How To Run A Country: Lessons From Japan Inc.

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In Theory Z, William Ouchi's message was that the Japanese could teach Americans a good deal about managing their businesses. Now Ouchi tells us that Japan Inc. may be able to teach us about managing our country. In his new book, The M-Form Society* How American Teamwork can Capture the Copmetitive Edge (Addison-Wesley Publishing Co., Reading, Mass.; $19.95), the lesson, in essence, is: Cooperate for the common good.

Americans, he says, have no incentive to cooperate, because we have arranged ourselves like an H-Form corporation, a holding company in which unrelated portfolio businesses are responsible for and judged by their own profits. Japan, on the other hand, has arranged its political economy in the M-Form, like a multidivisional corporation.

Hewlett-Packard Corp., Ouchi says, is a good example of the M-Form. "Each [semiautonomous HP] division sells to a slightly different set of customers, each employs different manufacturing methods, but all share in common a base in the profession of electrical engineering, use some similar manufacturing methods, and all depend upon a continual process of invention from central laboratories for their continued success." In an M-form corporation, he says, more emphasis rests on the success of the whole than on the profits of the individual units.

In Japan, writes Ouichi, a few hundred large companies and more than 8 million small businesses work together in a similar way. Through participation in a hierarchy of trade associations and government bodies, Japanese business has evolved a structure that gives each party an incentive to yield his self-interest, so that someone else may achieve his goal.

Would it work in America? Ouchi says that the accepted wisdom -- that teamwork between business and government is impossible -- may be wrong.

But some of his prescriptions for creating an M-Form society in this country are chilling. He recommends, for example, that equity markets "should be restricted to the largest, best-known, and most stable companies. The venture capital necessary for medium and small businesses and for emerging industries should instead be provided by banks . . . [which] can determine who is a good bet for successful growth and who is not . . . better than individual shareholders can."