Messages from Keidanren Executives February, 2016 Japanese Way of Achieving Innovation under Leadership of Top Management
The topic of innovation is brought up almost every day in the spheres of the government, industry and academia. I would like to discuss this topic from the viewpoint of the role to be played by top management.
In recent discussions and researches, innovation is often categorized into two types, namely, bottom-up and top-down. With regard to the traditional innovations that supported the growth of the Japanese economy, we developed new products following the footsteps of the advanced Western countries. In this case, where we tried to reach a visible target, the bottom-up efforts achieved a considerable success. Meanwhile, we now need to promote innovations in areas that are unprecedented and unforeseeable. It is often asserted that a top-down approach is necessary to achieve innovation of this type. There is some question, however, as to whether venture-company-type innovations, such as those in Silicon Valley, can be achieved under the leadership of top management of big Japanese companies. I also question whether it is realistic for top management to get deeply involved in specific cases.
Given the current ways of running an organization, we must establish appropriate systems and transform a corporate culture in order to encourage employees to take a risk and deal with challenges. I strongly believe top management need to recognize this as their role. As for the proclaimed "open innovation" and "business-academia collaboration," we should not simply leave the matter to people in charge. Instead, we should make sure that the whole organization systematically supports their efforts under the leadership of top management. We are entering a phase where an organization’s overall effort is critical.
Japan Economic Research Institute is now working to make a proposal on Japanese way of creating innovation. Discussions have been conducted over such topics as business-academia collaboration and ways to manage venture projects. People at the institute, however, have come to share a common understanding that it is most important to first lay the foundation of an innovation-oriented organization. This means that, before talking about specific measures, it is urgently needed to establish sustainable systems under the leadership of top management. By establishing a long-term, company-wide involvement system, we will be able to capitalize on the strengths of Japanese-style management. This is the role that top management should play.