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Sunday, July 3, 2005

THE ASIAN BOOKSHELF

OUTSIDE THE JAPANESE BOX

Writers ask: Are you being served?


SAYING YES TO JAPAN: How Outsiders are Reviving a Trillion Dollar Services Market, by Tim Clark and Carl Kay. New York: Vertical, 2005. 175 pp., $14.95 (paper).

Readers familiar with Japan are in danger of whiplash when reading this entertaining and informative book about Japan's services sector. Some funny anecdotes about typical encounters are sure to provoke vigorous head nodding and not a few rueful laughs. The authors tell us that the flipside of many frustrating customer experiences in retailing, financial services, real estate, information technologies and health care are potential gold mines waiting for savvy entrepreneurs.

Consider a visit to a computer store, where "you'll find ten polite but unknowledgeable sales associates who merely relay customer questions to one overwhelmed employee who actually understands the merchandise."

"Saying Yes" argues that customers in need of expert assistance are not well served by "fawning, empty gestures of service." Japanese firms excel at "standardized, one-size-fits-all services offered in assembly-line fashion," and as a result are not serving increasingly divergent customer needs.

More than two-thirds of Japanese carry Internet-capable mobile telephones in "the most advanced and pervasive wireless Internet infrastructure in the world." This level of hand-held, wireless access to the Internet is the "holy grail" for telecommunications executives, but the potential in terms of business applications is barely tapped.

The authors lament that "trivia, junk, and sex-related solicitations constitute the overwhelming majority of Japan's wireless online activity." Here we read about how two entrepreneurs -- one Chinese and one Indian -- developed applications that made them very rich by serving untapped markets.

"How does one describe a financial environment where criminals collect legitimate business debts, companies borrow freely regardless of their ability to repay, profit is meaningless, and banks are unable to tell whether or not they are solvent?"

Ripe for reform, and rich in opportunity. The authors argue that outsiders can make fortunes just by introducing global best practices.

The examples of Shinsei and Tokyo Star Bank demonstrate just how much potential there is for outsiders who think outside the box and find a competitive niche. Time and again, the success stories cited here highlight the importance of cultivating under-served markets by providing needed services.

Cultural arbitrage allows outsiders to identify opportunities where insiders see problems. Whether it is how to run banks, provide real estate services or improve debt collection operations, foreigners are introducing ways of doing things in Japan that have worked elsewhere.

For example, double-dealing real estate agents are the norm in one of Japan's more opaque and backward sectors. Typically, agents are paid by the landlord and customer, an arrangement that is rife with conflict in ways that often go against a customer's best interests. Enter an agent who only serves customers and you find a business success story, merely by doing what is lawful and common elsewhere.

Japan's overall productivity is the lowest among the OECD nations and its service sector productivity is nearly 40 percent lower than in the United States. Imagine if the world's second-largest economy began to embrace some of the reforms suggested by the authors and you can suddenly see a far more robust and dynamic Japan.

Improved productivity matters a great deal in a country facing an aging population and looming labor shortages. This demographic time bomb threatens to overwhelm the pension and medical care insurance systems. Better pension management and managed health care offer spectacular opportunities for improvement. And in the case of medical care, the authors suggest that overdue reforms are also a matter of life and death.

"Saying Yes" does not mince words detailing the poor practices that prevail in Japanese medicine. But times are changing and there are now online assessments of hospitals by accrediting agencies ( www.jcqhc.or.jp -- in Japanese) that enable customers to know where to go and avoid. And some hospitals are preparing for the coming revolution in medical care that many anticipate because the current system is unaffordable and saddled with perverse incentives that extend hospital stays (four times longer than in U.S.) and boost drug prescriptions (double those of U.S. patients).

The problem is that "health care in Japan centers around doctors, not patients" -- meaning long waits, little accountability, poor service, hefty under-the-table payments and patients in the dark about the work history of their doctors and, in many cases, their diagnosis. Managed health care, outsourcing, and elderly care represent growth markets where overseas practices have enormous potential.

This excellent and upbeat assessment of Japan's prospects suggests just how much Japan and entrepreneurs can gain from better services, and how this can translate into a better quality of life. For a very small investment, readers can say yes to the long experience of authors who have practiced what they preach and impart what they know in an engaging manner.

Jeff Kingston teaches history at Temple University Japan.


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