The Principles

The basic principle of the “Third Road of Management”

Reinventing strategy & leadership in a collective world.

 

In Japan, over time, priority has been given to the quality of execution. Through mastering a process targeting perfection and continuous improvement, Japanese have epitomized efficiency in the daily operations. All visitors in Japan will be amazed by the punctuality –not at the minute but at the second- of the bullet trains (Shinkansen) following each other with 3 minutes interval at 200 miles per hour with almost never a delay or by the repetitive perfection of the gastronomy and service at any of the tens of thousands restaurants of Tokyo. This passion for perfection to the extreme in the operations can be found in the manufacturing capability of the Japanese industry summarized in one word “monozukuri”. It requires great discipline in the respect of long established rules and processes that are marginally and gradually improved (kaizen 改善), only after deep study and having checked with all stakeholders that the improvement is well accepted and almost risk free. Deviating from those rules or even questioning them, which result from long history, is almost impossible even when, in some cases, they have little meaning.

On the other hand, Japanese do not focus on strategy and marketing, for which there is no exact translation in Japanese. The Japanese words senryaku 戦略 –strategy- andマーケチング –marketing- have a different meaning from commonly understood in English. Strategy is more broadly used as a tactic, an action plan or a schedule and marketing is understood as the activity of sales promotion and advertising campaigns –often orchestrated by the huge local media agencies, the most famous of which is Dentsu.

For example, Marketing is not taught or has not been taught until recently in the most prestigious universities of Japan.

Reversely, in Anglo-Saxon countries, where most executives have pursued an MBA, and where having worked for one of the prestigious strategy consulting firms such as McKinsey, BCG and some others, represents a highly valued experience, strategy and marketing are areas of professional expertise recognized as key and at the origin of all action plans. Defining the targets of a company or a product in terms of priorities such as geographical area, customer profile and distribution channels for example, their unique value proposition and differentiation against competitors and how it will be brought to the market globally represents a very important part of the company core competencies. This set of target customers, value proposition and competencies represent the “positioning” of the brand or the product that, more or less, will be found in any part of the world when it will be introduced and promoted.

There are key scientists in those areas such as Philip Kotler for marketing or Michael Porter for strategy who are as famous and important as Albert Einstein for the theory of relativity or Louis Pasteur for medical science for example.

Contrary to most Japanese firms, where each function and region proposes and often defines the products and services to develop and the way to promote them, western companies develop their strategy and marketing plans centrally. There is CMO who decides, together with other key executives and backed by the CEO, generally after recommendation of a single global advertising agency and often advised by strategic consultants, what the global positioning of the company and main products will be. It means that the company main focus is the result of the activity of a small group of people. It also means this group of people decides what the priorities are and which activities will be deprioritized or discontinued. The room for local adaptation to each market of products or campaign is generally limited. It is the meaning of the “think global, act local” motto where regional operations are not supposed to think too much but to implement. The lack of freedom of regions can vary by company but what is decided centrally can go from strategic guidelines to detailed implementation plans, such as campaigns or retailers standards for example as in the case of luxury goods.

 

For most Japanese multinational companies, the lack of focus on strategy and marketing results in the absence of clear value proposition of their products or services, in blurred customer perception often inconsistent among regions, great focus on domestic market and slow responsiveness to changes.

When you visit the big electronic stores in Tokyo such as BIC Camera, you are surprised by the resemblance of appliances between many local brands and their uniqueness compared to overseas products, which make them difficult to export to most foreign markets and leaves little room for profits. This phenomenon was named by media “the Galapagos syndrome”.

In brief, despite a great technological and manufacturing expertise, the actual value of the products and services is low in the eye of customers and particularly global customers.

For many western companies the consequence of the central decision is often a lack of ability to adapt and understand local needs and differences. It is also the demotivation and low buy-in from regional actors in the operation who have the impression not to be understood and to spend time in reporting and bureaucratic controls. It is also, and increasingly, the inability to grasps the good ideas and suggestions coming from local or functional operations and to make them global. This is the reason why, in so many industries, start up companies that bring disruptive models can grow successfully with little reactions if not denial from big traditional structures. There are many examples of such champions, which have become irrelevant.

 

In today’s increasingly fast changing and global world, the Japanese model ignoring strategy and global marketing achieved some limits and is putting the model at risk. Ability to grow revenue by increasing what customers in all markets are ready to pay for products and services that have a clear value proposition, are well designed for their price, fulfilling clear unmet needs, well promoted and branded is of a superior importance. The quality of production, which brings lower costs and higher quality, is not sufficient to win, as most global companies have copied Japanese manufacturing principles. The superiority of Japan in this domain, if it still exists, is getting thinner and not differentiating enough. Japanese firms that have not embraced the global marketing challenge are in great danger –they often start abandoning the B2C as a first tentative to buy time. Even, the companies that are still apparently successful, recently thanks to exchange rate, are the next ones to struggle for relevance.

Western firms are also facing difficulties, as the top-down approach is not working anymore in a fast changing world. Indeed, the established positions are questioned every day and the champions of today are to be threatened tomorrow; it is therefore imperative to be able to have everyone on board when strategy and marketing plans are established and to keep them motivated when it is time to roll-out, implement and roll-out the plans.

 

The third road of management (the first two being the one we have earlier described) is a new type of management, which combines the advantages of the two traditional systems and eliminate their flaws.

I have practiced, as an actor and a leader at Nissan and Toyota, this new type of crowd-sourced innovation and marketing strategy and it worked much better than what I have ever experienced in my career.

At Nissan, when I was head of product strategy and planning, we established product-planning teams in all regions and the product strategy was built with them in a very organized manner. Then, each region would take the leadership of a given product even if the product had a global role (Qashqai in Europe or Infiniti G35 in the US for example)

At Toyota, the team made of marketing executives of main regions and distributors played the role of the CMO under my leadership in the sense that we defined the marketing strategy made of the brand promise, the priorities, objectives and tools at global level. It was what we called the Brand Action Meeting or BAM.

Then, when the BAM had defined the frame of the global strategy, each of the decided actions or priorities would be assigned one of the regions as leader or co-leader.

In both cases, there was a real global strategy, marketing strategy in the case of Toyota and product strategy in the case of Nissan, with a strong focus.

In that sense, both cases differed from the Japanese model.

But this strategy was built with or even starting from the regions and in that sense differed from the Anglo-Saxon model where the strategy is mainly decided centrally.

In both cases too, the regions took the leadership of individual global projects and global headquarters’ role was to facilitate and coordinate to ensure strong products and marketing plans not to decide evrything. Eventually, each regions implemented and adapted but not in a forced manner.

Control and systematic reporting were not necessary, as they would represent a loss of time and a source of demotivation.

The results were in both cases more than convincing. Nissan has launched successful global products and marketing activity at Toyota has successfully shifted to a coherent brand focus.

 

In the third road management way, the strategy, the vision, the business opportunities and the brand promise are discussed and decided collectively. All functions, regions and projects need to contribute as good ideas come from everywhere.

They constitute a frame defined collectively in which there is still a lot of room for business opportunities, improvement or disruptions that cannot be missed.

Each region and function can propose topics for an agenda driven by operations not by headquarters, what the future priorities should be. Each action has an entity leader (region or function) and is developed in a very transparent manner so other regions can intervene and follow. The buy-in and motivation is total as the agenda, the frame and the actions are all led by the operations and every one wants to propose and lead the best ideas, designs and implementations. Other regions can rollout quickly as they are informed in real time and adapt to their region in “hidden time”. The decision is always left to the operations to implement or not. But if the idea is successful, there is little chance, unless there is a good reason (what we call inconsistency with purpose) that any region would reject it and remain different. As a result, those opportunities proposed, initiated and developed by an entity can become global more easily. There is no control or approval as each region acts freely in the collectively defined frame. Reporting is light and only exists but for the sake of transparency and sharing of best practice not for control.

The role of the global leader is, contrary to the CMO in a western company, not to decide but to guide, understand and facilitate. He must ensure that the strategy is not weak but really differentiating and makes a winning proposition. He is a challenger and a catalyzer for change and innovation. This leader must of course understand strategy and marketing and global challenges.

This methods works better than the existing ones for 2 reasons: first, the strategy and the plan is richer as it benefits from the involvement of everyone and second you get full involvement of all, as it is so motivating; having contributed to the strategy and being free to adapt it decuples strength to succeed.

 

At least for Japanese companies that want to be relevant in the 21st century, embracing marketing and strategy is critical and the third way of management is the easiest way to do so as it respects Japanese culture.

GG

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