Remembering the Fundamentals

INTERVIEWER  The international competitiveness of Japan’s electronics and home-appliance industry, which had been the country’s pride and joy, has also been slipping. Sony, for instance, for whom you once served as an outside director, is no longer the top company in its industry and has consistently posted losses in recent years. What does Japan need to do to regain the position it once held as a manufacturing giant?

KOBAYASHI  If you look at the manufacturers who have continued to generate profits, like Toyota or Komatsu, you’ll find that they have returned to the fundamentals and adopted a rational approach, always carefully considering why and when actions need to be taken. This is the result, I think, of not forfeiting their own corporate culture. When it comes to passing down that culture, it’s important to frequently convey to younger employees what has sustained the company up to that point—such as a commitment to manufacturing craftsmanship, for example.

Where Sony Went Astray

With regard to Sony, my impression is that the company began to feel limited by the approach that had taken it to the top of the electronics industry; an approach where the company always sought to improve its existing products, such as televisions. Its corporate culture began to prioritize making different products, rather than thinking in terms of improvements. In other words, the company did not seem to find motivation in the task of taking a product type that already existed and making it a bit better.

When it comes to making something different, a company needs to inject new investment. In contrast, existing capital can be used to make products better. Granted, it is also necessary for a company to produce distinctive new products, but if you only pursue that goal there is less chance for success, in business terms. So it is necessary for a company to also consider how to continue improving its existing products that form the basis for company revenue. The only option is to keep at this unglamorous, practical-minded task.

Having said that, I think that Sony will make a comeback—although I’m not sure whether it will revive itself as an electronics firm or not.

INTERVIEWER  The growth strategy dubbed “Abenomics” has yet to be fully implemented. We’ve seen some positive factors that are lifting results for export-driven industries, such as the weaker yen and the rise in the stock market, but this has been coupled with negative fallout from the weaker yen, too. What is your view of Japan’s economic recovery?

KOBAYASHI  Even though the first two arrows, monetary relaxation and application of fiscal stimulus, have worked relatively smoothly, it will not be easy to implement the so-called “third arrow” of Abenomics. As for Abenomics in general, we have seen that, despite the almost weekly fluctuations in the stock market, companies of a certain scale have been showing good results and increasing base pay for their employees. But there is a gap between those companies and other firms. My biggest concern at the moment is the impact of the recent rise in the consumption tax now that the surge in demand that preceded the increase has died out. I wonder how much trust the Japanese people have in the government’s policies to address this problem.

The Cabinet of Prime Minister Abe Shinzō still enjoys a relatively high approval rate, but I think he needs to be concerned about public trust in the wake of such issues as the manner in which he won Diet approval for the State Secrets Protection Law. We have seen a number of cases up to now where the LDP government relied on its overwhelming majority in the Diet to push through legislation. In these cases there has not been adequate debate—although the opposition also bears some of the blame for this. I think that the Abe government deserves a great deal of praise, particularly for its efforts on the foreign-policy front, but I hope that it will not lose the trust of the people as the result of how it is dealing with some issues, such as the question of collective self-defense.

Improving Ties with China and South Korea

INTERVIEWER  In your role as a corporate executive you have sought to improve relations between Japan and China. And this has also been a task for the government of Prime Minister Abe. What is your take on the current state of relations with China and South Korea?

KOBAYASHI  It’s hard to say which is in a worse state at the moment—Japan’s relations with China or its relations with South Korea. If historical issues become the focus of too much attention on each side, then it becomes much harder to find solutions. I wish that South Korea and China would also take a more realistic or flexible approach. It is true that there are things that your average Japanese person was not taught by the postwar public school system, but there aren’t that many Japanese who are completely ignorant of the historical facts. What has vexed the Chinese is not the outlook of the Japanese public but the statements of its politicians. Despite that situation, my impression is that both sides are gradually making efforts to mend ties—although Japan-China relations won’t be improved overnight.

INTERVIEWER  The corporate philosophy you advocated in leading Fuji Xerox emphasized the importance of fostering mutual trust. Could you share some of your views regarding the sort of management principles companies should espouse and what kinds of strategies they should adopt in terms of CSR and the like?

KOBAYASHI  Working is very important for people because it is connected to a sense of personal dignity. Everything has become much more convenient in the new IT era, but the work of human beings remains central to the task of making things better, in a more cost-effective way. The mainstream approach today is to try to make products with the maximum of added value, using as few workers as possible, but I have doubts about this sort of management style.

The other day I was talking to an executive who had been tasked with streamlining his company. When I asked him whether the effort had paid off, he told me, quite frankly, that he wasn’t sure if the reform undertaken really had been the right thing to do. For a company to run on all cylinders, it’s necessary for management and the employees to have a sense of unity. It is also important for a company, in terms of how it will be viewed in the marketplace, to take a multifaceted view of its overall organization, rather than being swayed by a desire for short-term profits. Balance and integrity of management, this is the key.

(English translation of an interview in Japanese conducted on March 25, 2014, at the campus of International University of Japan in Tokyo by Harano Jōji, representative director of the Nippon Communications Foundation; photographs by Hanai Tomoko.)