Is Japan the most innovative country in the world?

When you think of the most advanced countries within the technology or IT industries, among the first to come to mind is Japan. A country where robots guide and serve people in hotels, and high-tech toilets are deployed in public places. Because of this, my expectations were extremely high when I planned several visits to premium brand automotive dealers in Japan.

Part of the project was visiting some of the premium brand dealerships throughout Tokyo. While I cannot say that my experience was good or bad – I can say it was certainly surprising. I was only mildly disappointed when I was not greeted by a robotic sales consultant when I entered the dealership. Although, there were numerous technologies on display in the showroom, none of them were really extraordinary.

Let me share some of the most interesting findings. The first one has nothing to do with technology, but instead with the office culture. You may be aware, either by personal experience or hearsay, that company loyalty in Asian countries, like China and India, tends to be quite poor.

One of the biggest issues in those countries is staff attrition – within one year, you are very unlikely to come across the same people in the same dealership. This creates many challenges when it comes to training, development of teams, and deployment of new initiatives. However, during my trip to Japan, I was startled to discover through discussions with numerous employees that they had been working at the same dealership for twenty, some of them even more than twenty-five years. This type of loyalty, however, can create other challenges. For example, when asked about their opinions, experience and problems, these individuals were occasionally oblivious, due to the fact that they have never known any other process or system in their professional careers. This experience was the opposite of the ones I have had in Asian countries.

Change Management in Non-Changing Environment

Having great experience and loyal staff seems to be an excellent basis, and it is. However, in their traditional and conservative decision-making, Japanese companies – among them also dealerships – tend to play it safe. This results in companies staying static and “changing nothing”. Consequently, dealerships throughout Japan still utilize twenty-five year old, green-on-black text-based mainframe solutions. Having never been exposed to anything else, many people do not understand the pitfalls of these antiquated systems or do not have a vision of what can be improved.

This is further complicated by the hierarchical structure prevalent in Japan’s office culture. Many young employees, seeing the need for change, will not speak up as they are certain their opinions will fall on deaf ears.

Precise and Productive?

In mature markets such as Japan, the main stream of profits stems from the Aftersales area rather than from new car sales. It was unusual to discover that none of the technicians in the dealerships were stamping the hours they were spending repairing vehicles. When I asked the Service Managers to provide precise figures for the most common KPIs, such as Utilization and Productivity in their workshops, it became clear that most of the utilization and the productivity values were noticeably low compared to typical dealerships, where 80% Utilization and 87% Productivity are common. In the best performing dealerships worldwide, Utilization is around 100% and Productivity exceeds 100%. Overall, knowledge of these KPIs assists in of resource and workshop planning, which in effect significantly benefits the entire dealership.

Figure 1: Basic KPIs values in average and best dealerships | Source: incadea, 2015

Further benefits would be realized as well, as there are potential savings on activities that do not add value, mainly involving the double or triple entry of information and data between multiple systems. I observed that the main area of improvement in the sales department was integration within OEM interfaces and 3rd party systems, e.g. procuring financial offers. In the Aftersales area, the enhancement of the DMS functionality was clearly the most significant area for improvement. Departments had different root causes influencing the processes, but positive changes towards these causes could create additional savings, which could then be re-invested.

Savings by eliminating the non-value added processes were significant in both Aftersales and Sales departments. This money could be spent on new technologies, exploring new leads, or expanding business development.

Influence of tech-savvy, innovative and customer-focused environment

When one travels around the globe, it is interesting to explore different cultures and business attitudes. When comparing Asian and European mindsets towards customer service, one comes across different approaches. I was pleased to be warmly welcomed at the hotel - my luggage was taken care of, and I felt like a mini-celebrity compared to service I have experienced at European hotels. This level of service is one of the most impressive factors when you arrive at a dealership: your vehicle will be parked for you immediately, and the receptionist will offer you a cup of coffee with a smile, while you wait for the service job to be completed.

How does market maturity influence Japanese dealerships?

As a result, I noticed that larger and OEM-owned dealerships have a strong correlation between business processes and well-established organizational structures, which seems intuitive, since bigger dealerships can invest more of their budget into these areas. However, the negative correlation between the size of a dealership and IT system capabilities showed that sharp business processes need more advanced IT solutions offering more functionality. While conducting interviews in the dealerships, I observed that many employees had a plethora of ideas and expectations concerning a well-established DMS. This steers Japan towards innovation as its people are tenaciously driving progress forward.

Figure 2: Results of OEM owned and independent dealerships maturity | Source: incadea, 2015

Would you name Japan the most innovative country?

In the media, Japan is depicted as a country at the forefront of incredible and cutting-edge inventions across all sectors. Accordingly, I believe that OEMs and dealerships in Japan will sooner rather than later have to incorporate the most innovative tools, solutions and processes, if they desire a competitive advantage in the market.

Envisioning and implementing the newest solutions and innovations should be a priority for all companies and countries, not only to the usual suspects – like Japan.