The Business Reinvention of Japan: How to Make Sense of the New Japan and Why It Matters by Ulrike Schaede (review)

Japan's popular image as an economic powerhouse of the world economy has suffered considerably over the last 30 years. China is a frequent topic of conversation among people in business and finance, but Japan has somewhat been forgotten by Western observers and is now often dismissed for lacking vibrancy and being stuck in allegedly inefficient business practices. Given the small number of Western books that focus on Japan's economy these days, Ulrike Schaede's new volume is an important and timely contribution that questions the widespread public notion that Japan's businesses no longer matter. As the book's title implies, Schaede argues that Japan and its companies have become "once again important" (p. vii). For this she gives three reasons: the anchoring role Japanese companies play in global supply chains with critical input components and materials; the emergence of new markets for financial and consumer products in Japan; and "its alternative model of balanced capitalism in an economic system that moderates inequality and values social stability while pursuing economic success" (p. viii). Schaede argues that Japanese businesses have helped to maintain societal stability despite economic stagnation and business reorganization by reinventing their business operations and building "deep-technology competencies in critical components, inputs, and materials, while maintaining core strengths in manufacturing and systems engineering" (p. viii). The idea of Japan's supposedly alternative model of balanced capitalism is touched upon in various parts of the book but is not investigated systematically throughout. Instead, the concept is used at times to juxtapose the Japanese case with that of the United States.

Schaede's key argument is that Japanese companies, while operating in a system of social stability and slow change, have taken a new approach to global competition by following what she calls an "aggregate niche strategy." To follow this strategy, successful Japanese companies have, first, repositioned themselves by choosing and focusing on core business units, while carving out or selling off noncore parts of their businesses. Second, successful companies have engaged in organizational renewal to develop new internal processes and corporate cultures which foster creativity and deep-technology innovations and enable the coexistence of mature and new business lines.

The idea of successful companies choosing and focusing on core business units was already the topic of Schaede's 2008 book, Choose and Focus: Japanese Business Strategies for the 21st Century,¹ in which she investigated the beginnings of companies shedding businesses far removed from their cores during the early 2000s. The 2008 book focused in large part on Japan's changing industrial architecture in terms of corporate relations, ownership structures, subcontracting, price competition, and lifetime employment, which ultimately enabled these strategic shifts, and the new book continues this thread by discussing what impact these shifts have had on Japan's current role in global business. Moreover, the current book aims to assess the organizational renewal of Japanese companies as a vital precondition for their ability to stay relevant in new business fields.

Before delving in more detail into the strengths and weaknesses of this book, let me first introduce its overall structure. To explain the difficulty of Japanese managers restructuring their companies, chapter 2 introduces Michele Gelfand et al.'s tight-loose theory,² discussing Japan as an example of a tight culture. While this chapter probably offers few new insights for most Japan experts, the takeaway is that Japanese managers attempting organizational reform have to move carefully "to nudge employees into accepting new workplace dynamics and a new definition of the norms that guide their organizations and shape their self-identity" (p. 42). Chapter 3 presents a very condensed review of Japan's postwar business system to establish a baseline for the discussion of reform and change in the subsequent chapters.

In chapter 4, Schaede introduces her core concept, namely the "aggregate niche strategy." Her key point is...