Hacking growth: Ethiopia forges ahead with Japan's kaizen methodology

Hacking growth: Ethiopia forges ahead with Japan's kaizen methodology

Ethiopia is taking the lessons learned by post-war Japan to systematically transform how the country operates. From business to government, Ethiopia has fully embraced Japan’s kaizen methodology.

The post-war ‘Japanese Miracle’ stunned the world as Japan raced ahead to outcompete and out-innovate the West within a few short decades after the end of the Second World War. Now another country - halfway around the world - wants to follow suit. At first glance, Ethiopia seems the last country you would think of when considering Asian economic development, and you may rightly wonder what possible connections exist between Ethiopia and Japan.

Firstly, for the past thirteen years, Ethiopia’s GDP growth rate has averaged 11.5 percent, making it one of the world’s fastest growing economies. With over 100 million people (up from 73 million in 2007), Ethiopia is also Africa’s second most populous country (after Nigeria) and as such has the potential to be one of the continent's largest economies. In many ways Ethiopia resembles postwar Japan, both in terms of GDP growth and demographic trends, and the two countries are working together to spark an ‘Ethiopian Miracle’ which could dominate headlines in the coming decades.

Not only is Ethiopia experiencing a (albeit more dramatic) population boom akin to Japan’s post-war demographic wave, Ethiopia also finds itself in the same initial position as Japan; namely an impoverished, overwhelmingly agrarian society. While many developing nations share these qualities with post-war Japan, Ethiopia is unique in that it has embraced the Japanese growth model: kaizen.

 

What is Kaizen?

Japan emerged from the ashes of the Second World War as a leading economic power, a feat achieved in large part due to the country’s adoption of a holistic work-life philosophy. Kaizen (as the methodology is known) enabled Japan to transform itself from an overwhelmingly agrarian society to one of the world’s leaders in technology and innovation.

Japan’s kaizen - or continuous improvement - philosophy provided the framework for the country’s remarkable transformation: it succeeded because it took a holistic and inclusive approach to organization. The main focus of kaizen is to humanize the workplace by encouraging all employees to feel invested in the company’s success.

The Japanese characters Kai (change) & Zen (good) form the word for improvement

Kaizen acts as a counter to the problems of worker alienation and dehumanizing working conditions by involving the entire workforce in the decision making process. From CEO to intern, all employees are trained to share their suggestions and opinions on ways to solve existing problems, reduce waste and improve efficiency.

Kaizen removes the kinds of hierarchical decision making which often ignore the useful employee insights on the kind of factory floor problems that cause such headaches for management. What makes kaizen flexible is that it is not merely an exhaustive list of rules and proscriptions aimed at maximizing efficiency and standardization, but rather it moulds employee mindsets to take initiative and experiment in the workplace.

Successful companies are those that dare to question existing operating norms and plan for, as yet unknown, problems and opportunities, not ones which exhibit rigid adherence to established wisdom.

Kaizen principles translated into Amharic. Credit: BBC

What makes kaizen doubly useful, is that it can be implemented far beyond the factory floors where it was first conceived. Specifically, kaizen also applies to individuals, instilling habits of orderliness, cleanliness and responsibility in employees. This infuses even mundane tasks with an attention to detail that quickly becomes second nature, and even crosses over into one’s personal life. Consequently, this lets kaizen be applied to processes such as logistics and purchasing, as well as disparate sectors such as healthcare, banking and government.

Kaizen in the age of China's rise

With this primer of kaizen in mind, we can turn to how a Japanese management mantra captured the attention of an African country on the other side of the world. Foreign governments and organizations have been touting their respective development philosophies in Africa for decades, often with less than stellar results. A weariness and wariness of sweeping prescriptions for economic success characterize African attitudes to such claims, and with good reason.

After pressuring Africa to adopt a neo-liberal approach for the past three decades, the very Western governments who championed this idea are increasingly back-pedalling. Even the IMF’s once-dogmatic adherence to the infallibility of structural adjustment programs has been tempered, yet many African nations remain sceptical. This legacy of failed dogmas is in part responsible for the popularity of China’s pragmatic approach on the continent, although Beijing’s deep pockets and silence on domestic issues speak louder than any coherent norms China is trying to instil.

Nevertheless, in 2008, as the world stood agog at China’s rise, and Beijing feted the global community at the coming-of-age party that was the Beijing Olympics; Ethiopia quietly backed Japan.

What makes this decision important for foreign observers is that it comes at a time when China’s wealth and development strategy are driving discussions about Africa’s economic future. Ethiopia, which receives substantial support from both China and Japan is therefore an important test case pitting Japan and China’s competing development approaches; a contest in which Japan has an upper hand.

While the merits of kaizen were proven, throwing an entire country’s support behind Japan’s take on development was still a surprising move. In the shadow of China’s rapid rise, Japan had seen Beijing leapfrog it to become the second largest economy, while Tokyo had been stuck in two decades of stagflation since the 1989 Economic Bubble. Developing countries looking for role models would find China the obvious choice, especially as Beijing’s insatiable appetite for resources has funnelled billions into Africa.

How one conference shifted an entire nation's future

With China’s dominance in Africa it comes as a surprise that Ethiopia has so readily embraced kaizen. Indeed, kaizen only came to Ethiopia’s attention in 2008, during a visit by the country’s late prime minister - Meles Zenawi - to the Tokyo Conference on African development. He was so impressed that he decided to make kaizen Ethiopia’s national policy.

Meles_Zenawi_-_World_Economic_Forum_Annual_Meeting_2012.jpg

"What we hope to achieve...

[with] the kaizen system is improvement in the productivity of all our enterprises, public and private." - PM Meles Zenawi

While Zenawi served as prime minister from 1995 until his death in 2012, his efforts to enshrine kaizen in Ethiopian life have not perished, as Zenawi's successor - Hailemariam Desalegn - has vowed to continue his vision. This consistency of vision, coupled by the monopoly on political power which the ruling Ethiopian People's Revolutionary Democratic Front (EPRDF) has exercised since the early 1990s, could lead to a stable, long-term implementation of kaizen throughout Ethiopia.

The importance of kaizen is that it offers Ethiopia the means to help generate domestic growth that is less dependent on the largesse of foreign countries. Specifically, while China’s mega factories in Africa may garner the most attention, they are also dogged by complaints about working conditions, with workers seen as largely anonymous and replaceable. Moreover, there exists continent-wide criticism that China prefers to employ its own citizens for managerial and even entry-level positions, with Chinese companies often citing (in no uncertain terms) that African workers lack the required skills and work ethic.

We don’t believe in giving big fish without first teaching people how to catch them.
— Kimiaki Jin, JICA Ethiopia

This is where kaizen comes into its own, as it not only prepares African workers to meet the needs to foreign employers, it also builds a capable workforce with transferable skills that can aid in the creation of domestic, internationally competitive companies. This protects against the kind of hollowing out of local industries which has occurred since the massive influx of Chinese projects, themselves underwritten by cheap, unskilled labour.

The promotion of kaizen mirrors the overall strategy of Japan’s engagement with Ethiopia - “What we wanted to do was create results on the ground,” explains Kimiaki Jin, head of the Japan International Cooperation Agency (JICA) office in Ethiopia. “We don’t believe in giving big fish without first teaching people how to catch them.”

Opened by Japanese prime minister Shinzo Abe, JICA’s Ethiopia office joins the In Africa Business Education (ABE) Initiative scholarship as evidence of Japan’s growing commitments in Ethiopia. ABE sees 70 young Ethiopians from the private, public and academic sectors travel to Japan for training. While smaller than similar Chinese endeavours in Africa, the ABE program is the largest Japanese program of its kind on the continent.

In a comic twist, JICA's offices are located on the Ethio-China Friendship Avenue

Japanese academics are also preparing the curriculum for post-graduate engineering programs in Ethiopian universities, providing another bridge between the two countries, with Ethiopian officials touting the student’s familiarity with Japanese work culture as a major advantage. These students are only some of the tens of thousands of Ethiopians that have been trained by the Ethiopia Kaizen Institute since PM Zenawi adopted kaizen in 2008.

Ethiopia and Japan's economies compliment each other

Ethiopia is also benefiting from the fact that Africa's economic leader -South Africa - is losing its appeal in the eyes of Japanese investors, due to the Rainbow Nation’s struggle with corruption and violence, according to Katsumi Hirano, executive vice-president of the Japan External Trade Organization (JETRO). This in turn further encourages Japanese businesses to diversify their African portfolios and look to countries such as Ethiopia for opportunities.

Ethiopia’s close to ties to Japan will also allow it to benefit from the Japanese government’s pledge to spend $30 billion between 2016-2019 in support of African infrastructure, healthcare and education. This comes after a similar announcement from Beijing pledging $60 billion. Again, while Japan cannot compete with China in terms of raw funds, its more targeted, long-term approach promises to have a more lasting impact.

Ethiopia aims to be a middle-income country by 2025, and Ethiopia’s ambassador to Japan, Cham Ugala Uriat, believes that Japanese investment and technology will be key to achieving that goal. To this end, ambassador Uriat is touting Ethiopia’s familiarity with Japanese workplace culture as a key comparative advantage over other African destinations.

Japanese companies are not taking full advantage of Japan & Ethiopia's kaizen support system

Selling Ethiopia as an investment destination also helps Japan's efforts to encourage its small and medium enterprises (SME) to make to leap into the wider international market. Two decades of economic stagnation have made Japanese firms inward looking, yet sluggish growth and demographic challenges mean that any meaningful growth strategy must have a significant overseas focus. Ambassador Uriat is hopeful about Ethiopia’s prospects, stating that “Ethiopia is at the right time now to go out and tell good stories,” but he says his biggest challenge is still convincing risk-averse Japanese companies to invest.

While Ethiopia’s adoption of kaizen gives Japan an inside track on the country’s development plans, Tokyo needs to do more to capitalize on this advantage. Japanese companies not only lag behind their Chinese rivals, but also their Indian and Turkish counterparts when it comes to business presence in Ethiopia. Whereas some high profile deals have been made; such as Japan Tobacco’s $510 million partial 2016 acquisition (Ethiopia’s largest privatization sale in history) of Ethiopia’s National Tobacco Enterprise Share Company, Tokyo needs to do more to stand out.

Specifically, there needs to be greater coordination between aid, government projects and Japanese business operations. While the government has laid the groundwork for successful partnerships between Ethiopian and Japanese companies, the latter have traditionally been risk averse. Mega corporations like Toyota, Toshiba, Sumitomo, Marubeni and Koyo Holdings  may be on the ground, but Japan needs to encourage other major firms, and especially its SMEs to seize the opportunity that is Ethiopia.

Conclusion

Ethiopia finds itself in a situation not dissimilar to that of post-war Japan. Predominately agrarian and impoverished, Ethiopia needs to drive sustainable development in order to capitalize on its potential to be one of the largest economies in Africa. Despite the allure of Beijing's deep pockets, China does not offer any meaningful holistic framework for creating growth. Infrastructure projects are all well and good, but in order to train a skilled workforce and build a robust domestic business ecosystem, Ethiopia has chosen to enshrine the kaizen philosophy as the nation's mantra.

Jeremy Luedi is the editor of Asia by Africa. His writing has been featured in Business Insider, The Japan Times, The Diplomat, FACTA Magazine, Yahoo Finance, Asia Times, Huffington Post and Qrius. His insights have also been quoted by TIME, OZY, and the Washington Times, among others.