Rediscovering purpose in Japanese business

This article is an excerpt from our research publication SJ3: The pathway to regenerative business. A Japanese version is available on Note.

Summary

• Japan’s approach to purpose is more embedded, emergent, connected, and community-driven compared to the West.
• Despite some cases of ‘greenwashing’, integrating purpose into your business can lead to meaningful action and impact.
• Japan has a chance to redefine organisations for 21st-century excellence amid growing global competition.

Introduction

We’ve come to a tipping point. All over the world, leaders have come to the same conclusion: business as usual is unsustainable.

Companies simply cannot thrive in isolation from their environment and society, which in turn are struggling to support them. There has been a shift away from the pursuit of profit alone towards a more inclusive and responsible approach that considers the purpose of the organisation in broader terms.

In 2019, the US-based Business Roundtable released a statement redefining the very purpose of every corporation, emphasising the importance not only of shareholders but also customers, employees, suppliers, and communities: “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country”.¹

In this way, businesses can be part of the solution, not the problem. Instead of just mitigating harm, they can actively restore and regenerate.

As a new regenerative model emerges Japan has much to offer, drawing from a long history and culture, and in many ways returning to a previous sense of purpose. There is also much to learn from emerging global practices, bridging Western trends with local thinking to forge a way forward for Japanese companies.

Purpose from a Western perspective

Although its origins date back to the 1970s, the idea of purpose in business was elevated by Simon Sinek in his 2009 book ‘Start with Why’, as well as his subsequent TED talk with over 62 million views.² Sinek explained the concept using a ‘Golden Circle’, consisting of three parts: ‘Why’, ‘How’, and ‘What’. The secret to business success, he argued, is to prioritise the ‘Why’ — your company’s higher reason for being.

Consultants Fromm and Cross³ describe how purpose should ideally pervade every aspect of the business: “Purpose is foundational. It’s not a gimmick — it’s why you exist. It’s a clearly defined strategy that affects every part of your business, from innovation to product development, to customer experience and marketing … Purpose doesn’t stop at the mission statement, it influences every decision at every level.”

Japanese purpose

Purpose is by no means the domain of Western companies. Long before the concept was popularised in the Western world, Japanese companies thrived on social purpose. What distinguishes the Japanese approach is that it is embedded, emergent, connected, and community focused.

Purpose is embedded firstly in the sense that companies are deeply integrated in society. Even the word for company, ‘kaisha’, is composed of the same two ideograms as society, ‘shakai’. Many Japanese companies have struggled to articulate their purpose, precisely because it is to exist as part of the fabric of society. This is illustrated by the principle of ‘Sanpo-yoshi’ — literally good in three directions, buyer, seller and society — which dates back to the Edo period and is still much respected in Japanese business thinking.

On the other hand, Japanese purpose also tends to be ‘emergent’ rather than ‘deliberate’, to borrow Henry Mintzberg’s terminology.⁴ In other words, it is determined by the accumulation of actions under an unspoken understanding. Only now, in the face of international competition, is it becoming more important to articulate this in explicit purpose statements.

The Japanese concept of social purpose has always centred around community. From companies driving modernisation during the Meiji restoration, to the villages and towns founded by mining and textile companies and the employee dormitories of post-war Japan, there are ample examples of company integration into community and society.

Many companies themselves have existed as communities, with a strong sense of loyalty deriving from the promise of lifetime employment, increasing rewards with seniority, the strong mentor relationships embodied in the ‘Sempai-kohai’ dynamic, and the strong ties within groups based on year of entry, university, region, or extracurricular activity.

These external and internal relationships are not only a feature of Japanese companies, but their very reason for being — with business outcomes considered secondary to the human connections that make them happen.

Loss of purpose in Japan

However, this Japanese sense of purpose has been dwindling in recent years. VC investor and community leader Eriko Suzuki points to the strong national sense of purpose driving the Japanese business world in the immediate post-war period, or even after the Meiji transition, when there was a collective drive to grow more food for the population and increase quality of life.

Having achieved a certain level of affluence, this collective motivation is currently lacking.

While a few purpose-driven companies exist in each Japanese industry sector, they are hard to name and even harder to describe in terms of their purpose. Suzuki further elaborates, “I think if (Japanese companies) were able to find a purpose, they would be able to become a much more interesting, community-driven, collective type organisation.”

Another phenomenon is that with increasing diversity, especially of age, gender, and nationality, the embedded, emergent, and unspoken version of purpose that Japanese companies have traditionally embodied is no longer universally understood or appreciated.

According to Corinne Johnson: “When you have a homogeneous organisation where everybody is a ‘shinsotsu’ (joined straight after graduating), you can keep it high-context. And everybody knows, ‘if I join this company, I’m going to do this’. But the minute you start bringing in women, young people, mid-career hires, foreigners, you have to write it down, because you can’t assume that people are just going to figure it out. Young people today are living in a low-context world.”

While the workforce is demanding a clearer direction, international companies that had already jumped on the purpose bandwagon may appear to be one step ahead. In shifting to more explicit versions of what was once ingrained in high-context company culture, Japanese companies have a unique opportunity to update the model, and offer an authentic, people focused vision that is more fitting for our times.

Case Study
MARUI GROUP: Co-Creation for Happiness
丸井グループ：幸福感を生む共創

One company that has been exploring a new paradigm for meaning is MARUI GROUP. Since its inception in 1931, inclusion has been core to MARUI’s business. Merging retail and finance, its original business involved selling furniture with monthly payment plans.

Recently the finance side of the business has become the main growth driver. It was MARUI that issued Japan’s first credit card and its policy of financial inclusion — providing everyone with the financial services they need when they need them, regardless of income or age — has been termed the ‘co-creation of creditability’. In FY2014, the Group’s EPOS card transactions exceeded ¥1 trillion for the first time.

In addition, the business model has now come to include forward-looking investments, which include both co-creative and new business investments, fostering a new wave of innovation within the company in collaboration with startups and other partners.

Meanwhile the group’s retail spaces have evolved into ‘stores that do not sell’ and ‘eventful stores’, operated with the primary aim of simply nurturing closer relationships with customers.

The current strategic direction is thus to “evolve MARUI GROUP into an intellectual creation company through co-creation”.⁵ The company’s outlook on shaping a sustainable future for the company is founded on inclusion and co-creation.

In January 2019, the company published a Vision Book 2050 entitled “Co-creation with you: MARUI GROUP’s Quest to Create Happiness Together with Everyone.”

Importantly, the vision was tied directly back to innovation opportunities through identifying ‘Three Businesses Founded on Co-Creation for Generating Happiness’:

1. Inter-Generational Businesses, divided into ‘Green’ for carbon efficiency and circularity, and ‘Human’ for social sustainability inside and outside the company.
2. Co-creative Businesses, which include open innovation and co-creation. For example, the EPOS credit card and size-inclusive ‘Rakuchin Kirei’ shoe range both originated from customer co-creation, and the approach has now been expanded to communities and investors.
3. Financial Inclusion, with services including credit cards, lifelong asset building (such as investment trusts), and providing for customers including younger generations and non-Japanese, who have previously struggled to secure credit.

Meanwhile, Inclusion features strongly in the company’s four core themes for sustainability:

1. Customer Diversity and Inclusion
2. Workplace Inclusion
3. Ecological Inclusion
4. Co-Creation Corporate Governance

This reinterpretation of common goals brings them in line with the company’s heritage and core business model, making the higher purpose more relatable and actionable. The Vision Book 2050⁶ further ties the value (‘happiness’) that this strategy generates across six key stakeholder groups (customers, business partners, future generations, employees, investors, community and society) to financial gain, predicting a growing ‘sustainability premium’ in stock prices.⁶

In this way, inclusion and co-creation sit at the heart of both internal and external value creation.

Towards a new model

As we approach a new era of regenerative business, what unique offerings can Japanese companies bring to the table?

Corporate, brand, and personal purpose can be a source of that meaning. Although the concept has been popularised — and brought into question — recently in the West, it has existed in Japanese business culture for many years.

Companies have always been deeply integrated in Japanese society and their unspoken social purpose continues to guide them today. Embedded, emergent and community-driven, this Japanese model stands in contrast to the highly publicised, top-down Western model.

Historically, the post-war drive for economic expansion provided a national sense of purpose as a backdrop for business activity. Now, in a time of relative affluence, truly purpose-driven Japanese companies do not easily come to mind. Generational and media consumption shifts now also mean that the high-context approach does not always work. Could it be the time to blend the two approaches?

Japanese companies can achieve greater success by adopting a more explicit approach to purpose. However, for it to be effective, it should be grounded in the core business and employee experience.

Overly abstract, philosophical or complex frameworks may fail to engage employees, customers or other stakeholders, or lead to innovation, sales, or brand growth. On the other hand, a practical business-focused expression is more applicable to daily work, and has the potential to drive engagement and growth.

Essentially, combining the more Western value of explicit articulation with the more Japanese value of integration could be the best path forward.

Another element of the Japanese model has traditionally been a focus on community. This still very much has its place, but needs a twist to stay relevant. Japanese companies have tended to be somewhat closed communities, with a fierce sense of internal loyalty and pride. This has served them well over the years, but in a rapidly changing world, closed communities run the risk of becoming isolated and old-fashioned.

The open approach of co-creation, and a wholly inclusive approach to business where teams train and educate each other, sets the stage for innovation breakthroughs and sustainable growth.

When employees feel connected to a community and feel a sense of meaning in their work, which they can easily communicate with others and connect to their daily duties, they will be happier, more engaged, and more effective agents of change.

Leading with a community-driven purpose is the foundation for individual and collective wellbeing. Although there are obstacles in constructing this new model, achieving it on a larger scale can bring about a profound transformation in Japan and beyond.

1. Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans’ (2019). Business Roundtable. https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans
2. The most popular TED talks of all time (2023). https://www.ted.com/playlists/171/the_most_popular_ted_talks_of_all_time
3. Fromm, J. and Cross, P. (2021) The Purpose Advantage 2.0: How to Unlock New Ways of Doing Business. Vicara Books.
4. Mintzberg, H., & Waters, J. A. (1985). Of strategies, deliberate and emergent. Strategic Management Journal, 6(3), 257–272.
5. Marui Group (2023). Business Model. https://www.0101maruigroup.co.jp/en/ir/management/model.html
6. Marui Group (2018) Vision Book 2050. https://www.0101maruigroup.co.jp/en/sustainability/pdf/s_report/2018/s_report2018_a3.pdf

Fabric is a Strategic Design and Sustainability consultancy helping businesses move towards more innovative, sustainable futures. Based in Tokyo, we’ve been consulting with global and local companies since 2004. We have extensive experience bringing together design thinking, sustainability, and human insight to deliver good strategy for clients.