Foreword: Surviving the era of destruction
Published with permission of Kazuhiko Toyama, author and Bungeishunsha, publisher
Business that will survive the era of destruction
The ‘Corona Shock’ is here. The novel Corona Virus Pandemic which has spread across the globe, will at least be here for several months, and depending on which scenario we’re looking at, it looks like we cannot avoid suppressing the world economy from both sides of supply and demand (consumption) for perhaps years. This of course includes Japan’s economy. Of course, this destructive crisis attacks both human life and the economy. On a systems level, the economy will be irrevocably damaged.
In the following book, I discuss how I foresee Japanese companies will change their fundamental structure in this era when a new business architecture will emerge from destructive innovation. Whichever way you look at it, we’re living in ‘the era of destruction’. When a major crisis erupts, the architecture of business is forced to change. After society gets through the pandemic, the existing main industries that make up the Japanese economy and business infrastructure will take several years to undergo a destructive rebirth where old structures may become extinct.
This means the ground-up corporate architecture of firms will change and how we measure this radical change in the organization’s effectiveness will also change. To describe this phenomenon, I invented the term, “Corporate Transformation (CX)”. In fact, the hardest part of ‘corporate transformation’ is getting started. To break it down, it begins with the implementation of “Digital Transformation (DX)” to reform operations, and then dramatic changes to the corporate environment to the point of almost eliminating existing core business and operations. These changes are required in order to become sustainable.
This demands a company to fundamentally change its organizational effectiveness, to diversify, and to uplevel. Causing high stress, the start and implementation of reforms usually takes a long time. Human beings and organizations are creatures of habit. So if there is not some major trigger that is deeply structural, it’s difficult for this foundational transformation to happen.
Now “Corona Shock” is here. The first priority of crisis management is somehow to survive. At the same time, when the crisis ends, those companies that will survive will have implemented reforms beyond mere survival and have moved more quickly than others as a reverse offensive. It will be those companies who can serially grow and be sustainable via CX (corporate transformation). In the past, those firms that were able to able to connect continual growth using the crisis succeeded. These are companies which were able to move into TA (Turn Around) mode via CX (corporate transformation).
To survive the carnage of the era of a destructive crisis, the first key management technique is TA (Turn Around), which is Chapter One. Chapter Two talks about the CX, which discusses CX management that enables companies to survive the era of destructive innovation.
A crisis is also an opportunity. At the end of the Showa Period, Japan’s economy and companies entered the period of high growth to recover from World War II. This peaked in the ‘Bubble Economy”, when Japan’s economy became the largest economy in the world.
However, the next 30 years during the Heisei Period was when the Bubble Economy deflated, and Japan entered a period of long-term recession. This was a period when Japanese companies lost leadership in revenue growth, net profits, and market capitalization. Emerging countries like China began to rise, and the gap between these and other developed countries like the US and Western Europe began to widen.
We’ve had 30 years of prosperity, then 30 years of stagnation, so as a businessman in Japan, I would like the next 30 years to be the era of prosperity.
We just entered a new reign, that of Reiwa, which will usher in a new 30 year era. At the same juncture, the Corona Shock has hit Japan. There will be many old structures that will fall apart during this economic crisis after we have overcome the hardships of the pandemic. In the ashes of this destruction, there is a window to imagine and birth new types of companies and ways of doing business. This corporate transformation can occur if the new company structures and skills of employees that the company values function as a strong living metabolism that is diversified, flexible and nimble. This is again another trial for Japanese companies.
I hope that business will leverage the management toolkit of the contents of my book, and that many companies, no matter small, medium or large, can get through this crisis, and seize the opportunity to implement radical reforms for growth.