource development to support digital transformation,” realizing data utilization through factory IoT and optimizing existing assets. Management understands the importance of digitalization and actively invests in it.
5. Positioning IT Investment as a Strategic “Investment in the Future”
Solutions:
- Aligning Business Strategy with IT Strategy: Position IT investment not merely as a cost, but as an essential “investment in the future” for corporate growth and competitive advantage, closely linking business strategy with IT strategy.
- Long-Term IT Roadmap: Develop a medium- to long-term IT roadmap, not just short-term ROI, and plan for continuous investment.
- Data-Driven Investment Decisions: Quantitatively evaluate the effectiveness of IT investments and make rational, data-driven investment decisions.
Success Stories:
- LIXIL: Through DX, they are providing new value that meets customer needs and transforming their traditional business model. The development of their “online bathroom design system,” in particular, is considered an innovative example where customers can select optimal products. This is a successful case where IT investment directly led to new business creation.
- ZOZO: In their system refresh, they conducted thorough market research and analysis of user needs, implementing a system that provides personalized services based on customer purchasing behavior. This led to increased customer satisfaction and repeat customers, demonstrating that IT investment can generate clear business results.
As these examples show, for Japanese companies to succeed in digital transformation, it is essential not only to adopt technology but also to transform organizational culture, develop human resources, and have strong leadership from management. IT professionals are encouraged to refer to these success stories and approach problem-solving in a way that suits their company’s specific circumstances.
