Nissan's Carlos Ghosn: Steering Through Crisis, Driving Into The Future

Nissan CEO Carlos Ghosn. Via.

Carlos Ghosn has a laundry list of crises that he has faced as the President and CEO of Nissan. Recent events including the post-Lehman collapse, the March 11 earthquake and tsunami in Japan, the Thai floods and European economic turmoil have all presented huge challenges for the automaker. However, according to Ghosn, the yen’s rise is exacerbating the impact of all the other crises and is forcing even profitable companies to stop investing in Japan. Endaka--or strong yen--is affecting the long-term future of Japan and it needs fixing immediately.

“The yen is appreciating at the worst moment for the Japanese economy,” Ghosn told a packed auditorium at the Japan Society recently [full video here]. “The problem is we are making money, everywhere except Japan,” he said.

Ghosn said that the appreciation of the yen means that Japan cannot compete on cost, despite the “indisputable” quality of goods, skilled workforce and wealth of talent. “We are surrounded by countries who are making sure the exchange rate is competitive, how can we face a tsunami, a flood, a financial system collapse and on top of this have to have a re-evaluation of the currency of 35 or 50 per cent? We can’t.”

Ghosn has taken his concerns about the yen right to the top. When the Japanese Prime Minister Yoshihiko Noda visited the Nissan plant in Yokohama recently, Ghosn said he decided not to overwhelm him with a long list of problems.

“When the Prime Minister said, “What can I do for you?” I said, “One thing, fix the exchange rate.”

But Ghosn clearly subscribes to the school of what doesn’t kill you makes you stronger. Carlos Ghosn was brought in to Nissan in 1999 to save the company. And he did. He quickly implemented the Nissan Revival Plan and the carmaker returned to growth and profitability--it now ranks third behind Toyota and Honda in the U.S. car market. In 2005, he was also named CEO of Renault and the combined companies have 350,000 employees and global sales of 7.2 million units in 2010. Nissan’s latest innovation is the Leaf electric car, the market leader in 100 per cent gas free cars with about 15,000 units sold worldwide.

His prescription for crisis management starts with a clear assessment of the scale of the problem. The next step is to make a plan that selects a few priorities to get through the crisis but also maintains some longer-term projects. In Nissan’s case, after the collapse of Lehman Brothers in 2008, everything except electric car production and expansion in China was put on hold while the company concentrated on maintaining cash flow.

Ghosn also emphasized the importance of empowering the workforce to deal with adversity. “There is no way, you’re going to get through a crisis alone,” he said. “The one key which explains why we recovered faster than our competitors after the tsunami and the Thai flood is because we empower people.” Naturally for empowerment to work, top management also needs to be committed to and engaged in the plan.

Ghosn does however believe that Nissan has an “anti-crisis” weapon in the form of the electric car. Some predict that electric cars will be 10 per cent of the market by 2020. “Everybody knows I am the most optimistic,” he joked. “Which is obvious because we’re the only one with the car.”

Joichi Ito: Open Networks And Hacker Spaces Can Save The World

Icono clash. Via Fast Company.

Juliet Hindell reports form Japan Society's November 10 event Innovation in an Open Network with MIT Media Lab director Joichi Ito. Watch the full video here.

Joichi Ito is the ultimate iconoclast – a college dropout who now heads an academic institution, the MIT Media Lab. He is also the Chair of Creative Commons, the open network organization, and founder of Tokyo-based Digital Garage.

And he recently became involved in Geiger counter production. Six months after partial nuclear meltdowns at three Tokyo Electric Power reactors, skeptical Japanese took nuclear measurement literally into their own hands. And Ito was there, doing what he does best – finding opportunity in chance.

Home-monitoring of radiation is just the latest venture of one of Japan’s foremost entrepreneurs. Ito is most famous for helping usher Japan into the Internet age by cultivating and connecting a generation of angel investors and hungry young Internet entrepreneurs eager to replicate the energy and success of Silicon Valley.

Ito didn’t plan much of this; in fact planning is something he thinks is overrated.

His own Internet career began when he realized that nobody really achieved anything in Japan before the age of 45. In the new virtual world, he discovered it was better to be young. There were no rules and things moved fast and fluidly.

“If you plan everything you can’t be lucky and you need a lot of luck,” he said at a recent talk at the Japan Society. Ito was describing how many great Internet ideas started through chance connexions.

“Nearly every internet company starts out as what sounds like a stupid idea,” Ito said. But a willingness to try things out has resulted in companies like YouTube, which began as a dating site and morphed to become the biggest video site on the Internet. Chance over planning is a foreign concept in Japan. He recalled proposing an idea to a Japanese company, which he estimated would have cost about $100,000 to implement. But the company embarked on a feasibility study at a cost of $3million. “So they spent $3miillion dollars trying to decide to eventually not do something that would have cost $100,000.”

Today with the Internet’s Open Software protocols, anyone can start a company quickly and easily, a process he sums up with the word “agile”. But it’s not a process that lends itself to too much planning. While he thinks the Japanese talent for such business strategies as just in time delivery should sit well with this open architecture, he also warns that when the process is institutionalized, it gets bogged down in over-planning. “You have what I would call a compass, but how exactly you get there you figure out as you go,” Ito said.

Figuring things out is where open networks and hacker spaces have a crucial role to play according to Ito. He believes they are at the forefront of the democratization of knowledge.

Earthquake Survivors And Lawson: More Than A Marriage Of Convenience

Lawson's vans mobilize to reach those in need. Via.

When Takeshi Niinami, CEO of Lawson convenience stores, first agreed to talk at Japan Society he expected to speak about Lawson’s expansion overseas. The company is opening stores in China, India, Indonesia and perhaps Vietnam. That changed on 3/11.

Those earth-shattering events brought new meaning to the important role convenience stores play in Japan's economy. To the surprise of many, when relief first came to some of the devastated areas, it was with a Lawson’s delivery truck, not a self-defense forces vehicle.

Stepping in after the tsunami where the government failed, Lawson's found itself in a highly unusual role of feeding and supplying hundreds of thousands of affected Japanese. “The public sector was of no help at all in the first ten days,” the CEO of Japan’s second largest convenience store chain told an audience at Japan Society recently. “We supplied aid more smoothly and systematically.”

Lawson’s nimble reaction is a telling indicator of Japan's rapidly evolving private sector economy.

Lawson took immediate action despite facing major disruption to its own business. While 20 Lawson Stores, many factories and distribution centers in north eastern Japan were destroyed or damaged by the earthquake and tsunami, the company’s supply chain in other parts of Japan remained in tact. Lawson's decentralized structure made it nimble enough to allow the company to move supplies quickly to the affected area.

Niinami's intense focus on the disaster required him to make unorthodox decisions with a speed unusual in Japan. “I took the executive decision to send supplies from Tokyo to Tohoku; this action brought a shortage of inventory to Tokyo causing complaints from customers there. I still believe that decision was correct though we lost some sales in the Tokyo area.”

And while Niinami was making key and quick decisions in Tokyo, he wasn’t trying to run the show from the capital. From the first day, he delegated authority to the regional head office in Tohoku where the general manager had more first hand knowledge of what was needed.

The devolution of authority led to some surprise requests including 20 motorbikes. “The Tohoku general manager needed the motorbikes because the roads were destroyed and there were no express ways,” said Niinami. Motorbikes were the most efficient way to get around and helped the company gather information on the ground. “I think the information we got was more correct than the information the public sector was collecting.”

Lawson was able to do this because the company has a well-established management culture where local managers exercise a great deal of autonomy. After the earthquake this proved invaluable. “In irregular times they had to make decisions,” Niinami said. “ They did a good job.”

In the first days of the crisis, a priority was to restore fuel supplies to the affected area. According to Niinami, most fuel supplies were being controlled by the government, which commandeered some commercial fuel tankers. Resupply was slow.

Niinami urged Lawson franchisees to not wait, but to drive their own fuel tanks to the area with or without government approval. Business partners also lent vehicles and shared their limited stocks of fuel. “Do not talk to the government,” Niinami said they told him. “So we sneaked in to some hidden places anyway.”

When Niinami heard that some truck drivers supplying Lawson stores were reluctant to go to areas with high levels of radiation, he took matters into his own hands and contacted some of them directly. “I will go with you, I told them,” he said. “Then one of the drivers said, “Okay I will go, I understood your guts, we don’t need you to come.”

Lawson’s rapid response to the disaster is proving to be much more than a marriage of convenience. Survivors were grateful that Lawson was quick to arrive on the scene, as other aid was slow to materialize.

The halo effect of its response is having surprising results in Japan and, Niinami hopes, soon overseas. The company has seen changes in consumer behavior following 3/11, some of which may influence the kind of stores it runs in the future.

After the quake, more people are shopping at local stores because they have no gas to drive to larger supermarkets. Housewives and senior citizens, who are not typical convenience store customers, are now seen much more often. As a result, Lawson is offering more fresh produce in small portions to meet their needs. Niinami hopes these groups will now become regular customers.

Overseas, Niinami feels that other countries will not only benefit from stores themselves but also from learning from Lawson’s record as a good corporate citizen as demonstrated by its response to 3/11.

Niimani's bold actions come as no surprise to those who know him. The Keio University and Harvard Business School graduate has earned a reputation for being a straight talking man of action, firing people when he arrived as CEO at Lawson and changing vendors.

Niinami has been President and chief executive officer of Lawson since 2002, after a career that started at Mitsubishi Corporation’s sweetener products division. Under his leadership, Lawson has increased operating profits for eight straight years. He is also vice chairman of Keizai Doyukai (Japan Association of Corporate Executives).

Reflecting on his recent experience, he understood the importance of not taking for granted what seems so normal and routine - operating a 'conveeni'. “We transported essential things, prepared foods, baked goods, water and blankets from as far way as Western Japan. I am proud we could provide some comfort and relief to the survivors.”

--Juliet Hindell 

Hindell was BBC Tokyo bureau chief and Daily Telegraph Tokyo correspondent and is now based in New York. Read her article about the Japan Society panel Why Japan May Surprise the World: Rebirth after the Tohoku Quake.

Optimism And Hope Glimmer Behind Gloomy Realities Of Post-Quake Japan

Detail from Nikmak's "Japan is Arising". Via.

Two months after the devastating earthquake and tsunami, which unleashed a nuclear crisis in the Tohoku region of Japan, the enormity and complexity of the problems the country now faces are daunting. More than 14,000 people lost their lives and nearly 200,000 have been evacuated from the region and remain in emergency shelters. The Japanese government now estimates that the cost of the damage could reach $310 billion.

In a discussion on Japan’s prospects after the Tohoku earthquake entitled Why Japan May Surprise the World: Rebirth after the Tohoku Quake?, a panel of leading economists at Japan Society did not sugar coat the challenges the country must now overcome. “It will have a pretty darn big effect on GDP,” said Bruce Kasman, Chief Economist at JP Morgan. The panel however, said the economic outlook for Japan, like the people, shows signs of resilience.

The immediate impact of the disaster was serious said Bruce Kasman, with a 15% drop in production in March. Retail sales fell 8% and car sales were down 40% for March and April. Overall he estimated a drop of 4% of GDP on an annualized basis over the second and third quarters of this year. But he predicted that after all the “sound and fury” had died down, Japan would be back at 90% of production capacity by the end of the summer and back on a growth path by the end of the year in part because of fiscal stimulus programs launched in response to the quake.

Paul Sheard, Global Chief Economist with Nomura said the quake had been a huge blow to Japan’s national confidence. Many had been waiting for the next “big one” to strike Tokyo or Tokai not Tohoku. The result was that many now feel another earthquake could still hit elsewhere. However, he suggested the negative impact of the crisis could also have a positive outcome. While the supply chain disruption caused by the earthquake, could lead companies to shift production offshore, it also reminded the rest of the world just how crucial Japan’s technology sector is to the global economy. Reconstruction not just by the government but also by the private sector looking to protect its own infrastructure from future disasters, could create a major economic boost for Japan. He estimated that while GDP would shrink by 0.5% this year, next year Japan’s economy would grow by 3.1%.

The panel saw the crisis as an opportunity for Japan to address some hard questions. Mr Sheard said now was the time for Japan to grapple aggressively with its deflation perhaps by issuing bonds. He also recommended that Japan look at its immigration policy in the face of its ageing society. He said opposition to immigration might diminish and the government should draw up a new structured, strategic immigration plan. It is also a time when strong leadership and continuity would be essential, he said.

The impact of the earthquake will have ramifications in all sectors of the economy but Kyohei Morita, Barclays Capital Chief Japan Economist, felt that problems the economy is facing were there long before the earthquake struck. He predicted that while Japan now enjoys a healthy current account surplus, the ageing society and an outdated tax policy which relies too heavily on corporate tax, will mean that the surplus disappears by 2018. "A current-account deficit would change completely the way the Japanese economy looks," he said. Companies facing expensive power supply and a weaker yen could take their business overseas resulting in what he described as “hollowing out” of the economy. Mr. Morita said that the nuclear crisis would spark a debate in the near term about electricity production in Japan. He said use could be made of thermal and hydroelectric power but in his opinion it would be “impossible” to shift way from nuclear power completely.

Much has been made of the reduced capacity for electricity production with predictions of a shortfall of 20% by the summer months. But the panel felt this was being overplayed and that Japan would rise to the challenge and find ways to make sure that power could stay switched on.

The panel agreed that there was much to overcome and that strong policy initiatives would be essential to Japan’s success. Jeffrey Shafer, a former Citigroup executive, who chaired the event, said the panel had pointed out some gloomy realities but that there was “optimism and hope glimmers”.

-Juliet Hindell

Hindell was BBC Tokyo bureau chief and Daily Telegraph Tokyo correspondent and is now based in New York.