Strategic alliances with Japanese firms: making them work

As Japanese companies become more open to cross-border collaboration, they are establishing joint ventures and other strategic alliances with foreign firms at a dizzying pace.  On paper these partnerships sound like marriages made in heaven: pragmatic matches of foreign design capability and Japanese manufacturing capability, foreign products and Japanese ability to access their domestic market (or vice versa), foreign creativity and Japanese capital, or Japanese creativity and foreign management know-how. 

Unfortunately, in many cases alliances between Japanese and foreign firms fail to meet their initial promise — they limp along or simply self-destruct.  When alliances go awry, the wasted time and lost opportunity can be a significant cost.

There are any number of reasons why a strategic alliance may be unsuccessful.  Businesspeople often focus on issues of finance, production, and marketing.  Yet, in the case of Japanese/foreign alliances, one significant factor is often overlooked: the need to make plans for bridging cultural differences and managing conflicts.

Issues of decision-making, strategic planning, coordination, authority and control are stumbling blocks for any strategic alliance.  When foreign and Japanese firms collaborate, these problems are often magnified by cultural differences in how non-Japanese and Japanese approach relationships and communications.

Japanese, for example, tend to avoid confrontation.  Rather than debate a topic and risk embarrassing their partner, they will smooth over the discussion.  As a result, important issues get buried and remain unaddressed.  In one case, a Japanese bank was frustrated with its American joint venture partner.  Unsure of how to broach differences without causing unwanted conflict, the bank simply turned its energies to other projects, leaving the American partner to wonder why the venture was being neglected.

The ability of individual managers to gather internal support for activities is a crucial factor in making alliances successful.  However, Japanese and foreigners have different approaches to rallying internal buy-in.  Americans, for example, tend to take the “Lone Ranger” approach, making a decision on their own and then worrying later about getting others on the bandwagon.  This frustrates Japanese, who expect high degrees of internal coordination behind any corporate commitment.  Meanwhile, Japanese are careful to achieve consensus before finalizing any course of action, leading to a decision-making process that — from an American perspective — seems excruciatingly long and drawn out. 

This different approach to decision-making is also reflected in how meetings are conducted.  By and large, westerners see meetings as a place to vigorously discuss ideas, while Japanese generally prefer quiet one-on-one conversations prior to a meeting.  As a result of this consensus development technique, called nemawashi in Japanese, key decisions are made before the meeting is even begun.  Thus, the purpose of the meeting is not discussion and decision-making, but ratification of a decision reached privately beforehand.  This attitude can cause frustration for westerners who feel that debate is being stifled.

Avoiding alliance pitfalls

Creating strategies for handling these types of cultural difficulties is key to a productive alliance relationship.  The following approaches are important for ensuring successful Japanese/foreign alliances.

•     Developing a road map that identifies likely obstacles and strategies to work around them.

A useful step at the initial stage of an alliance is to conduct a cultural and conflict risk assessment.  Such an assessment identifies both the similarities between potential partners and the sources and scope of possible disputes.  These may include national culture differences, corporate culture differences, human resource management systems, and organizational incentives.  Cultural informants — employees who can shed light on their company’s way of doing things — should play a key role in this process.

•     Creating alliance teams to coordinate management of the relationship.

By establishing teams representative of the professional and organizational diversity of the collaborating firms, greater coordination at all levels of the relationship can be achieved.  These teams should work together to coordinate long-term planning of alliance management within and between partners.  Such teams can also play an important role in developing the operating culture of the alliance.

•     Designating a champion with responsibility for making the alliance successful.

In addition to wide-ranging alliance teams, designating an individual as relationship manager responsible for the success of the alliance can ensure that strategic objectives are being met.  This individual can act as the internal champion for the alliance, and can make sure that important communications from the alliance partner are not overlooked.

•     Providing opportunities for key employees to develop cross-cultural skills.

Cross-cultural communication blunders can decrease productivity and jeopardize the alliance relationship, but they are avoidable.  Providing cross-cultural training to all key employees involved in the alliance can sensitize them to cultural differences, and prevent friction and misunderstanding.  Training sessions that bring non-Japanese and Japanese together to work on communication and team-building are particularly effective.  In addition, cross-cultural processes that can be used on an ongoing basis to review decision-making are a useful tool for avoiding cultural conflicts.

•     Establishing programs to familiarize companies with each other’s work styles and cultures.

Organizational and occupational culture often dictate an individual’s relationship towards their work.  These differing perspectives can be broadened to develop a familiarity and understanding of the partner’s organizational and national culture.

•     Setting up mechanisms for dispute management.

Dispute management mechanisms should be addressed early in the alliance formation process.  This can involve expanding the dispute management components within the alliance contract, for example, mediation and alternative dispute resolution procedures.  These processes should go well beyond the limited arbitration clauses often found in alliance agreements and should provide for the incorporation of systems to provide internal management of disputes.

•     Creating communication systems to compensate for language and cultural barriers.

Differences in language, communication style, and business systems and structures between Japan and other countries can make it difficult to transmit information accurately.  Assuming that your Japanese colleagues will automatically understand all your communications may be problematic.  Systems for ensuring that communication is complete and effective should be adopted.

Mismatches in culture and organizational style can hurt an alliance’s bottom line.  Inadequate coordination and communication between the alliance partners can lead to loss of productivity and poor performance, and can even threaten the survival of the alliance itself.  When foreign and Japanese firms take the trouble to form cross-border alliances, it’s worth the extra effort to make sure cultural conflicts don’t weaken their partnerships.