Episode #58 No Mistakes Allowed In Japan

We all want to go to heaven, but none of us want to die. We all want change, but we don’t want to change. These are some of the typical contradictions we find in human society. Another one concerns the messy process of innovation. In Japan, which is a highly risk averse culture, there is a strong contradiction at play here. Not tolerating mistakes but expecting innovation from our people are completely opposing ideas. Innovation requires mistakes. That is how we learn and how we progress. If we punish people for mistakes and if we are coming down heavily on them, they learn the best way to avoid trouble is to do nothing. We get to deal with people who take no decisions, take no actions, and adopt no new processes. Not fun! Japan usually offers little in the way of upside reward for innovation or trying something new, but has a lot of downside for those who fail. If we want to see innovations produced by our teams we need a different way of managing people. Do you know how to do that?

Before we get into this week’s topic, here is what caught my attention lately.

About fifty percent of securities and forty percent of all financial assets in Japan are expected to be held by those age seventy and over by the year twenty thirty five, according to the Mizuho Research Institute. What could go wrong with this picture!

Currently there are about five million people in Japan suffering from dementia and they are holding one point three trillion dollars in wealth, according to the Dai Ichi Life Research Institute. That is equivalent to more than a quarter of the size of the overall economy in Japan. Let me repeat that, one quarter of the entire Japanese economy folks. The finance industry and the Government would love to see this stockpile of wealth being actively invested. Instead it just stays idle. Various banks and securities companies are looking at ways to get this wealth into investment products, that enable those with dementia to put their money in trusts or bequeath assets at an earlier stage. With the aging of society here in Japan this problem will only grow in scale. In other news, Panasonic has announced that their joint venture with Tesla to produce batteries is finally yielding returns. President Kasuhiro Tsuga said, “we will be in a position to deliver profits at a very early stage”. Panasonic’s investment in the battery Gigafactory in Nevada will exceed one point eight billion dollars. Panasonic produces cells which Tesla uses to make battery packs for its electric vehicles. Panasonic could use some good news.

This is episode number fifty eight. Soredewa ikimasho, so let's get going. Doing more, better, faster with less, screams out for innovation. This could be at the incremental level – a kaizen approach of continuous improvement or it could be breakthrough leaps that forge new businesses. Either way, there is a dynamic in play here between processes and people that is critical for our success. How much scope for error can we allow in the creative process? At the practical level, this is really asking how many and how huge are the mistakes you will tolerate to achieve idea creation? This is on you and your career by the way.

Managers manage processes. Leader also manage processes, but they have an additional important role to build people. Especially people who have ideas on making the business better. In any workplace there will be some degree of compliance required around regulations, laws, safety concerns etc. If these are overly tight, then there is usually not a great deal of tolerance for errors. If you were in the finance area after the Lehman Shock, you know how all innovation and risk taking ground to a complete halt, as companies recoiled from risk. If it is a complete laissez-faire environment, with no controls, then we will wind up in court and possibly in jail. Somewhere between compliance and chaos is the sweet spot of the environment most suitable for our people to be developed to become innovative, idea generating machines.

By its very nature, any change requires us to step out of our Comfort Zone, because we are either doing something old in a new way or something completely new. Getting people to step out of their Comfort Zones is just fraught with difficulty, especially in Japan. It is even more so when we are requiring a more creative approach or when we are seeking to create something entirely new. How do we encourage people to come up with new and creative ideas? We have some classics in this regard. Standing in front of the whiteboard, marker pen at the ready and looking expectantly at the audience for their ideas is probably one of the most common and one of the worst methods in captivity.

To totally top it off, saving time by critiquing the idea flow as it emerges, is a guaranteed one hundred percent innovation killer. Take a good look around your own organization and check just how your culture encourages the pursuit of ideas. How do you do your brainstorming down at your shop? What if your actual technique may be harming the idea creation environment? If this is the case, let me know, because we have a great system for producing ideas from the whole team and not just the usual noisy three who usually dominate the airwaves. Is there a way forward?

In the messy process of innovation, there will be mistakes. Accepting this in theory is pretty easy, but what about confronting it in practice when you are the one responsible, because you are in charge? What is the environment for reporting mistakes or problems? Usually, the boss finds out about trouble last – after everyone has done a sterling job to cover it up. I saw this when I worked at the Shinsei Bank. Staff selling financial products to wealthy investors would make small mistakes from a compliance point of view. They would try and hide them, but eventually the problems would emerge. Instead of receiving a reprimand for making a small mistake, they got fired for trying to hide the error. The truth only emerges when the issue can’t be hidden anymore. Why is that?

It very much depends on the culture you have created. A workplace recording many violations of procedure and one reporting few, will be looked at differently on paper down at headquarters. The many incidents location will seem to indicate a poor compliance environment (and by extension your poor leadership). In fact, it may be the other way around. The workplace reporting few issues may be magicians at hiding bad stuff and the other may be one where mistakes are encouraged, as part of the learning process. What is the situation in your company? Are people hiding stuff through fear or are they encouraged to admit mistakes and learn from them? Constantly encouraging ideas and experimentation, but also faithfully recording errors for root cause analysis as part of the creative process, could be seen as leadership failure when judged from the number of incidents. I believe we need to look past the numbers, to what type of environment the leader has created?

How we celebrate failure; how we ride the edge of the razor between compliance and crazy; and how we deal with mistakes is being very carefully observed by the whole team. Everyone is watching you for your reaction to errors. If there is a trust environment, where mistakes are accepted as part of the process of creative change and ideas are not critiqued as they emerge, then the team will feel safe to suggest their ideas. Leaders who can build this type of environment are treasures. Is this your current reality? In Japan unfortunately, this is a rarity still. The no mistake mentality is actually holding the economy back, because it just encourages total timidity. Mistakes are part and parcel of the innovation process, there is no getting around that. Nothing will change until the leaders of the business start thinking differently about the type of environment they need to create to see creativity thrive. If you look around you and all you see is a blame culture and rapid retribution for failure, start praying your competitors haven’t worked out the balance needed between mistakes and innovation. If they have, over time, they will win and you will lose. This is a zero sum game. Someone will come up with best practice, best ideas and best execution - it may as well be you!

Action Steps

1. Check whether the balance between killer compliance and free form creativity in your company is at the right level?
2. Is your brainstorming technique an idea deleter not an idea creator because of the way you are doing it?
3. Are you encouraging people to come out of their Comfort Zones and take risks, adopt new methods and think differently?
4. Is reporting mistakes seen as a guaranteed formula for being punished, so that everyone keeps busy trying their best to hide them?
5. Are you developing an idea generation environment which is going to give you an edge over the opposition or are you slowly but surely losing the innovation war?