Posted , in Differentiation
Four reasons why consulting firms are investing heavily in Japan and why you should too
- Callum Jack
The Japan market—a tough nut to crack for consulting firms in the past—is generating quite a buzz. As organisations start to use consultants more than ever before, consulting firms are sensing huge opportunities and are acting fast, which is intensifying competition.
In the past, Japanese business leaders were loath to spend on consultants for two reasons. First, the culture of international consulting firms didn’t always fit with the Japanese way of doing things. Differences in etiquette, hierarchical structures, and decision-making processes made it very difficult for firms to build strong client relationships. Second, Japanese clients—already sceptical about buying anything intangible—didn’t see the value in buying consulting advice if you couldn’t measure its impact. As a result, the Japan consulting market, valued at just US$1.4bn, is much smaller than its counterparts in other mature economies like the UK, where the consulting market is worth US$10bn and in a much smaller economy.
These challenges have hitherto prevented international consulting firms from really pushing to establish their presence in Japan. However, many of the consulting leaders we’ve spoken with recently are now investing heavily in Japan, and they cite four reasons for their new-found optimism:
- Japanese companies are investing and expanding on to the global stage at an unprecedented speed. As they adapt to Western business culture, the ease of doing business with them is improving. This plays into the hands of consulting firms as these clients seek advice and support from firms with global expertise.
- Bureaucratic Japanese companies have been relatively slow off the mark with digitisation, but it is starting to gather momentum. Digital expertise gathered from markets further along the digital journey is starting to look increasingly valuable to Japanese clients as they shift from strategising and piloting small initiatives to wide-scale digital transformation.
- A serious shortage of talent—caused by an ageing population—is causing recruitment headaches for clients who will need consultants to plug the gaps.
- Japanese clients’ aversion to services that don’t provide tangible results seems to dovetail perfectly with the growing trend of digital asset-based services, as these can apply advanced analytics to provide quantifiable insights.
Consulting firms are right to sense the opportunities but, as competition heats up, there is no guarantee of success. Developing a deep understanding of the Japanese business world, and providing services that demonstrate tangible outcomes for clients—which could be through implementation experience, digital assets, or managed services for instance—will be critical to establishing strong client relationships. A key thing to consider here about the Japanese business market is the high value placed on trusted long-term working relationships. So while it may prove difficult to get a foot in the door and establish trust initially, the hard work will pay off in the long run for the firms that get it right.