Improving Business Agility and Providing Continuous Value

Japan, once the most internationally competitive country and the world second largest economic power in the world, entered a prolonged period of stagnation in the early 1990s. Having experienced the “Three Lost Decades,” Japan is steadily on course to extend this to a fourth decade. The Wall Street Journal noted in 2020 that the these Lost Decades were the result of Japan’s failure to implement structural reforms. While direct foreign investment increased steadily for ten years through 2023, growing about 4% YoY ^*1, the revenues from these investments have largely been reinvested overseas, meaning that crucial innovation efforts needed for domestic economic recovery have been overlooked.
Typical Japanese companies are organized as vertically separated functional organizations, where operational and IT departments function independently. Product development is approached as a one-off project, organized around temporary teams composed of members selected from various vertical departments. Projects follow the Waterfall model, with teams disbanded upon completion. This makes it difficult to deliver value to customers in a timely manner. Processes and knowledge gained during projects are not retained, future-oriented continuous improvement does not occur, and no organizational culture is fostered.
In software development, cost reduction has become the primary goal, depriving companies of internal development capabilities. Consequently, they frequently must outsource entire projects to vendors or defer to vendor judgement. This vendor-dependent model represents a negative legacy of the Three Lost Decades. The cost-cutting priorities have created shortages of talent needed for requirements development and product development, slowing companies responsiveness to change requests.
This reduced responsiveness has degraded software quality through End-User Computing (EUC) disorder, increasing operational complexity due to ad-hoc workarounds, and the proliferation of duplicated codes for short-term development. This accumulation of issues has created systems that no one can properly comprehend. Problem-solving consequently requires excessive time, further delaying response times and creating a negative spiral that consumes more resources and inflated costs. This leads management to conclude that IT costs balloon with insufficient return on investment, prompting further cuts to maintenance budgets. This represents the fundamental problem and vicious cycle confronting Japanese IT today (see Figure 1).

*1 Japan External Trade Organization (JETRO), Global and Japanese Direct Investment

With that said, for the typical Japanese company, there is one more barrier that needs to be overcome. This is the separation between development and operations.
In leading global companies, development teams typically take on the operations of the systems they develop, and a mindset that puts operational excellence (OE) at the forefront permeates the workforce. That is to say, such companies practice continuous improvement to maximize efficiency, quality and customer satisfaction across the organization, and constantly provide value to customers, while advancing business activities including systems KPIs, and not just business KGIs and KPIs.
In the IT departments of typical Japanese companies, however, development and operations are made up of separate teams, and coordination between the two is lacking. Development teams are made up of a single or multiple vendors, so having established team members is difficult. It is also rare to see knowledge sharing, the establishment of operational processes and improvement activities take place within such teams. This makes it difficult to foster shared understanding of the goals and value of the business or product, let alone a team culture. As a result, team members tend to limit their goals to fulfilling their assigned tasks, so it is often a struggle to maintain team motivation.
To address these issues, companies of course need to build environments using the right Agile product development methodologies and tools. But the most important element is to have a culture that permeates throughout teams, organizations and the entire companies. Lacking such a culture, organizations will not be able to exhibit high performance. American sociologist Ron Westrum put forward three models of company culture (“A Typology of Organisational Cultures,” 2004):

Generative organizations are the model used in DevOps, so it is important for companies to optimize their cultures to make their product organizations follow the generative organization model. For example, such organizations build frameworks for viewing failures as learning opportunities and then putting the lessons learned into practice. Leadership encourages constant learning and improvement, and provides an environment that lets people take the challenge of improving. Once mistakes are discovered, it is easy to go back to them, even if the decision is thought to be important and have a major impact on the future. Finally, culture affects software delivery and organizational performance, and leads to improved job satisfaction. The key elements underpinning such cultures are improvement and continuous delivery.

For Japanese companies to accelerate future growth, business and IT departments must collaborate to prioritize customer value generation and drive performance improvements in business operations and digital technology utilization. To put this into practice, it is important for companies to build organizational structures that continue to execute digital transformation quickly and with high quality, to put in place culture and systems that practice continuous improvement, and that drive transformation with a view towards overall optimization. Japanese companies can achieve high quality by having each individual once again take ownership of and practice the kaizen, exported from Japan, as a Japanese form of “improvement,” thus unfalteringly advancing such an overall flow.
ABeam Consulting is ready to contribute to improving the business agility and continuous value provision of your company, based on our strong track record of developing business and IT strategies for companies, developing new businesses and transforming existing businesses using digital technology, training digital transformation-ready personnel, and implementing and consolidating high-level Agile, DevOps and quality assurance approaches.