In the past month I have had conversations with 5 Tokyo business leaders. We have discussed the challenges CEOs have faced in the past 2 years or so, and how they have confronted them. We have also discussed their outlook as the pandemic endures, supply chain issues persist, and foreign exchange rates hurt financial results.
The changes undergone by companies when the pandemic hit Japan in April 2020 were so dramatic and sudden that it’s a wonder how well we rode the wave and found success in the hardest of moments. A client in the fashion industry explained “There are 3 things you absolutely need to make sure of. First, you have to work out how to survive, implement inventory control, ensure you have liquidity, and consider worst case scenarios. Then you have to look at how to make a success out of the challenges, and finally explore new fields to bring in operational changes.”
Investing in those “new fields”, for example new products or digital marketing campaigns, requires convincing company leadership outside Japan, so it’s not enough to understand the current status of your own business; it’s vital to make the situation in Japan clear to APAC and global HQ and let them know exactly why it makes sense to invest in those fields.
Another FMCG leader described the challenge of convincing management teams external to Japan that they need to be patient waiting for results. “When the rest of the world has already started to come out of Covid, it’s understandable that global leadership expects the same from Japan.” Supply chain trouble, the damaged tourism and travel industries, and now the weakening Yen have severely harmed those hoped-for results.
I spoke to a CEO in the luxury industry who was required by global leadership to implement unit price increases on his products. “I mitigated this price increase by adjusting the quantities of products on sale in the stores in order to maintain average store offering”. This was a creative approach adapting to the demands of leaders outside Japan. For this particular leader, his staff were key, and he was made sure to maintain reasonably generous salaries and provide reasonable conditions for their transition to working within the constraints of recent times. “We have been careful to maintain reasonably good salaries. It’s vital to not give up on the staff.”
A Country Manager in another area of the luxury sector echoed these comments. He talked passionately about the steps he proactively took to enable operations in their stores to continue. He was fastidious in making sure the correct precautions were taken through the hardest, pre-vaccine stage of the crisis, resulting in zero cases.
The topic of employee care was reflected in a conversation I had with a General Manager in the publishing industry where although revenue streams were not affected by the pandemic, his primary concern was of team morale. He regrets not having set up one-on-ones for each and every member of staff in his organization during the time when the whole office was required to work from home. I suggested that it would be a challenge to meet over 60 people individually. He responded, “but it would have been possible, and it would have helped”. It’s an interesting insight into the pressure on executives to look after company performance by doing the right thing for their teams and attempting to retain good people being tempted away by opportunities at other companies.
So there have been a range of issues which have either directly impacted on financial results or the staff themselves. Outside of the essential financial management at the start of the process, the key seems to have been communication both within the team in Japan and up to APAC or global leadership.
The outlook remains unclear, and we continue to live in times of uncertainty. The key for most executives is to keep your faith in your products and your company values, keep investing in your talent, and ensure solid and clear communication with regional and global company leadership. Managing up to APAC or global and managing expectations is as important as maintaining company performance on the ground here in Japan. It is also important to be strong and push back when you need to. Japan has suffered entirely differently from other countries and it has been important for business leaders here to tell that particular story.
If you are in a leadership role here in Japan and you would like to have a conversation about your work and your team, please reach out to me. I’m happy to meet you.