Lessons to business leaders from Japanese companies: A conversation with HBS Professor Hirotaka Takeuchi

Professor Takeuchi at his office at Harvard Business School.
Ryo Takahashi, Deputy Editor-in-Chief

For many decades, Japan’s corporate culture has been an enigma to many. Even more puzzling still was how a small, resource-poor nation grew at one point to become the world’s second largest economy. The Harbus met with HBS Professor Hirotaka Takeuchi to demystify what makes Japan unique and what lessons could be drawn.

Maintaining a long-term vision

“Japanese companies are quite distinct from that of their Western counterparts,” says Professor Hirotaka Takeuchi of Harvard Business School. One aspect, he explains, is the long-term strategic focus held by Japanese companies.

“It’s not rare to see a CEO who would be the 17th generation of his family to take over the business,” says Takeuchi, “a tightly-knit, family run business that is run from one generation to another has a longer-term business perspective and leads to a very different implication for how to run a company compared to some of the more modern Western counterparts,” he says.

There are over 700 companies in Japan with histories dating hundreds of years, including many globally known firms such as retailer Mitsukoshi (1673), pharmaceutical giant Takeda (1781), and soy-sauce manufacturer Kikkoman (1603). Many of these companies have been closely guarded family-run businesses with enduring business principles and family edicts that get passed down from one generation to another.

As an example, Takeuchi chose Honda (his favorite case at HBS). Honda, founded in 1946 in the immediate aftermath of World War II, traces its roots as a humble motorcycle repair and production shop and quickly rose to prominence as one of the largest automobile manufacturers today. But founder Soichiro Honda’s vision was bigger.

“To say that Soichiro Honda, the founder of Honda, had a vision of becoming an automobile manufacturer is misguided,” Takeuchi explains, “He wasn’t about automobiles—his vision was about mobility. Witness the logos of Honda and you’ll see that there were wings in the emblems of their early motorcycles. Honda wanted to fly.”

And indeed, many years later, after decades of expensive R&D, Honda unveiled its HondaJet, the first of which was delivered in 2015.

“The HondaJet was the best-selling small business jet in the United States last year,” Takeuchi notes, “and what’s more, it embodies the realization of the founder’s dream. They had a strong vision of a future that they wanted to create, which would not have been possible if they had only a short-term focus.”

Japanese companies’ long-term focus is also embodied in their focus on kaizen (continuous improvement). HBS students are familiarized with this concept of continuous improvement in the Toyota case, which is a mandatory first-year case.

“US companies are far ahead when it comes to disruptive innovation,” admits Takeuchi, “whereas Japanese companies are more about slow, continuous, incremental innovation. At one point, however, the innovation can jump, as we saw in Toyota going hybrid,” he says.

Companies as a force for societal good 

Another key difference between Japanese companies and their Western counterparts is a strong focus on societal concerns.

“Since the time of Omi merchants [in the 1700s], Japanese companies have operated by a principle of Sanpou Yoshi,” Takeuchi says.

Sanpou,” which means “three ways”, and “Yoshi”, which means “to satisfy”, jointly mean that a company needs to ensure that it is creating value for customers, the company, and for society.

“Today in the West, this is being popularized under the notion of CSV (Creating Shared Value) by Michael Porter,” says Takeuchi, “it’s really about putting economic as well as social value at the heart of one’s main business.”

CSV, which was a concept introduced by Michael Porter and Mark Kramer in a Harvard Business School article, is a fundamental departure from CSR (Corporate Social Responsibility).

“Many Japanese business leaders already practice this unwittingly,” Takeuchi says. He pointed to Lawson’s fast response to the 2011 Great East Japan earthquake.

“Then CEO of Lawson Takeshi ‘Tak’ Niinami, an HBS alumnus, immediately ordered rice balls from his convenience stores to be shipped to the disaster-struck regions. Niinami said, ‘disregard cost. Just do it’. That’s not possible when one is just thinking about maximizing shareholder value and managing one’s P/L,” Takeuchi said.

Teaching at HBS

Professor Takeuchi has had a long and illustrious career as a business school professor. From 1976-83, he first taught courses in marketing, and then returned to Japan where he became Founding Dean of Hitotsubashi University’s business school, Graduate School of International Corporate Strategy.

In 2010, Takeuchi returned to HBS, where this time he co-taught “Microeconomics of Competitiveness” with Michael Porter and taught “Knowledge-based Strategy”.

“In a way I was a heretic in the Strategy Unit at HBS,” Takeuchi says. “The conventional wisdom about strategy was that firms differ because they have different value chains and different activities. In a sense, my course took the opposite view and was taught on the premise that firms differ because they envision a different future.”

“At HBS, we taught Honda Case (A) and Case (B) in the Strategy course. Case (A) was all about traditional strategy, where it was about data, experience curves, and achieving economies of scale.”

“We then handed out Case (B) of Honda, which was based on interviews with the executives at Honda. In the case, they basically admitted that they didn’t have the sort of strategy that Case (A) describes, or rather any semblance of a strategy at all. What they had was a belief and a gut feeling about what they could achieve in the future,” he says.

Bridging theory and practice

Today, Professor Takeuchi teaches the Japan IFC (Immersion Field Course), which has garnered such strong student demand over the years that it is now in its third 3-year cycle of being offered at HBS. He sees it as a natural extension of teaching “Knowledge-based Strategy”.

“Japan was a natural choice. I take my students to a 2-week trip to Japan,” Takeuchi says, “and then, with their own eyes, they can really see Knowledge-based strategy in action.”

“For example, I take my students to Honda and they get a glimpse of ASIMO, a humanoid robot. Originally, it was designed with the intent of winning the World Cup soccer games by 2050, but now, given the societal need for elderly caregivers, Honda redefined ASIMO’s role and is working on improving its dexterity so that it can bathe, and eventually fully care for the elderly. This exemplifies how Honda continues to think about how it can add value back to society,” he says.

“Many of my students learn about a higher purpose when they take my course,” Takeuchi says, “Analytical, outside-in approaches towards business are certainly important, but just as important is balancing that with a deep introspective inside-out perspective of how to envision something that is meaningful and adding value both economically and socially.”

In an increasingly competitive world, Professor Takeuchi leaves future business leaders to ponder a simple question that is oftentimes the most difficult to answer.

Ryo Takahashi (MBA ’20) originally from Japan, is a management consultant and writer. Prior to Harvard Business School, he worked as a Project Manager at the World Economic Forum (WEF) and was a Senior Associate at McKinsey & Company. Prior to these roles he worked at The Economist and The Japan Times. His writing has appeared in TIME Magazine, The Economist, The Japan Times, and the World Economic Forum, among other outlets. He received his B.A. in Economics (with Distinction) from The University of Tokyo and was also a Rotary Scholar to the London School of Economics