The Reality of Paradigm Shifts ―What Changes and What Remains Unchanged―①

Amid unprecedented circumstances like major shifts in media and the internet environment, what should we focus on?
This time, we welcomed Kazunari Uchida, Professor at Waseda University Business School, who has long advocated the importance of paradigms in corporate strategy and is also active as a consultant. Together with Yasushi Tomisawa, Specially Appointed Professor at Meiji University's Graduate School of Global Business, they introduced various real-world examples, exchanged views on the paradigm shifts occurring, and looked ahead to future directions.

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The Magic of Paradigms

Tomoshi: Professor Uchida, in the preface to the book The Magic of Paradigms (by Joel Barker), which has been read for over 20 years, you wrote, "I have used this book as my work bible." What was the reason for that?

Uchida: I've worked as a consultant for many years. In that field, you need perspectives and viewpoints that differ from conventional ways of seeing things. This book is packed with hints for that, and it introduces numerous examples of pitfalls that people and companies often fall into.

For instance, there's the story about how, at depths of 40 to 50 meters underwater where red light is completely invisible, the text on a Budweiser can still appeared red. I wondered why, and it turns out the human brain retroactively assigns color. Essentially, because we're convinced the can is white and red, we perceive it that way even though the actual color isn't visible. The point is that viewing situations or listening to others' opinions through the colored glasses of our preconceptions can cause us to overlook unexpected truths.

Another point the book makes is why humans struggle to change their behavior: we're trapped by outdated paradigms that blind us to new ones. For consultants, this book is incredibly stimulating and thought-provoking.

Tomisa: I often hear the term "paradigm," but how should we define it?

Uchida: In this book, we define it as "a rule, and something that tells us how to act within the rules we've established." Rules within a company for streamlining work or creating good products are also paradigms. However, there's something important to note. Paradigms are essentially helpful tools for work, but they can sometimes turn into obstacles hindering adaptation to new eras. This happens when a paradigm shift occurs. Conversely, shifting to a beneficial paradigm is now extremely important.

Tomisa: In the preface, you also mention the word "realization." Does that signify an opportunity to transition toward a more beneficial paradigm?

Uchida: For example, imagine a couple discussing the shops between their home and the station. The wife might mention a florist, dry cleaner, or stylish accessory shop, while the husband lists izakayas, coffee shops, or gyudon restaurants. Even viewing the same scenery, their different paradigms make them see different things.

In other words, if you maintain your own problem awareness daily, your perception of your surroundings changes, and you occasionally spark new insights or have flashes of inspiration. If you observe the field or attend meetings without any problem awareness, you only see things at face value, and it becomes difficult to grasp the underlying paradigm.

Tomisa: I'm part of the Corporate Perspective Research Team for a commissioned study by the Hideo Yoshida Memorial Foundation. While this project envisions the situation around 2020, what strikes me most is how significantly the players in the market will change.

Until now, media companies focused on media, advertisers on advertising, and agencies on agency work – their roles were quite clearly defined. However, with the advent of the internet, the structure of players has changed dramatically, new business models have emerged, and I truly feel we are in a situation where a paradigm shift is inevitable.

The Emergence of New Players

Tomisa: Professor, you authored "Cross-Industry Competition Strategy," which explains the essence of evolving business model wars. How does this connect to our current theme of paradigm shift?

Uchida: In the past, the term "industry" carried tremendous weight. It was the norm for competitors to vie within their own industry. Recently, however, we've seen increasing instances of new players entering from outside the industry, people from completely different industries encroaching on our business, or even mavericks emerging from within the industry itself.

The changes in the camera industry are particularly fascinating. Once, film manufacturers included Kodak, Fujifilm, Konica, and Agfa, while camera makers were Nikon, Canon, Olympus, and Minolta. Additionally, there were photo processing shops and labs in towns, and the finished photos were stored and viewed in albums like Fiel or Kokuyo.

However, the advent of digital cameras first replaced film with memory cards, shifting key players to Toshiba, SanDisk, Samsung, and others. Film development disappeared, printer manufacturers took over that role, and albums have become a minor means of viewing photos. When different players emerge within the same industry, it's inevitable that the existing industry gets bypassed or replaced.

Tomisa: Some companies have abandoned the film-development-printing business chain, undergoing major restructuring to pivot their operations. Others have completely shed that business, focusing on other ventures or shifting to B2B models to survive. But paradigm shifts are never easy.

Uchida: Unintended battles are also occurring within cross-industry competition. For example, the game industry is currently suffering greatly from smartphones. Until a few years ago, Nintendo was an excellent company with annual operating profits of 500 billion yen, but it has now fallen into the red for three consecutive fiscal years. I believe Nintendo should be able to make games superior to those of Mobage, Greer, and GungHo, but they clung to their own paradigm and failed to transform.

Toshi: Even within cross-industry competition, it's no longer just a competition between products or services.

Uchida: For example, if electric cars become explosively popular, people will be able to charge them at home, and gas stations will become unnecessary.

Tomisa: If that happens, gas station operators will have to change how they use their land. I feel that this will lead to a paradigm shift in our lives themselves, not just in individual companies or business chains. Furthermore, as business chains change, we will also have to rebuild our social infrastructure.

Uchida: While individual companies can change some aspects, the major societal impact comes from infrastructure changes transforming the world. For example, Amazon succeeded in Japan because of the Takkyubin infrastructure. Looking ahead, convenience stores might become the new infrastructure. They're no longer just shops for young people; they've become lifelines for the elderly, single-person households, and those unable to travel far.

Policy and Leadership

Tomisa: It's not just business models shifting; we're seeing a paradigm shift in corporate structures too.

For instance, the company Megane 21 made all employee performance metrics, compensation, and salaries completely transparent.

Uchida: Currently in Japan, companies operate under the assumption that they belong to shareholders, so they manage for shareholder benefit, maximize shareholder returns, or focus heavily on IR. However, Starbucks clearly states that its most important stakeholder is its employees, followed by customers, with shareholders coming third. I believe it's far more important to have a policy stating "this is what we prioritize" rather than simply conforming to global standards.

Moreover, since the days of clear growth industries are fading, whether a company becomes a winner or a loser has become far more critical than the overall growth of the industry. That's where a company's individuality and policies will be put to the test.

Tomisa: Of course, in terms of performance, market share and sales volume are important. But what's becoming the most crucial point is which company takes the leadership in creating new markets and what kind of market it aims to transform.

Uchida: Exactly. Japanese companies tend to have a strong mindset of observing the market and competitors and then responding accordingly. That might have worked when the country was growing or when they held a competitive advantage, but that era is over. What matters far more now is how well you can create a domain that others can't easily invade and establish a winning pattern. To do that, you have to do things differently from others, which requires tremendous courage and puts your leadership to the test.

Tomisa: In that sense, which companies or executives are drawing attention as potential leaders for the next decade or so?

Uchida: My position makes it difficult to comment, but if I had to name someone, it would be Masayoshi Son, CEO of SoftBank. His adventurous, even gambler-like approach is incredibly fascinating. He's always trying to transcend existing paradigms. I believe that even if only three out of ten such people succeed, it would be well worth it if Japan changed as a result.

[Continued in Part 2 (Final) ]

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*The full text is available on the Hideo Yoshida Memorial Foundation website.