• 10 17, 2014

    #031 Associate Professor Hirofumi Tatsumoto, Faculty of Business Sciences

    Scientific Study of Successful Corporate Management


    As markets become more globalized, business styles are changing. Over the past several decades, there has been a shift away from the model in which a single company handles all phases of business, from R&D to manufacturing and sales, to one in which multiple companies divide up the work, and work as a group to seek profits. Prof. Tatsumoto is researching strategies for “winning” in the ever-changing world of business.

    His attention is focused on industrial structures known as “business ecosystems.” These are models that produce innovation through the open sharing of knowledge and information, as is typified by Silicon Valley. Companies grow by coming together and forming independent, dispersed networks. In this environment, open standards and intellectual property rights (such as patents and copyrights) are important weapons. This kind of model is expanding through various business sectors, from telecommunications and semiconductors to energy and bioinnovative pharmaceuticals.

    In these industrial structures, businesses may coexist within industries, but their wealth is unevenly distributed. This is the case because there are companies that earn monopolistic profits through innovation (platform companies) and companies that engage in business in the environments created by those businesses. For example, Apple created the iPod/iPhone environment, giving anyone the ability to enter the market and make a profit by developing applications and content for those devices. Companies like Apple serve as platform companies. As the size of an industry grows, the platform companies will reap enormous profits, making it impossible for anyone to ignore their influence. In other words, in the business ecosystem, it is important that companies ask “How will we become a platform company” or “How will we protect our profits from the platform companies?” This requires a wholly different approach from the conventional business management models that focus on quality and cost.

    The conventional auto industry, meanwhile, has been experiencing industrial growth by moving in a different direction from this business ecosystem-based industrial structure. However, the telecommunications and electronics industries have been essential to the auto industry in recent years. Automatic driving technologies are a good example of this. Prof. Tatsumoto is deeply interested in the question of how businesses function when collaboration is pursued between vastly different types of business styles.

    The business ecosystem is not a matter of Prof. Tatsumoto vigorously contends that it is important for companies to carve out their own niche within the context of interdependent relationships.

    Another important topic that must be examined in the context of business ecosystems is the issue of management strategies that use patents and other intellectual property. A patent is the right to the exclusive use of technological information even if that information has been shared openly. Intellectual property is a key determinant of corporate competitiveness. Depending on how they are used, patents should be able to provide a company with a real business advantage. Japanese companies, however, while they have submitted a very large number of patent applications in Japan, have not gone so far as to submit applications or acquire rights overseas. The dearth of patent litigation in Japan and the common acceptance of organizational structures that make it difficult for divisions handling intellectual property rights and management divisions to work in partnership, are particular characteristics of the Japanese business environment, but Prof. Tatsumoto argues for the need to recognize the value of intellectual property as a business tool and to explore methods of utilizing that tool in management strategies.

    The impetus for Prof. Tatsumoto’s interest in business ecosystems was his research on development project management. When analyzing the reasons for the low productivity of Japan’s software industry from a project management perspective, he found that while software quality is high, the business strategies adopted by upper management are inappropriate for their industry, thus inhibiting that quality from generating the desired level of business performance. In Japan, there is a strong sense that "management" is something one learns through experience in a real-world environment, and very little education and human resource cultivation is therefore done in this area. However, the emergence of business ecosystems shows that companies can succeed with the right strategies, regardless of the size or level of experience of the company. Thus, Prof. Tatsumoto presents scientific theories on efficient management structures that can help actual businesses.

    Mathematics, and statistics in particular, are important tools in the science of business.

    Two methods are used to understand business phenomena: case studies and statistical research. In a case study, researchers visit the companies being studied, conduct interviews with executives and managers at each level, conduct tours of factories and other work sites, and sometimes gain hands-on experience of the work being performed at a job site. They conduct similar types of surveys at rival companies and suppliers. By listening attentively to what the people at these companies have to say, they are able to get a sense of personal biases as well as the common knowledge that is shared within a company or industry, and can objectively understand the situations in place at those companies. With a statistical approach, researchers examine publicly available databases and survey results to explore the regulating factors and correlations between the elements that reflect business conditions. By combining case study findings with statistical analysis, researchers can then gain an overall picture of a situation. Precisely because this is a field in which it is impossible to verify data empirically, efforts are made to eliminate biases and inconsistencies and to ensure the validity of the results by using multivariate analysis.

    In the same way that there are managers known for their charisma or who go on to be CEOs of legend, to stand out one must certainly have a particular “business sense” that is hard to put into words. He or she must also be passionate about pursuing his or her dreams. However, this does not make a scientific approach to the matter any less necessary. The vast majority of important factors in management are matters of science, and we can learn about these issues by analyzing case studies and engaging in discussions. Scientific analysis is a valuable skill not only for people involved in management, but also for engineers. Prof. Tatsumoto emphasizes that this scientific approach is the key to setting oneself apart as a project management professional in the world of business.

    Article by Science Communicator at the Office of Public Relations

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