For this week’s interview I am very happy to have a chance to hear more insights from a long time Japan specialist: Richard R. Newton. Although he currently lives and practices law in the US (Birmingham, Alabama), part of his heart still resides in Japan, where he’s twice lived and to which he still travels 1-3 times each year. Richard’s competence related to Japan/Asia is immense. His specialties range from business matching between Asia and the U.S., to consulting/training in cultural matters related to Japan/Asia. On the strictly law-related side, he incorporates new businesses in the U.S., assists Japanese and other companies from abroad in the U.S. legal sphere, negotiates contracts and provides employment law consultation. Although at first sight this article may seem somewhat “involved,” I can promise you that you will love every word of it.
Sibylle Ito: You have been working related to Japan/Asia for many years? Can you observe a shift away from Japan to China, or is it mainly a topic in the media?
Richard R. Newton: I believe that this is true on its face, that some significant degree of U.S. business interests, and interest in general, is to some extent shifting from Japan to China. That’s not to say that American companies and businesspersons have lost interest in Japan, but about three years ago the United States exports to China did, for the first time, overtake its exports to Japan. And it’s been eight years since the China overtook Japan in terms of imports to the United States. So these things go beyond any kind of media-generated thing. Moreover, there are only so many hours in the day, days in the week, weeks in the month and so forth, so that for every project that consumes the attention and resources of an American — or British, or German, or French, or Canadian, etc. — company, that’s a day that, likely as not, may have been devoted to business development with or in Japan.
On the other hand, China has also afforded, and will continue to bring, opportunities to Japan. Here I’m not merely talking about this or that particular project, supplier or market for this or that product. I’m talking about all of these things, and more. A growing, thriving, China will provide innumerable avenues for Japan’s well-established businesses, technologies, products, universities, and international market know-how to thrive and enjoy a “spillover” from Chinese prosperity, but only to the extent Japan’s corporate culture embraces Chinese prosperity as a thing to actively promote and participate in. So far I think that that’s the case and bodes well for Japan, as an economic ally of China. In fact, I think Japan should, subtly, pitch itself as a conduit for, a jumping-off point into, China for medium-sized American companies desiring to “go global.” Japan is not the “Wild (business) West” China can be. For all of the myriad challenges a North American or European company may have in cracking the Japanese market or otherwise consummating a deal in Japan, Japan offers structure and experience and a sophisticated consumer base the likes of which are only beginning to emerge in China. I should add that, Japan’s legal system also enjoys a well-settled and established maturity when dealing with business related issues, from contracts to regulations to intellectual property protection. American companies know this and take this into account when deciding whether to launch a product, or collaborate on technology development, in any one of several Asian countries.
Japan’s economy enjoyed a 4.5% growth rate in the third quarter, and its GDP has returned to (barely) top China’s, putting Japan back for now as the world’s second largest economy. It remains a leader in green and clean technology, life sciences and nanotechnology. So there are numerous aspects of Japan’s economy for its business community to not only tout, but grow and continue to develop. Thus, the “shift” towards China should not be seen as an indictment of or against Japan.
Finally, Japan as a whole, as a Nation, and Japanese companies in particular, need to keep in mind and be proud of the fact that it is a representative democracy which stands far above China when it comes to free speech and freedom of conscience. When I say “be proud” I don’t mean be nationalistic, it just seems to me that the internal freedoms Japanese citizens — and residents and guests — so enjoy should not be taken for granted and, indeed, I believe it would behoove Japanese businesspeople to sublty remind their Western (prospective) partners of this.
SI: Over time do you think the US “got more used” to dealing with Japanese business practices?
RN: I believe that American businesspeople are more adaptable than many others in the world give them, give us, credit for. That is, while Japan offers a “comfort level” for American companies, American intrepidness — when it comes to developing or diving into new business opportunities — continues to inform business decisions and ready the internationally-minded American businessperson to tailor their goals, models and attitude to the opportunity at hand. And, as with young business persons from every country, there are Americans in their twenties and thirties who have no compunction, no hesitation, about throwing themselves into China, or Japan, Korea, India.
SI: Apart from limited English abilities on the Japanese side, what do you see as the biggest hurdle in global business negotiations?
RN: It’s with regret that I continue seeing too many Japanese decision-makers — that is, board members, presidents, vice-presidents and senior managers — who seem stuck in 1989. That is, they remain too insular. Too many corporate leaders do not seem to fully grasp that when it comes to making decisions, the luxury of time, of meandering through the process of ringiseido (consensus building decision making) which they practiced in previous decades, cannot continue unchanged. In the 20 or 30 years ago today’s Japanese executives were mere underlings, were just beginning their corporate careers. They’re continuing to model their actions based on what they learned back then. But time-consuming consensus building now can easily lead to their Western counterpart merely taking the opportunity to another Asian country, to a country hungry to do a deal. In other words, when Japan was “the only game in town,” American or other businesses had to wait in line. Those days are gone. And for all the unique opportunities and comparative advantages Japan still enjoys, demand for Asian partners and Asian markets has grown elastic; such markets, namely China, and partnership prospects have grown exponentially since the Bubble days. Younger Japanese businesspeople and the growing entrepreneur class in Japan certainly “get” this. But today, in the beginning of the second decade of the 21st Century, the culturally sensitive, bi-lingual or tri-lingual Japanese engineer or lower level manager in his or her 30s or even 40s continues to sit silently while too often company leaders operate as if the Bubble never burst, as if India was still socialist, China had never seen a traffic jam and Theory Z was still required reading in every American MBA program. Japan must modify this decision making model if it wants to hold its own.
SI: In a Japanese business environment if you could change something, what would you change?
RN: Along with and related to the need to stream decision-making, Japanese companies must learn to stop fearing failure. That doesn’t mean they have to take crazy risks, but I would like to see them risk more. One neologism I’m hearing more and more the U.S. is “deal flow.” That is, that the more agreements, deals, transactions, partnerships, projects a company can bring online, the more opportunities for success come that company’s way. That’s not to say companies, from any country, should undertake crazy or stupid projects in order to hit one “jackpot.” And a high deal flow risks turning a good project bad by a company’s spreading itself too thinly. So a balanced approach is certainly called for. Right now, though, I still don’t see much of that balance in Japan; I see much of the same plodding, overly cautious, slow-go approach to making decisions both large and small. It would be helpful to Japanese companies to open up more to foreign partnerships, international collaborations, to joint R&D. Of course this happens, collaborations and partnerships have been going on for years, but I would like to see the pace picked up. Besides — and this is the positively ironic part — taking the risk to partner more shares and spreads and mitigates overall project risk. This applies to any company, of course: whether Japanese or American or Indian or British, what have you.
SI: For so many years you have been connected to Japan. Why can’t you stop?
RN: We never forget our “first love,” do we? Perhaps, for example, had I studied Spanish and the history of Spain and lived the life of a college exchange student in Spain, rather than Japanese and Japan, then I would feel the depth of emotional connection with that great country the way I do Japan. It’s been more than 25 years since my first time living in Japan and I’ve gone through several phases of my life wherein I’ve either lived in Japan, or in which Japan’s played a pivitol role. Japan’s brought me opportunities and it’s formed the backdrop for personal aspects of my life — both indescribable joys and inconsolable tragedies — that are forever intertwined with who I am. I can no more think of Japan not being part of my life than I can think of cutting off a limb. Besides, as a long time resident of Japan, an American friend who lives in Kyoto, told me last year: “There’s a surprise every day.” I think that that’s part of what makes Japan continue to be so fascinating to me, I am simultaneously completely comfortable and braced for “the surprise of the day” whenever I’m in Japan. I should mention that, while I live in the United States now, when I’m scheduled to travel to Japan — business usually takes me there one to three times a year these days — and I’m mentioning this to someone in Japanese, I don’t use the verb “iku,” (to go), but, rather, “kaeru” (to return), as in Nihon e kaerimasu. It may not be grammatically proper, but it’s what I feel.
Thank you so much Richard for taking so much time to provide us with these amazing insights. Honestly I was really surprised that you had mentioned that you see the Japanese legal system as mature, because from a legally inexperienced person’s viewpoint I just perceived it as so complex and incomprehendable, that I gave up trying to understand even a part of it. At the same time, I agree that in Japan a contract is still a contract and I have not experienced any situations where a contract seemed to be “only a piece of paper” without legal consequences. Additionally I agree with you that the business decision making process can be too slow in Japan, especially when dealing with a larger, long established Japanese company. On the other hand, this lack of time concern creates lots of opportunities for smaller newer companies, who are very proactive and flourish in comparison. I am really curious whether one day (again?) Japan will create an environment for “go getters”, proactive business men with a time efficient approach, not being afraid of taking risk in business in order to create some “hit” on a global scale.
Brought to you by Sibylle Ito (シビル伊藤)