Environmental Scanning in Japanese Corporations

Japanese corporations are ahead of US and European corporations in the area of environmental scanning and business intelligence. Several scholars, intelligence professionals, business executives, and government officials have observed that it is the relentless pursuit of information, intelligence and knowledge that is the single most important factor in explaining Japanese economic growth since the Second World War.

Harvard Japan scholar Ezra Vogel wrote that

"If any single factor explains Japanese success, it is the group-directed quest for knowledge. When Daniel Bell, Peter Drucker and others hailed the coming of the postindustrical society in which knowledge replaced capital as society's most important resource, this new conception became a great rage in Japan's leading circles. But these leading circles were merely articulating the latest formulation of what already become conventional Japanese wisdom, the supreme importance of the pursuit of knowledge." (Vogel 1979)

From tracing the historical development of intelligence activities in Japan, Dedijer (1991) supports and extends Vogel's hypothesis by further suggesting that it is the Japanese skills in social intelligence that gave Japan the crucial edge Ð "Japan since 1868 had among the best economic, trade, technological transfer, and cultural intelligence in the world." (Dedijer 1991, p.15; see also discussion on social intelligence in Chapter 4). Intelligence professionals like Jan Herring and Herbert Meyer have similarly noted that information and intelligence gathering is endemic to Japanese culture: "Really, there's no such thing as a Japanese entity that doesn't have intelligence gathering built in. ... Pulling in information is part and parcel of what the Japanese are paid to do. You will not find that in the job description of most American managers." (Meyer, quoted in Martin 1992, p. 44) It seems that everyone at every level takes an active role, and is often given explicit instructions on what information to collect.

Environmental scanning as practised by different Japanese corporation share a surprisingly common pattern (the same isomorphism has been observed in the scanning activities of large South Korean companies, in a 1988 study by Ghoshal). Information gathering is typically achieved through six channels and sources:

(Lagerstam 1990).

The planning department specialises in collecting and directing the collection of information in the firm. It has a very high status and reports directly to the vice-president of technology. Information gathering and analysis is often organized into research project groups, consisting of individual specialists with expert knowledge in their fields. The companies consider them to be the supreme information collectors.

In the patent department, as much as one-fifth of the staff may be engaged in information collection, that is, scanning other competitors' patent applications to monitor their technological progress.

Companies generally invite retired professors to sit on their advisory boards, with the intention of transferring information from academia to the firms. Apart from formalized units, every employee is expected to participate actively in information gathering. Their efforts often result in written suggestions submitted to managers. The Japanese average eight suggestions per employee per year, the highest rate in the world.

Attaches are stationed abroad to be closer to the ground to catch the latest news and developments. Biotechnology companies for example, typically have over 10 attaches each, stationed mainly in New York, Dusseldorf, and Los Angeles. Generally, the same six methods of gathering information are used in most Japanese companies. Such a multiplicity of methods must lead to a certain amount of duplication, but the Japanese firms encourage this information redundancy, allowing more than one unit to gather and analyze the same information, in order to ensure that everything important has been included and to speed up the process (Lagerstam 1990).

In business, the superpowers of information and intelligence gathering are the Japanese trading companies or sogo shosha. The total revenue of the nine major sogo shosha make up approximately 30 percent of Japan's GNP ÐÊtogether they handle nearly 50 percent of Japan's total exports and 60 percent of its imports. The nine corporations (C. Itoh, Kanematsu Gosho, Marubeni, Mitsubishi, Mitsui, Nichimen, Nissho Iwai, Sumitomo, Toyo Menka) employ more than 60,000 people in their 2,200 offices throughout world, and have total annual sales in 1990 ranging from US$45 billion to US$160 billion. According to Juro Nakagawa, a general manager of Nichimen Corporation,

Japan's economic development after World War II owes much of its success to trading companies. Their employees have cultivated and established contacts within government circles, international agencies, trade circles and research institutions. They regularly attend innumerable conferences, exhibitions and social gatherings and they have developed a corporate culture based on gathering information from a variety of sources including trade magazines, newspapers and business associates in order to establish new businesses. (Nakagawa 1992, p.42)

Each sogo shosha invests huge amounts of resources to create its own far-reaching network for data gathering. The Mitsubishi intelligence staff in New York, for example, takes up two entire floors of a Manhattan skyscraper. It is reputed that Mitsui's business intelligence unit, the Mitsui Knowledge Industry Corporation, is superior to the CIA in collecting information, so much so that the Japanese government was said to have used Mitsui's network during the Second World War (Teitelbaum 1992). At the Tokyo headquarters of Marubeni (a trading company serving the Fuyo keiretsu which includes Canon, Fuji Bank, and Nissan), row upon row of clerical workers could be seen diligently filing away slips of paper, photographs, charts, and reports sent from far-flung employees on competing businesses and businessmen (Duggan and Emenstodt 1990). The sogo shosha's voracious appetite for information has been described vividly:

To serve their broad commercial interests, the Japanese trading companies -- the sogo shosha -- have created vast overseas data-collection networks. Indeed, every branch office of every trading company operates like an information vacuum cleaner, sucking in statistics, documents, brochures, articles from technical and current events magazines, reports delivered at industrial and scientific conferences attended by one or another Japanese executive, and even gossip picked up at dinner parties or on the golf course.

... Raw information collected by Japanese executives stationed overseas is transmitted daily -- sometimes hourly or even by the minute -- back to Japan. There, at company headquarters, a senior intelligence staff collates this raw material and shapes the finished intelligence products for key policymakers within the trading company. And, yes, in one form or another -- informally as well as formally -- much of this intelligence is shared with executives at the trading companies'manufacturing partners and with selected Japanese government officials, who move the information around still more. (Meyer 1987, p.58-59)

Through diligence and tenacity, the sogo shosha have become masters of gathering vast quantities of business intelligence information by tapping the most public, boring sources, and cultivating legitimate, open human contacts. Juro Nakagawa, then general manager of the new ventures development division of the Nichimen Corporation (now a business professor at Aichi Gakuin University), relates a few personal examples of intelligence gathering during his 30 years with a Japanese trading company.

In summary, there is much to suggest that environmental scanning and business intelligence is the vital key to the strategic success of Japanese organizations in the international arena (Tomioka 1990). The Japanese energy that drives the information gathering, the diligence with which information is communicated and shared in a timely fashion, the universal commitment to acquire and accumulate knowledge, and the strategic use of information to create new businesses, enter new markets, and strengthen existing positions -- these are the defining traits of intelligent organizations that have learned to effectively collect, organize, analyze, and use information to beget competitive advantage.

Recall again the rows upon rows of clerks filing away slips of paper, the coordinated teams of businessmen swarming trade shows, the eager employee on study tours perpetually firing his camera, the endowment of professorial chairs and the establishment of affiliation programs at top US universities, and so on, and what we are witnessing is a

"massive human 'infrastructure' that sends in bits and pieces of competitive data in a continuous flow, like a giant net that makes sure very little can and will be missed. ... This is the infrastructure that almost guarantees competitive learning." (Gilad 1994)