What Working for a Japanese Company Taught Me

Back in the late 1970s, as a consultant to several Japanese computer giants, I read everything I could about Japanese business. It was all very interesting—interesting, but not particularly useful. When I became a line manager in 1981, I realized how little of what I’d read had any practical value. I couldn’t control interest rates, the education system, or the culture. Wasn’t there something to learn from the Japanese that I could actually apply in my own managerial role?

Having spent the past ten years working for Japanese companies, I can now answer that question. As an insider, I’ve discovered more than ten specific management techniques the Japanese use to run their businesses. I’ve also come to understand why these techniques are so effective; I’ve seen them change people’s behavior—including my own. And I’ve learned that many, though not all, of these approaches are equally effective in the United States.

My “research lab” has been Toshiba America, where I was vice president and general manager of its computer division for nine years, and Seiko Instruments USA, where I have been president of U.S. operations since 1989. Toshiba America and Seiko Instruments USA are U.S. companies, have mostly American employees, and compete in the U.S. market, but they have strong cultural and financial ties to Japan.

I have had close relationships with the Japanese managers assigned to me and with those to whom I reported in Japan. I have seen how they manage their own people, American employees, customers and vendors, and the external marketplace. I’ve heard the president of Toshiba America say, as we discussed some problems with product quality, “This is not Japanese quality.” And I’ve heard Japanese managers say, when talking about problems with an American employee, “We must help this person overcome his weaknesses.”

From this vantage point, I’ve seen how powerful seemingly simple things like six-month budget cycles, consensus decision making, and kaizen, or continuous improvement, can be, especially in combination. While non-Japanese managers are familiar with—and may even practice—some of the typically Japanese management techniques, rarely do they practice them all.

I want to encourage non-Japanese managers to put aside economic, cultural, and trade issues for the moment and learn from what I’ve seen the Japanese do every day.

Mục Lục

Welcome to Japanese Management

When I was hired in 1981 to help Toshiba capture the U.S. computer market, I was full of ambition and energy. I needed it, since all I had to work with were four Japanese engineers, one American secretary, and two misfit personal computers the U.S. market didn’t want. The two CPM-based, 8-bit CPU personal computers could not run any U.S. software and were hardly elegant machines. (CPM is the operating system for the 8-bit computer.) The trade press, in fact, described the PCs as “rugged tanks.”

Within a month, IBM made the whole CPM world obsolete with the introduction of the IBM PC DOS machine using 16-bit CPU (central processing unit) technology. We had a difficult product to sell, and problems of culture and credibility made it hard to convince Toshiba’s Japanese engineers to respond. The problems seemed insurmountable. Frankly, I thought Toshiba would fail and abandon the U.S. market. But it didn’t. We overcame the initial business setbacks and over the next three years introduced a better quality dot-matrix printer and went on to build a $75 million printer business against such formidable opponents as Epson, NEC, and Oki. We then reentered the PC market with a laptop computer and gained a leading share in that market. By the time I left Toshiba in 1989, 350 American and two Japanese employees were supporting annual sales of $400 million.

Perseverance and patient capital helped, but I also attribute Toshiba’s success to the management approaches that allowed the company to learn and stay on track. Let me explain how I came to accept—and even appreciate—these approaches and why I think non-Japanese managers should use them too.

Budget for Six Months

When I went to work for Toshiba, I immediately had to adjust to a 6-month budgeting cycle. The Japanese fiscal year generally runs from April through March. Although a full-year budget is prepared in January or February, only the first 6 months are approved—the A period. The B part is modified based on the initial results in the A period and is formally approved in August or September.

Like any U.S. businessperson, I had come in with a 12-month mind-set, so the budgeting periods seemed to come up too fast. I had no sooner developed a budget and countermeasures to correct variances than I was going through it all again. I was giving twice as many performance reviews and awarding bonuses twice as often.

To me, 6-month budgeting was just twice as much work. But after three or four fiscal periods, I began to appreciate it. I came to welcome the opportunity to change the budget because the world had changed so much in 6 months (remember, this was the PC business!). And having two deadlines each year leaves less room for procrastination. If you’re slipping from the budget after the first quarter and you know you have only 3 months instead of 9 to get back on plan, you work harder to figure out what to do. There’s a greater sense of urgency to hit the target.

Of course, budgets are also a planning tool. If the budget becomes meaningless during the course of the year, the company is like a ship without a rudder. And if you’re running a company with several divisions, the effect is cumulative. If, say, three divisions are each off by 20%, it’s pretty hard for senior executives to know what to expect. If, on the other hand, the divisions are pretty much on track, management has some control.

Also, each new budget gave us a chance to wipe the slate clean and start over, which was good for motivation because it allowed managers to adjust goals that no longer seemed achievable. All managers miss their budgets. But if you slip so much that you lose hope of reaching your target, you lose motivation. You know you don’t stand a chance of making it, so you give up.

When I arrived at Seiko Instruments, its seven divisions were using a 12-month budget cycle. One of the computer peripherals divisions at Seiko Instruments, which was in a particularly volatile industry, was so far off the plan that managers weren’t even referring to the original budget. They had given up on it and were putting up a new set of numbers every month rather than concentrating on developing and implementing countermeasures to minimize the negative variances to budget.

Since then, all of our divisions have switched to a 6-month budget. This year, the same division was off budget again—but it was off for 3 months instead of 10. Knowing that the end of the fiscal period was just 3 months away, the managers immediately developed countermeasures to minimize the variances to budget. Midyear, they reset the budget and came up with additional countermeasures. If they had still been using a 12-month budget, they would have been directionless again. But by stopping to ask why they were off and then making adjustments, they put a rudder on their ship. The division used to be 30% off budget, but now it’s maybe 10% off—which is something you can get your arms around and fix.

When I tell my U.S. peers about 6-month budgeting, I get one of two reactions. Either they say we spend too much time planning, or they ask why we don’t use a quarterly plan. A quarter is too short a time to turn the ship. Besides, it would be too time consuming to create the plan, get it approved, communicate it to everyone, and start performing against it every 3 months. Six months is a good compromise. You ensure that the budget is realistic, but you don’t spend all your time on the budget process. Having lived with it for nearly a decade, I think it feels just about right.

Fix the Problem, Not the Blame

When I say many people miss their business plans, I include myself. From the first month on at Toshiba, I missed the plan. We had a personal computer the market didn’t want; we couldn’t make any changes without getting engineering in Japan to approve and implement them; and management in Japan didn’t fully understand the U.S. market. The budget called for $3 million in sales in the first six months. We shipped approximately $3 million worth of equipment—but we got paid for only about half. Since we were unable to make the engineering upgrades we had promised, the rest came back. The next year the plan called for $10 million. We almost made those numbers, but the product mix—and profit—was not as planned. We made it with printers; the PC sales never really got off the ground.

I was doing the best I could under the circumstances, but I expected big trouble when I met with the Japanese higher-ups. They represented manufacturing, product development, and the money, and I represented sales and marketing. Everyone was under stress. I was prepared for a knock-down-drag-out fight over who was to blame for our lousy performance.

Those early meetings were another source of insight into Japanese management. When we got together to talk about why we were underperforming, no one got emotional. The discussions were always calm, and the focus was always on solving the problems. No one seemed the least bit interested in laying blame. Rather than chastising me and putting me on the defensive, they talked to me about what was going wrong and how to fix it.

I immediately felt that I was part of the team and worked that much harder to get us out of our predicament. I realized that others in the company had a lot of trust in me, and I wanted to live up to it.

I can’t help but think about what would have happened in a typical U.S. company. When things go wrong, the instinct is to find a scapegoat. I probably would have been fired and replaced. And the problems would still be there for the new person to deal with.

Don’t Rest on Your Laurels

My managers and I really knocked ourselves out during those early years at Toshiba, with little to show for it. Even though I didn’t get beat up about it, I was under a lot of pressure to make the goals. We started to achieve the budget in the third year, and we continued to make it for something like nine periods in a row.

I felt great that all the stress and hard work was finally paying off, and I kept waiting for my efforts to be acknowledged. But I never got a thank-you. I got some satisfaction from the business performance itself, but I was frustrated and discouraged that no one back at headquarters seemed to recognize how far we’d come. My staff was discouraged too and complained to me, “We do this great job, but we never get a thank-you. Do the Japanese think we’re their slaves?”

I finally gave up hope of getting praise. I figured it was just a cultural thing. But little by little, I began to understand what was behind it. The Japanese simply are not interested only in the absolute results; they are equally interested in the process and in how you can do it better next time. I didn’t have a name for this seemingly negative environment back then, but now I see it as part of the process of kaizen, or continuous improvement.

Kaizen is typically referred to in the context of quality control, but the Japanese apply it broadly. In many areas, they not only plan something and do it but also stop to see the result to determine how it could be done better. American managers, on the other hand, tend to be task-oriented. They create a goal and set out to attain it. Americans interpret the see part as a report card—a pat on the back or an admission of mistakes. For the Japanese, it is an opportunity to reflect and learn.

I have a friend who is responsible for two factories, one in Japan and one in the United States. He explained why the factory in Japan always outperforms the one in the United States: “They both set the same target, and they both may hit it. But when the Japanese hit it, they keep going, whereas the Americans tend to stop and rest on their laurels before pursuing the next goal. So in the end, the Japanese achieve more.” They continuously strive for perfection with the goal of achieving excellence.

I’m not saying that it’s a good idea to withhold praise. The Japanese style is very frustrating for many non-Japanese, especially those who have little direct contact with the business plan and therefore don’t derive direct satisfaction from achieving the numbers. Even for me, there were times when positive feedback would have boosted my enthusiasm and morale at Toshiba. Most people respond better to constructive criticism when it is balanced with some thanks and compliments. But the constant striving to do better and to learn from your successes and failures is an important step toward superior performance.

The compulsion to look for ways to improve paid off at Toshiba. One common promotional tool in the PC business is dealer demonstration programs, whereby you offer dealers a free unit for buying a certain number of products. The dealers have to keep the demos in the store for a specified period of time before they sell them. Like most Americans, I started out designing the program, getting the units out, and then going on to the next thing. My Japanese colleagues would always remind me to see if the program was working. Improving a million-dollar program, even a little, saves a lot of money.

Stay Focused

Just as the fascination with deal making permeates U.S. business, the sense of sticking to the knitting characterizes Japanese business. Americans love to make deals. The highly publicized large salaries and jackpot payoffs of the 1980s further encouraged this get-rich-quick deal making. Japanese businesspeople prefer to improve incrementally something they’re already doing—just like Japanese artists. The vast majority of Japanese artists pick a subject or a style and stick with it forever. Yoshiharu Kimura, a wood-block artist, has done nothing but birds for 25 years; another, printmaker Shigeki Kuroda, has for 10 years been depicting only bicycles and umbrellas in every conceivable permutation. By staying focused and by applying the technique of kaizen, these artists consistently improve their work.

It was the same thing at Toshiba. We questioned how we could improve, but always in the context of what we were already doing. We were never drawn off track, even when attractive opportunities arose. In 1987, I was approached by an entrepreneur with an intriguing plan for a laptop computer with an Apple Macintosh base. He had a solid scheme for solving the legal and technical issues. When I proposed this plan to top management, I received a polite but emphatic no. Toshiba R&D management people in Japan said that their mission was to be king of the PC laptop, meaning the IBM-compatible laptop. And that was that. They didn’t want to dilute Toshiba’s efforts by going into another area. Maybe there were other reasons not to go into the Macintosh area, but we never discussed them. It was understood that the Macintosh distribution channels, software philosophy, and user base were simply too far away from our main business.

The Japanese not only passed up seemingly attractive options but also pursued seemingly unattractive ones simply because of how they defined the boundaries of the business. For instance, Toshiba got into the floppy disk drive business in 1987 when everyone else was getting out. Toshiba was in the computer business, and floppies were a way to add value to that business. The company entered that market by brute force. Maybe Toshiba is making money on floppies now, but at the time, no venture capitalist “deal maker” would have backed that decision.

I’ve also seen the stick-to-the-knitting mind-set played out at Seiko Instruments. For the past 50 years, the company has been one of the world’s largest manufacturers of quality watches. A dozen years ago, the company decided to diversify beyond its relatively mature category. But instead of buying other companies or inventing totally new products, either of which it could have done, the company looked inward to its own products—those proprietary technologies and applications it knew best. It commercialized those and now has more than 15 product lines ranging from precision assembly robots to electronic components to scientific test instruments.

So sticking to the knitting is a way of channeling energy, of putting blinders on, and of defining the realm in which you’re going to play. To Americans, it probably seems boring. They see all these other exciting things going on in the world and know the company has the resources to pursue them. It takes a lot of discipline to ignore them and stay focused. But after a while the discipline becomes automatic. People who have been in a company, a division, or a department for their whole careers understand that they’re there to make the best computers and to sell them on a worldwide basis. It’s just instilled in them.

You could argue that it’s wrong to be narrow-minded, but I think the more focused approach is better in the long run. It takes the emphasis off making deals and puts it on figuring out how to sell more, bring costs down, gain market share, and add more value for the customer. So Toshiba looks for ways to expand the basic technology its products are based on, like the color liquid-crystal display monitor. It tries to expand geographically or improve the product cycle by offering postsales support, always building on the core business.

Quantify Everything

Another frustration for an American is the Japanese insistence on quantifying everything, even intangible things. It seemed like an obsession to me at first. During my second year at Toshiba, we started to experience success with the dot-matrix printer business, and we started launching some marketing programs to build our active dealer base by providing them with demo printers. About 18 months into the program, we were seeing some success, and we started to have some money for promotions. We had maybe $300,000 that we wanted to use to get demonstration units out to the dealers. I discussed the program with the Japanese assistant general manager, Shigechika Takeuchi, now president of Apple Computer, Japan. As an aside, I reported to Tokyo, and he reported to me, but he communicated regularly with Tokyo. He was sort of my nag and “shadow.” (For more on shadow managers, see the insert on “Japanese Blindspot: Outsiders.”)

The Japanese draw sharp distinctions between insiders and outsiders. The concept of insider starts with the family and extends to the school, the company, and the country. The result is a strong “old boy” network in each company that makes it hard for outsiders to be accepted.

The old boy network gains strength as groups of managers progress through the company together. Every group entering Toshiba is given a class-year designation, and people take it to heart. I’ve heard senior managers at Toshiba referring to other managers within the company as their classmates, even though they entered the class 30 years ago.

Many Japanese companies will not hire outsiders (people from other companies) for any position higher than an entry-level one, even when it works to the company’s disadvantage. Toshiba went into the laser-printer business after several other manufacturers had already developed and introduced products. But rather than hire top engineers from those other companies, it reinvented the wheel. The product development process moved along so slowly because of the lack of expertise that the company missed an important opportunity.

The Japanese are also notorious for limiting the advancement of non-Japanese managers. No matter how long a non-Japanese works for a Japanese company, he or she is still considered an outsider. It’s a black-and-white issue with nothing in between. This, of course, deprives the company of the experience and knowledge that an outsider can contribute.

Some people point to the use of “shadow managers” as a clear indication of the lower status of non-Japanese managers. Shadow managers play the role of informally communicating with Tokyo, often performing nemawashi, which literally translates to cutting the roots before you plant the tree. What it really means is informing Tokyo of what is going on and what requests will be made. It is much like a lobbying effort that precedes a formal plan or proposal. I’ve always experienced this role as a positive one. But I’ve heard that other Japanese companies use shadow managers to relay what amounts to orders from Tokyo through the assistant general manager to the general manager and then to the division, effectively depriving the non-Japanese executive of any real decision-making power.

I can still picture Mr. Takeuchi sitting in my office where we were planning our first demo program. I vividly remember it because it was so exciting—the first tangible indication of our success. We really had a product that the channel and the end users wanted, and we were able to do something constructive to broaden our distribution. This excitement was dampened, however, by Takeuchi’s obsession with the numbers. He kept asking, “How much are you going to spend? What are you going to accomplish? How much more are you going to sell next month, next quarter, next year as a result?” I was convinced that these things couldn’t be measured. I said, “You can’t tell how much you’re going to sell next year because of this program. That’s ridiculous.” After all, this was marketing. But the more I resisted, the more he insisted that we do it. And soon we were putting numbers on the white board.

I still believe that the numbers you attach to marketing programs are not an end in themselves; you can’t predict exactly the sales a demo program will generate. And public relations and corporate citizenship programs are even harder to justify in numerical terms. In short, I think the Japanese take “management by the numbers” to the extreme. I guess it’s because they don’t completely trust personal judgment—especially when they’re depending on gaijin (outsiders)—and want to avoid personal risk taking. And maybe, too, it’s because numbers are a universal language.

While I still believe that subjective judgment has its place, I’ve come to appreciate the value of trying to quantify things you know are uncertain. The numbers force you to make estimates and to compare relative alternatives, and they give you something to measure the outcome against. They impose a certain rigor that can help you consider different options. If you’re seeding 700 PC units at about $2,100 each, which is the size and cost of a typical demo program, you want to have some idea of how long those units are going to be used as demos there (dealers have a way of selling them). How many more units will dealers sell because they have the demo there? How many sales will they miss by not having them? It’s amazing how many problems become clearer when you try to break them down into numbers.

Now I’m the guy at the white board telling others to put it in numbers. It usually takes a lot of arm-twisting, which I’m willing to do. I recall having to push one American field service manager at Seiko Instruments, who was proposing to invest $100,000 and increase staff by 15%, to improve field service. He kept giving qualitative measures of what he wanted to accomplish. I constantly had to ask him to give me quantitative targets. This forced him to refine and justify his thinking and programs. It was a painful process. Although it seems to be second nature for the Japanese, it is something most Americans don’t do naturally.

Know the Whole Person

Having spent many an evening at Ginza restaurants and hostess clubs, like every business visitor to Japan, I was struck by how easily the Japanese can change gears. During the day, they grappled intensely with heavy-duty business problems, but at night they drop the subject completely and socialize. Six o’clock begins a second day, one in which conversations about business are taboo. Once when I started talking about business during a golf lunch, my colleagues reminded me that it was “personal” time.

Reserving strictly social time forces businesspeople to get to know each other on a different and much more personal level. They get to know each other as whole people. I’ve seen how important that is to business relationships. It builds trust and makes communication much easier.

I can think of a couple of situations that illustrate the point. When my first manager, Mr. Hirai, learned that the senior manager he worked with in Tokyo was leaving for an assignment in Germany, he was very disappointed. “Mr. Sato and I have worked together for so long that we know how each other thinks,” he explained. “I can anticipate what he’s thinking and feeling.”

I had the same kind of relationship with Dan Crane, my vice president of computer marketing at Toshiba. He and I shared a lot of experiences in Japan—from drinking beer in Roppongi to climbing Mount Fuji. So we trusted each other and never had to waste energy wondering what the other really meant or worrying about hidden agendas.

That trust was especially important during the tense time when Toshiba was ready to get back into the U.S. computer business after having de-emphasized it several years earlier. It seemed obvious to me that our division should market the computer; but the Japanese always explore the alternatives, so a task force was formed to analyze it. Dan was on the task force with many Japanese managers from Tokyo, and I wasn’t. I could have found that situation very threatening, but I had confidence in Dan’s judgment. I knew that the decision the task force reached would be rational. As it turns out, the decision was in favor of our division—which proves my point!

Japanese companies are unwilling to invest in training their female employees. As a result, this highly educated part of the work force is terribly underused. I’ve often seen very competent women who have graduated from the top universities do little more than serve tea. In the 15 years that I’ve been closely involved with Japanese companies, most of the “career moves” I’ve seen women make are to graduate slowly from tea servers to note takers to administrative assistants.

Management does not consider training and development of female workers a sound investment because it expects the women to leave the workplace at an early age to marry and raise a family, as they have traditionally done. If a woman leaves the work force when she is about 25 years old, it is difficult for her to return. The Japanese culture and infrastructure do not support women who wish to return to work after having children. There are no day-care centers or babysitting services, and such women are looked down on. Of course, there are some highly publicized exceptions where women have taken strong leadership roles in Japan. But attitudes and institutions overwhelmingly work against the effective use of women professionals.

I can’t say I’m prepared to go out every night with my American colleagues—and I doubt that they would want to. But when we do get together outside of regular business hours, I try not to work on business problems. We talk about families and sports and other things that help us get to know each other better. It helps us get along during the business day.

Get People to Buy into the Decision

This issue of getting back into computers after our initial failure demonstrates the Japanese approach to decision making: try to get everyone to agree. This is the Japanese consensus decision making we all hear about. Toshiba wasn’t the only company in deep trouble because its computers couldn’t run Lotus and weren’t IBM compatible. Every Japanese company had made the same mistake, as had Texas Instruments, Digital Equipment Corporation, Wang Laboratories, and Hewlett-Packard.

At a certain point, it was obvious to us at Toshiba America that we had to be IBM compatible. We had been living and breathing the U.S. market. But we had two other groups to contend with—the Japanese engineers in the Tokyo factory R&D and the Tokyo marketing group. They weren’t sure. So we formed a study team, led by McKinsey, to go through the painstaking process of talking to distributors, dealers, and end users, gathering data, and deciding what we needed. Guess what the task force concluded: we needed to be IBM compatible.

The purpose of the task force, of course, was to get the others to buy in, which seemed to me a royal waste of time. But I learned that in the end, it wasn’t. When the other groups bought in, they bought in with a vengeance, and their commitment more than made up for the slow decision making. When we finally settled on the idea of “being blue” (IBM’s color), all the players felt they owned the idea. We were all equally determined to be “brighter blue.”

That’s how we arrived at the idea of a full-featured, IBM-compatible laptop computer. We were the first major company to come out with a successful laptop. We lost more time in the beginning getting everybody focused, but things moved quickly after that.

With my American managers, I’m somewhat less concerned about reaching 100% consensus agreement. I’ve learned through experience that collaborative decision making works virtually as well as the consensus approach. While consensus requires 100% effort to achieve 100% “buy in,” collaboration requires only 20% effort to achieve 80% buy in. I talk or collaborate with everyone because I’ve seen the importance of owning a decision; I know people want to be heard and not dictated to. But I have limits about how much time I can afford to take. In the United States, the majority rules, so no one seems to expect 100% agreement anyway.

Empower the International Sales Group

Sorting out the Japanese organizational structure is a challenge—job titles are not equivalent to those in the United States. There are many dotted lines and gray areas of responsibility. Most of my early dealings were with the president of Toshiba America. But soon after, I had a lot of communication with a group of engineers from Japan who seemed to have similar business interests. I wondered who those guys were.

“Those guys” were part of the international sales and marketing group. The ISM is highly influential and important. In fact, the president of the U.S. subsidiary reports to the general manager of the ISM. And the general manager of the ISM reports almost directly to the president of the whole company, with maybe one person in between.

The ISM is responsible for global business development outside Japan. In essence, it buys product from the Japanese and resells it to the U.S. and other international subsidiaries at a markup, which covers its salaries and creates a pool for investing in geographic growth elsewhere. When we started, the ISM had money to invest in us. Then after we got going, the ISM took money from us and invested it in Europe and Canada.

But the significance of the ISM is that it focuses solely on developing business internationally and has the organizational clout to make things happen. It goes out and researches other markets, identifies existing products or product development opportunities, and then goes back to Japan and spearheads the development effort. That’s exactly what happened with the laptop. The ISM was on the task force that decided we wanted to be brighter blue. Then Mr. Hataya, who headed the group, led the laptop product development in Japan. It is interesting to note that although NEC is the compatibility standard in the Japanese market, Toshiba did not develop an NEC-compatible laptop. That goes to show how much power the ISM has.

Because of the ISM, I basically had two bosses. I reported directly to the president of Toshiba America, who approved the business plan and evaluated the fiscal period business performance. But I also had a dotted line—a very thick, black dotted line—to Mr. Hataya. He was interested in long-term business development in addition to meeting the current fiscal business plan. So each of my bosses had a different perspective. One manager was looking at the day-to-day P&L, and the other was taking a back-road view of product development, spin-offs, and global market development.

This arrangement gave me the flexibility to subordinate short-term pressures to long-term market development. If I wanted to invest current profits to expand the market instead of making a higher percentage profit, for instance, I could always make my case informally to Mr. Hataya, who could then informally influence the president.

Although many U.S. companies have international sales and marketing organizations, those organizations don’t have the same power, probably because company leaders have only recently recognized the importance of actively pursuing international markets where stiff competition against the best in all areas of the world ensures that they remain world-class. Typically, world-class companies should have more than a third of sales outside their home market.

I attribute the ISM’s success to two things: first, the product manager is highly empowered; second, the product manager is a senior manager with more than 25 years of experience in the company, a wide range of experiences, and a broad network of colleagues he knows and trusts.

Visit Customers, Build Market Share

When I presented my budget, I was always pressed hard to justify head count, for two reasons: first, head count sooner or later leads to higher fixed expenses; and second, the Japanese don’t believe in layoffs, so they would rather be conservative. On the other hand, advertising and travel expenses were easy to justify—advertising because theoretically it yields market share, and travel because it encourages visits to customers. I know that in U.S. companies, you’re always trying to schedule several things when you’re making a long trip. Consequently, the trip inevitably gets postponed. But for the Japanese, having only one meeting is no reason not to go.

I was amazed at how easily the Japanese would jump on an airplane to visit a customer. I could always get the president of Toshiba America to fly to Texas, even for a one-hour meeting. I do my share of flying too. Recently, I flew from California to Greenville, South Carolina for one two-hour meeting.

At Seiko Instruments, we have guidelines for how much time we should spend visiting customers, either at their offices or at trade shows, and we tie customer contact to the management bonus plan, even for top managers. General management should spend 20% of its time with customers, for instance, sales management 40%, operations management 30%, field service management 20%, marketing 25%, and engineering 5%. This is one way to reinforce the idea that customers matter.

Market share also matters. The conventional wisdom is that market share is good because you sell more, and therefore you can make big capital investments in the manufacturing process. That’s true, of course. But there’s also a less obvious advantage. Market share gives you visibility, so more people will hear about the product through word of mouth. Many people buy a technical product because they have confidence in it—it was recommended by a friend, or they saw someone else using it. And existing customers are already sold on your brand, your quality, and your service, so it’s relatively easy to sell them an add-on or upgrade.

Some U.S. companies have de-emphasized market share, and they’ve lost visibility. After a while, they’re no longer a force in the market. One New England photographic company comes quickly to mind, but there are lots of other examples.

The Japanese don’t like businesses that aren’t profitable, so when they talk about investing in market share, they’re not talking about negative P&L. They want the business to make a “healthy” profit, which means enough money so you can still break even if you have a setback. But it’s okay to make a few percentage points less and spend money on promotions and other things that will build market share—things that look like an expense but translate into an investment.

I had a good technique for making this case. I would prepare a 6-month budget with “normal” operational P&L. In addition, I would show projected sales for the 18 months beyond that budget. Then I would prepare a second “investment” budget with lower P&L results. Along with it, I showed the 18-month follow-on sales, which were enough to justify the lower P&L that I was attempting to sell.

Granted, U.S. companies have to produce quarterly profits to bolster the stock price, but I think it’s a matter of pitching it to investors the right way.

Demand Active, Informed Directors

Japanese companies have an important operational resource U.S. companies generally do not: the board of directors, which consists of 15 to 20 of the company’s top operating managers and a few outsiders who are closely associated with the company. Managers become eligible for the board in their early fifties and have a few opportunities to be elected. The grapevine is always abuzz with conjecture about who will or will not make it.

Those who do make it sit on the board for a few years and then retire. The constant turnover of members ensures that the board doesn’t get stale. The fact that the members are drawn from the ranks of people who have many years of experience ensures that they are committed and knowledgeable.

So when Japanese boards get deeply involved in strategic and operating decisions—as we all do—they have a lot to contribute. Board members are really an extension of top divisional line management, and the constituency of the board is really the employees. Therefore, the point of view is on operations and building value in the core business rather than financial or legal maneuvering and deal making.

I can appreciate that outside directors bring an important perspective to U.S. boards, but outsiders have neither enough time nor financial incentive to understand the company deeply. And because the CEO usually appoints them, they tend to be reluctant to stand up to management. It’s the company’s loss.

Let me repeat the disclaimer that the approaches I’ve described here are not unique to Japan. In fact, my observations are consistent with the new wave of management thinking in the United States. And let me reiterate that I don’t think non-Japanese managers should do everything that Japanese managers do. For instance, I don’t recommend 100% consensus decision making, especially in crisis situations, nor do I think managers should neglect to thank people for a job well done.

My message is simple: the way to make great leaps is to take many small steps, consistently, every day.

A version of this article appeared in the November–December 1990 issue of Harvard Business Review.