Table Of ContentTHE NONAKA SERIES ON KNOWLEDGE AND INNOVATION
Dr Kazuo Inamori’s
Management Praxis
and Philosophy
A Response to the
Profit-Maximisation Paradigm
Kimio Kase · Eugene Choi · Ikujiro Nonaka
The Nonaka Series on Knowledge and Innovation
Series Editors
Kimio Kase, International University of Japan, Niigata, Japan
Eugene Choi, Ritsumeikan University, Osaka, Japan
The Nonaka Series on Knowledge and Innovation is designed to honour
Professor Ikujiro Nonaka for his scholarly achievements. Through his
intellectual contributions, Professor Nonaka has achieved a remarkable
advancement in our academic understanding of management and organi-
zation as well as the very practice of management.
After decades of conceptual and empirical work, many scholars and
managers alike have come to see good leadership as an essential means to
unleash individual and organizational potential to create knowledge. We
recognise such leadership in Professor Nonaka, who, like all great scholars,
deserves an academic tribute. The reader of this series will find many novel
and inspiring ideas, interesting historical nuggets, critical thinking, and
unusual perspectives.
The series will be composed of research-based books on knowledge
and innovation in management. It will centre on the discussion and study
of knowledge and innovation from a wider perspective including philo-
sophical, epistemological, psychological, linguistic, semiological, cognitive
founding in lieu of focusing on IT-related social network, intranet angles.
· ·
Kimio Kase Eugene Choi Ikujiro Nonaka
Dr Kazuo Inamori’s
Management Praxis
and Philosophy
A Response to the Profit-Maximisation Paradigm
Kimio Kase Eugene Choi
International University of Japan Ritsumeikan University
Niigata, Japan Osaka, Japan
Ikujiro Nonaka
Hitotsubashi University
Tokyo, Japan
The Nonaka Series on Knowledge and Innovation
ISBN 978-981-19-3397-4 ISBN 978-981-19-3398-1 (eBook)
https://doi.org/10.1007/978-981-19-3398-1
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer
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To Mercedes and in tender memory of Gabriel; and to Professor José Luis
Lucas and Professor Pedro Nueno, my maestros at IESE—KK
To Yoshiko and Mina; and to my parents, Hee-Jun and Soon-Hee
(Kazuko, 1941–2018)—EC
To Sachiko, Miho, and Yukiho—IN
Foreword
The last half century has been exceptional in business history. The view
that the primary purpose of business is to maximize returns to share-
holders has swept the capitalist world. The beginning of this trend is often
traced back to a widely cited article published in 1970 in the New York
Times Magazine by the economist Milton Friedman which was entitled
“The Social Responsibility of Business Is to Increase Its Profits.” The
responsibility of corporate executives, was entirely to the owners of the
business, he argued, and it was to “make as much money as possible
while conforming to the basic rules of the society.” Friedman was not just
any economist, but a prominent figure in his profession and a passionate
advocate of free markets, based at the University of Chicago. The article
encouraged a paradigm shift with the development of agency theory by
William Jensen and William Meckling, This view of the sole purpose of
business was born in the United States, but especially because of the
importance of U.S. capital markets, the shareholder value model spread
widely to countries with quite different traditions, including Germany and
even Japan.
Friedman’s view that the sole purpose of business was to maximize
shareholder value has never been the norm in the history of business.
This is obviously the case in Japan. Historical traditions of sampo-yoshi
management were joined after the Meiji Restoration by Shibusawa Eiichi’s
gapponshugi, and, later, Matsushita’s kaisha wa shakaino kouki . There
have been, historically, many business leaders elsewhere convinced of the
vii
viii FOREWORD
public and societal roles of business. Prominent examples include the
great Indian business houses founded by Parsee families in the nine-
teenth century, like Tata and Godrej, who combined the spirituality of
Zoroastrianism with a holistic view of the societal and indeed ecolog-
ical responsibility of business. A subsequent generation of Indian business
houses was heavily influenced by the trustee model of business devel-
oped by the interwar freedom fight Mohandas Gandhi. The Bajaj and
Birla business houses grew as successful intergenerational businesses moti-
vated by Gandhian thought and Hindu spirituality to believe that business
serves the community and the goal of social justice. They remain amongst
the largest businesses in India today. Nor are such views found only in
Asia. In nineteenth and twentieth century Britain and the United States,
Quaker (and other Christian) business leaders such as George Cadbury
combined deep spirituality with the strongest commitment to ethical
behavior and serving the community. In the decades after the end of
World War II, American big business—and American business schools—
were fully committed to a stakeholder model of capitalism, with no
sympathy for shareholder value maximization. In 1949 Harvard Univer-
sity embarked on a lengthy investigation into the American “business
creed.” The results, published in 1956 as The American Business Creed,
revealed a consensus opinion was that “the role of professional managers
in the large business firm” was to “consciously direct economic forces for
the common good.”
If a long-run historical perspective clearly reveals Friedman and agency
theory as historical aberrations, this does not deny their contemporary
importance, and the negative consequences it has imposed. Although
intended among other things to increase the efficiency of businesses, there
were also many unintended consequences. Executives were incentivized to
deliver value for shareholders by being given stock options. This became
a driver of huge share buybacks, whose primary purpose was to drive up
share prices. Frequently these buybacks came at the cost of innovation,
and they were rarely aligned with social purpose. Seeking to maximise
share prices also drove a short-term focus on quarterly earnings by execu-
tives. This was one factor in driving the wealth inequality seen in so many
countries over recent decades. It was one factor behind corporate scandals
such as Enron, Olympus, WorldCom and Wirecard. Perhaps, above all,
the belief that the sole purpose of business was to maximise shareholder
value looks almost obscene in a world undergoing massive environmental
challenges of climate change, water shortages, and mass extinctions of
FOREWORD ix
species. Business has driven such ecological damage to the world, and
continues to do so, and to dismiss this damage as an externality, while
focusing on maximizing shareholder value, is social destructive. It is an
ethically hollowed-out vision of capitalism.
The downsides of the Milton Friedman paradigm are increasingly
apparent. The pressing task now is to understand viable alternatives which
will enable business to both prosper and serve as a force for ecological,
ethical, social and spiritual good in the world. This is why this present
study of the philosophy and management practice of Kazuo Inamori is so
important. Inamori is a well-known business leader in the West because
of his creation of the highly innovative Kyocera company, and his later
success rescuing JAL from bankruptcy. Inamori’s Amoeba Management
System has also been celebrated for its success in dynamic and highly
competitive environments. This book breaks new ground by seeking to
capture the whole of Inamori, his motivations and his actions, and posi-
tion them within broad philosophical, phenomenological and religious
contexts. What emerges is the opposite of the impoverished world of
shareholder value maximization. Motivated by a strong belief in the inter-
connectedness of the material and the spiritual, Inamori offers a virtuous
alternative to Milton Friedman. The purpose of business, for Inamori,
is not to make a few owners rich, but to transform people, and let them
realise their potential. Importantly, the authors of this book not only artic-
ulate Inamori’s vision, but also explain how he executed it at the level of
individual encounters with him. This is a bold book about a radical busi-
ness leader who offers us, with great humility, a superior path to the one
the business world has chosen to follow in recent decades.
Geoffrey Jones
Harvard Business School
Boston, USA
Preface
In the Foreword to Kase, González-Cantón and Nonaka (2014, p. x),
Mr. Yotaro Kobayashi, a former chairman of Fuji Xerox Company and
an ex-member of the Trilateral Commission, points out that “the profit-
maximisation paradigm as a goal of business stands […] to reason […]
However, the excessive zeal of managers for the maximisation of purely
economic gains has led us to disastrous consequences.”
Removed from the Porterian paradigm (Porter, 1980, 1985, 1987,
1996), following the trend set by the resource-based view of the firm
(Barney, 1986, 1991, 1996), and going beyond strictly conventional
views of corporate existence, Professor Ikujiro Nonaka and the followers
of his School of Management have always been in pursuit of a broader
scope and human-centric view of management (Ikujiro Nonaka, 1988,
1990, 1991; Nonaka, 1994).
This book is the result of an endeavour to reveal an alternative to
the profit-maximisation paradigm.1 Its theme is centred on the figure of
Dr. Kazuo Inamori, the founder of Kyocera and KDDI, who, during the
development of his career as a unique and innovative corporate leader,
has shown us a way to redefine or rediscover the purpose and reason of
for-profit organisations.
1 A viewpoint advocated by Valero y Vicente and Lucas Tomás (2011) must be given
a due consideration regarding this.
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