Why Apple Isn’t Japanese

The reasons for this run deeper than a dysfunctional corporate culture. Among the problems: promotion based strictly on seniority (resulting in managers with little training in information technology), and a near-complete disconnect between universities and the corporate sector.

Takahiro Fujimoto, an economics professor at the University of Tokyo, poses another theory: that personal computers, software and hybrid gadgets like the iPod are "modular" products, made up of existing components that "people mix and match in an innovative way." The Japanese tend to excel at "integral" products like cars, with customized components designed from scratch. "When you need this kind of activity, it's likely that people will be working on the same floor for a long time as a team," says Fujimoto. "We are not good at dealing with genius individuals—we're good at teams." That consensus-oriented approach tends to preclude the sorts of disruptive innovation that companies like Google throw off practically at will.

One intriguing exception: Nintendo, the gaming company whose remarkable, easy-to-use Wii console has enabled it to break away from more-conventional rivals like Microsoft and Sony. But Nintendo is also the exception that proves the rule—it has cultivated an outsider image and pursued a distinctive strategy of tapping consumer groups traditionally uninterested in gaming. It's no accident that Nintendo, like several other more innovative companies, is based in Kyoto—far away from staid Tokyo.

The insularity issue, which underscores so much of the innovation problem, has reached a boiling point. One of Japan's leading business papers, The Nikkei, published a piece earlier this year describing how a senior executive at Sanyo Electric had an idea similar to the iPod back in 1997; when he tried to form an alliance with Apple to explore the technology, his company's own chairman refused. Today, the story noted, Sanyo is struggling to survive. The paper went on to point out that Japanese electronics companies depend to a large degree on sales to regulated industries and the government. The world's second biggest market, protected by the Japanese language and its own cloistered standards, offers many companies a profitable sanctuary. But, as the article concluded, Japanese companies must ultimately "face globalization."

Of course, Japan's obsessive, incremental approach to innovation is a perfectly good way to run some companies. Japanese steelmakers have a proprietary technology that makes their high-tech steel untouchable by Korean and Chinese competitors. They keep trying to close the gap, but the Japanese, given their extraordinary attention to detail, could very well manage to keep a few steps ahead—enough to maintain crucial comparative advantage.

Japan abounds with this sort of almost artisanal industrial company. Toyota's famous production philosophy of kaizen, or continuous improvement, is perhaps the ultimate example—a system where workers are constantly proposing small improvements that perpetually bring the manufacturing process closer to perfection. Over the short term, says Fujimoto, Japan shouldn't be afraid to maintain focus on those areas where it truly excels. But over the longer term, he warns, something will have to give. Growth industries, like technology, aren't about incremental improvement—they are about making big bets, and finding the next new new thing.