Published on February 13th in the Nikkei newspaper, there was an article about the discussion of “Business Management with Purpose” by Ikujiro Nonaka and Chairman Kao Sawada. In this blog, we will introduce the English translation of the contents.
“Business Management with Purpose” is spreading in each industry as companies are required to contribute to society. This is because it is necessary to maintain a sense of unity in the organization in an era of uncertainty and clarify the significance of the company’s existence to customers and shareholders. Professor Emeritus Ikujiro Nonaka, who also has a book on “The Nature of Failure,” and Michitaka Sawada, Chairman of Kao, who puts ESG (Environment, Society, and Corporate Governance) at the core of management, talked about the management philosophy of the company.
Nonaka starts off with the topic of purpose management; with how it has become popular among companies to get their employees to have an understanding of what their purpose and in doing so can benefit them from knowing better how to approach their customers. Sawada continues by explaining how Kao corporation appeals to be, with the management it uses, and the essence. He introduces essence saying that to grasp it, it’s necessary to deepen the understanding and the research about it. He gives a brief explanation of the KAO corporation’s purpose, where he mentions how he always thought essence was a researcher, but later comprehended that it’s the understanding of all parties. Sawada states “Business, I think, can be shared by understanding the series of consumer behaviors that are the basis.”
In the flow of movement, seemingly contradictory things are integrated. Nonaka calls this (not binary opposition, but both conflict and cooperation) binary dynamics. Management has two themes of ESG and profits. The idea of how one must be sacrificed for the idea to prosper. however, talks about how following the path of ESG will lead to eventual profits even if it shows profits are dropping in the beginning. They talk about pursuing “essence”, which means to be colliding with each other’s understanding and knowledge to find a middle ground where both merge together. Nonaka says that “only through the collision can we find the essence of things”.
There must be empathy in the process of internal discussions. We need trust between people. They sympathize and resonate. In both product development and basic research, innovation is born when this is achieved through dialogue. Based on the idea of management, we will transform the employee’s knowledge into the power of the organization. Since understanding each other is the key, Nonaka says “If you meet and sympathize with each other every day, you will gradually see the essence in the midst of the “wide present” that connects the past and the future.”
Adding on to Nonaka’s comment on the importance of sympathy, Sawada says that “The ability to notice in the process of empathy is very important.” He criticizes how the internet causes people to lose their ability to notice themselves, but instead they focus on what’s noticed by the mass. Similarly, because of this leaders are looking to find a narrative/ constructing a narrative. Nobel Prize-winning economist Robert J. Shiller uses the term “narrative economics” and Nonaka calls it “humanizing strategy.” In times of rapid change, the role of the middle-man that connects the ideal of the top and the reality of the front is great.”
Sawada then explained about an in-house initiative he conducted/moderated asking a group to discuss how to get out of the chaotic state created by corona. Nonaka stated how “In times of rapid change, the role of the middle-man that connects the ideal of the top and the reality of the front is important”. Their conversation led to how there’s a need for people to discuss beyond the boundaries of organizations and departments and make use of it in their work. There is a need for direct communication without scruples. This drives the company. He also states “It takes empathy to pursue the essence, but if there is a degree of sympathy, it will cause mayhem.”
With the change, Sawada said that they also adopted a system “OKR”, in which his employees set goals themselves and evaluate the process from 2009. Each individual thinks about what he or she wants to do and takes on the challenge. When there isn’t any challenge, they take a step back. He believes if you try to challenge only what you can see now, your world will become smaller. There are strong points and weak points in companies, and when it is difficult, people say “Is it worth doing?”. It ends with Sawada saying “There are many wonderful technologies that support the industry, and it is basically connected to the daily necessities business. If chemicals are eliminated, the main body of daily necessities will probably be weakened. Companies that exist are rare in the world. Connections are created from different species and become powerful. Kao will continue to balance both and maximize their synergies. “